CAAD 116/2014-T: IUC Liability on Sold Vehicles

Process: 116/2014-T

Date: March 14, 2018

Tax Type: IUC

Summary

CAAD Process 116/2014-T addresses a critical dispute over IUC (Imposto Único de Circulação) liability when vehicles subject to financial leasing are sold but registration records remain outdated. A financial institution challenged IUC assessments totaling €2,333.23 plus compensatory interest on 21 vehicles for tax years 2009-2012, arguing it was no longer the legal owner when the taxable events occurred. The core legal question centered on whether Article 3 of the IUC Code establishes a rebuttable presumption or an irrebuttable fiction of ownership based on vehicle registration data. The claimant contended that the purchase and sale contracts had real efficacy and that actual ownership, not registered ownership, determines IUC liability. The Tax Authority raised jurisdictional exceptions, arguing the assessments were self-liquidations (autoliquidação) extracted by the taxpayer from the Tax Portal, not official assessments subject to arbitral review. Additionally, the Authority argued that any challenge to self-assessments requires prior administrative objection (reclamação graciosa). On merits, the Tax Authority maintained that IUC liability follows vehicle registration records exclusively, that the legal fiction in Article 3 cannot be rebutted, and that accepting the claimant's interpretation would violate constitutional principles of legal certainty, trust, and tax system efficiency. This decision, reformed following appellate review by the Central Administrative Court of the South, establishes important precedent on the interplay between vehicle registration, actual ownership transfers, and IUC tax liability in financial leasing contexts, with significant implications for leasing companies' tax compliance obligations.

Full Decision

CAAD TAX ARBITRATION DECISION - ENGLISH TRANSLATION

In compliance with the judgment delivered by the Central Administrative Court of the South, in the context of proceedings for challenging an arbitral decision conducted therein under case number 08101/14, initiated by the Tax and Customs Authority, the following arbitral decision is issued, reformed in accordance with the rescissory judgment of the Central Administrative Court of the South. It replaces the decision of 30 September 2014.

Arbitral Decision

REPORT

A..., S.A., a company with registered office at Rua ..., ..., ...-... Lisbon, holder of the unique registration and identification number for legal persons ..., hereinafter simply designated as Claimant, filed a request for constitution of an arbitral tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of subparagraph a) of paragraph 1 of article 2 and subparagraph a) of paragraph 1 of article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter abbreviated as LRAT), petitioning for the annulment of the acts of assessment of the Single Circulation Tax (IUC) relating to twenty-one (21) motor vehicles identified in the request for arbitral pronouncement and corresponding compensatory interest, relating to the years 2009 to 2012, in the total amount of €2,333.23, as well as reimbursement of the same amount and payment of corresponding indemnificatory interest.

To substantiate its request, it alleges, in summary:

The Claimant is a financial institution that, in the course of its activities, concludes long-term rental contracts and financial leasing contracts for motor vehicles;
On the date of the occurrence of the taxable event in the present proceedings, the Claimant was not the owner of the motor vehicles on which the paid tax was levied, which had already been sold;
Pursuant to article 3 of the IUC Code, the taxable subjects of the tax are the owners of the vehicles, being equated with owners the financial lessees, the acquirers with reservation of title, as well as other holders of purchase option rights by virtue of a leasing contract;
Paragraph 1 of article 3 of the IUC Code contains a rebuttable presumption;
Thus, the taxable subject of IUC is the owner, even if not appearing in the vehicle register, provided that sufficient proof is presented to rebut the legal presumption arising from the register;
In the case of assessments in crisis, the Claimant is not a taxable subject of IUC;
The purchase and sale contract has real efficacy;
The Tax and Customs Authority (TA) is not a third party for purposes of registration, and therefore cannot avail itself of the failure to update the property register to call into question the full efficacy of the purchase and sale contract;
The Claimant paid the tax in question in the present proceedings, as well as the corresponding compensatory interest.

The Claimant attached 76 documents and did not call any witnesses.

In the request for arbitral pronouncement, the Claimant chose not to designate an arbitrator, and therefore, pursuant to the provisions of article 6, paragraph 2, subparagraph a) of the LRAT, the signatory was designated by the Deontological Council of the Administrative Arbitration Center, and the appointment was accepted as legally provided.

The arbitral tribunal was constituted on 15 April 2014.

Having been notified in accordance with the terms and purposes of article 17 of the LRAT, the Respondent presented a response, defending itself by exception and by challenge, alleging, in summary, the following:

By exception:

Contrary to what was alleged by the Claimant, the assessments in question are not official assessments but rather IUC collection documents extracted by the Claimant from the Tax Portal;
Thus, the request for arbitral pronouncement lacks subject matter, and the arbitral tribunal is incompetent to assess this request, which constitutes a peremptory exception and gives rise to dismissal of the claim;
Should it be understood that the issued collection documents are self-assessments, subject to challenge before the arbitral tribunal under the provisions of subparagraph a) of paragraph 1 of article 2 of the LRAT, it will always be said that such challenge must be preceded by a gracious objection;
In the present case, the Claimant did not submit any gracious objection, and therefore such self-assessment acts are not subject to challenge before this tribunal;
The conduct of the Claimant, which, on the one hand, without having been notified of any official IUC assessment act, self-assessed the tax, issuing collection documents and paying, and on the other, came to challenge the very acts to which it gave rise, constitutes an abuse of rights, in the modality of venire contra factum proprium.

By challenge:

Article 3 of the IUC Code does not establish any presumption of ownership, but a true fiction of ownership – the legislator does not say that they are presumed to be owners, but that they are deemed to be owners;
The failure to register the changes of ownership in the register has the consequence that the obligation to pay IUC falls upon the registered owner, and the TA cannot assess the tax on the basis of elements not contained in the register;
IUC is owed by the persons appearing in the register as owners of the vehicles;
The invoices submitted by the Claimant as proof of the conclusion of the purchase and sale contract are not apt to prove such;
As regards the vehicle with registration number ..., the Claimant does not submit any invoice;
The interpretation of article 3 of the IUC Code conveyed by the Claimant appears to be contrary to the Constitution, violating the constitutional principles of trust and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

The Respondent attached a copy of the administrative file and did not call any witnesses.

On 25/06/2014, the first meeting of the Arbitral Tribunal took place, in accordance with the terms and purposes of article 18 of the LRAT. The Claimant requested the production of witness evidence because the TA had objected to the invoices as a means of proving the sale of the motor vehicles. The Respondent opposed this request. The tribunal understood that the case already had all the necessary elements, and therefore dismissed the Claimant's request.

The Parties waived arguments.

ISSUES TO BE DECIDED

In view of the positions assumed by the Parties, as expressed in the arguments presented, it is necessary:

To decide on the matter of exception raised by the Respondent;

If that does not prevent the examination of the matter of exception mentioned above,

To determine who is the taxable subject of IUC when, on the date of the occurrence of the taxable event, the motor vehicle originally subject to long-term rental or financial leasing contract has already been alienated;
To determine the legal value of the vehicle register in the context of IUC, particularly for purposes of the subjective scope of the tax;
To determine whether the interpretation of article 3 of the IUC Code conveyed by the Claimant is contrary to the Constitution, violating the constitutional principles of trust and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality;
To determine whether the failure to update the vehicle register permits considering, as taxable subjects of IUC, the persons in whose names the vehicles are registered; and
To determine whether the invoices submitted by the Claimant are or are not apt to prove the alleged alienations.

FACTUAL MATTER

Proven Facts

With relevance for the decision to be rendered in the present proceedings, the following facts were established as proven:

The Claimant is a credit financial institution whose corporate purpose is the practice of operations permitted to banks, with the exception of the receipt of deposits;
In the course of its activities, the Claimant concludes with its customers long-term rental contracts (ALD) and financial leasing contracts having motor vehicles as their object;
The 45 IUC payment documents refer to vehicles in relation to which, on the date of the occurrence of the taxable event, a sales invoice to a third party had been issued by the Claimant;
The Claimant paid the tax and the compensatory interest now under discussion.

Facts Not Proven

With interest in the proceedings, no other fact was proven.

Substantiation of Factual Matter

The conviction regarding the facts established as proven was formed on the basis of the documentary evidence submitted by the Claimant, indicated in relation to each of the points, and whose adherence to reality was not questioned.

CUMULATION OF CLAIMS

Nothing is said on this matter by the Claimant. It is necessary to take a position: there is identity as to the nature of the tax facts, the factual and legal grounds invoked, and the tribunal competent to decide, and therefore nothing prevents proceeding with the cumulation of claims, pursuant to article 3 of the LRAT and article 104 of the Tax Procedure and Process Code.

SANITATION

The Arbitral Tribunal is regularly constituted and materially competent.

The parties possess judicial personality and capacity, are legitimate, and are regularly represented.

The case does not suffer from defects affecting its validity; however, the Respondent raises a matter of exception that must be previously examined; this will be done below.

ON THE LAW

On the Matter of Exception

The Respondent proposes the peremptory exception of lack of subject matter of the request for arbitral pronouncement, alleging, succinctly, that the Claimant did not proceed with the payment of official assessments, but rather of IUC collection documents extracted by it from the tax portal.

The Respondent sustains that it did not proceed with the notification of the discussed assessments and, likewise, did not issue any official IUC assessments for the years and vehicles in question, relying, for this purpose, on the documents attached by the Claimant to the request for arbitral pronouncement under numbers 2 to 46.

It further states that it was the Claimant who, without having been notified, proceeded with the issuance of collection documents in relation to each of the vehicles; from this inferring that "the present request for arbitral pronouncement is not based on official assessment acts issued by [the Respondent], but rather on collection documents that the Claimant entirely voluntarily extracted from the Tax Portal, and on which it proceeded with payment".

The Respondent continues by saying that "the assessment act is configured in the determination and identification of the taxable subject of the tax, on the one hand, and on the other in the fixing of the tax to be paid". Subsequently, the assessment act is "subject to notification to the taxable subject in accordance with the provisions of Article 36 of the TPPC".

And it further emphasizes that, in accordance with subparagraph b) of paragraph 2 of article 10 of the LRAT, the request for arbitral pronouncement "shall contain the identification of the tax act or acts subject to the request for arbitral pronouncement"; and that from subparagraph a) of paragraph 1 of article 2 of the same diploma, it follows that "it is within the competence of arbitral tribunals to declare the illegality of tax assessment acts, self-assessment acts, withholding at source acts, and advance payment acts".

As was seen, the Respondent sustains that no IUC assessment acts relating to the vehicles and years in question were issued, but rather collection documents extracted voluntarily by the Claimant from the tax portal, from which it results, according to the former, that the "present request for arbitral pronouncement lacks subject matter given that no assessment acts are being examined".

And it continues by saying that, "given the lack of subject matter of the present case in view of the fact that no official IUC assessment acts were issued by the Respondent entity, which constitutes a peremptory exception, which is invoked for all legal purposes, in accordance with the provisions of paragraph 3 of Article 577 of the CPC as amended by Law 41/2013 of 26 June applicable pursuant to Article 1 of the CPTA, which gives rise to dismissal of the claim in accordance with the provisions of paragraph 3 of Article 576 of the CPC".

The Respondent further adds – in case the exception raised does not proceed – that, even if it is understood that self-assessment acts are at issue – subject to challenge covered by subparagraph a) of paragraph 1 of article 2 of the LRAT – it would always have to be concluded that the present request for arbitral pronouncement would have to be preceded by a gracious objection, pursuant to paragraph 1 of article 131 of the TPPC. Now, given that the Claimant did not submit said gracious objection, the challenge of such self-assessment acts is also foreclosed.

For all that it exposes regarding the matter of exception, the Respondent concludes that the arbitral tribunal is not competent to assess the acts in question. It sustains, furthermore, that in the present case we are not dealing with official assessment acts, but rather with collection documents that the Claimant voluntarily extracted and paid.

And it concludes by saying that, "not [being] in the presence of tax assessment acts (...) the Arbitral Tribunal is incompetent to challenge such acts".

It is necessary to assess and decide.

The Respondent sustains, and rightly so, that we are not dealing with official assessment acts. Indeed, the issuance of official IUC assessments can only occur in accordance with the terms and conditions fixed in article 18 of the respective Code; in the year of registration in accordance with paragraph 1, and in subsequent years, in accordance with paragraph 2. Now, having examined the factual circumstances of the present case, it is clear that this is not the case, for which reason the Respondent could not have proceeded with the issuance of any official assessment.

However, the reason supporting the Respondent begins and ends there; for it is certain that the payment of the tax must have underlying a prior operation of assessment or self-assessment, as will be explained below. It is, therefore, with increased perplexity that one reads the argument of the Respondent, set out in article 40 of its response and whose contents are now reproduced:

"Therefore, not being in the presence of tax assessment acts (IUC), as is explicitly set out in the provisions of subparagraph a) of paragraph 1 of Article 2 of the LRAT, the Arbitral Tribunal is incompetent to challenge such acts" (emphasis ours).

One asks: does the Respondent intend to sustain, in the present case, that it is possible to fulfill the tax obligation in the absence of a prior assessment act (latu sensu)? Surely only by oversight.

In fact, proceeding from the non-existence of official assessments to thereby affirm the negation of the existence of assessments, tout court, in the present case, amounts to a logically inadmissible leap. One thing is the (non)existence of official assessments; quite another, which it is necessary to determine, is knowing what type of assessment we find in the context of IUC.

Let us proceed, then, to determine the type of assessment, as it is certain that it exists and existed in the case at hand.

Under the heading "assessment," article 16 of the IUC Code provides as follows:

"1 – The competence for assessment of the tax belongs to the Tax and Customs Authority, the tax act being considered, for all legal purposes, as performed in the tax service of the residence or registered office of the taxable subject.

2 – Assessment of the tax is made by the taxable subject itself via the Internet, under conditions of registration and access to electronic declarations, being mandatory for legal persons.

3 – Assessment of the tax may also be made by any tax service, in public service, whenever the taxable subject requests it or when the following circumstances occur:

a) The taxable vehicles are not registered in national territory;

b) The taxable vehicles benefit from exemption whose requirements must be subject to proof;

c) There is an error of identification or omission of a taxable vehicle in the database, which does not permit the taxable subject to assess the tax via the Internet.

4 – At the moment of assessment of the tax, a single collection document is issued which, certified by the means in use in the collection network, proves the proper payment of the tax.

5 – When theft, loss, or destruction of the documentation proving payment of the tax or exemption occurs, a certificate proving such may be obtained at any tax service or via the Internet."

Now, considering the criterion of the organ or subject competent to carry out the assessment, it appears from paragraph 1 of article 16 that we are dealing with an administrative assessment. However, this understanding must be tempered by reading paragraph 2 of the same article, which determines that it falls to the taxable subject to make the assessment; via the internet, mandatory, when it is a legal person, or at the counter of any tax service, when the taxable subject is a natural person, as results from the combined reading of paragraphs 2 and 3.

Thus, knowing that self-assessment is spoken of when the assessment of the tax is carried out by the taxable subject, on the basis of the taxable matter entered in the respective declarations, one asks: does the assessment of IUC assume the typology of self-assessment?

The answer does not appear univocal, because if from articles 16 and 17 of the IUC Code an affirmative conclusion appears to result, it will always be said, in light of the first normative – and making use of the way in which, in practice, the "assessment" and obtaining of the single collection document is processed – that it is possible to sustain that it is an administrative assessment. And, it should be noted, the existence of informed doctrine is not ignored which, in this regard, understands that we are dealing with self-assessment whenever it is processed via internet.

Let us see: as BRÁS CARLOS refers, in cases of self-assessment it is "the law that imposes that assessment of the tax be carried out by the taxpayers themselves. This is the case, namely, in VAT and IRC".

However, it differs from what occurs in IRC – where it is determined that the competence for assessment is attributed to the taxable subject itself, through the filing of the income declaration within the deadlines provided in articles 120 and 122 of the IRC Code, and is based on the taxable matter contained therein – in the context of IUC the law expressly attributes the competence for assessment of the tax to the Tax Authority (cf. paragraph 1 of article 16 of the IUC Code).

Thus, it can and must be said that, in the case of IRC, the "taxable subject, in the respective declarations, applies the law to its particular case, determines its taxable matter and the value of tax due", the same cannot be done with respect to IUC, because here the taxable subject in no way influences the determination of taxable matter and the determination of the tax amount. And let it not be said that such operations can be assimilated to the conduct of the taxable subject which, through its reserved area in the tax portal, "assesses" and issues the single collection document relating to IUC.

Indeed, in this case, the taxable subject, expressing its agreement with the tax parameters inserted previously and automatically in the motor vehicle registry, executes a mere material act leading to the obtaining of the DUC; and not concrete operations of determining the taxable matter and of applying the rate to it with a view to calculating the tax collection. Moreover, in the context of IUC, and unlike what occurs in true self-assessment procedures, the taxable subject does not proceed with the filing of any tax declaration.

We believe, by what has been stated, that in the context of the Single Circulation Tax we do not find a true self-assessment, but rather an administrative assessment stimulated by the taxable subject. Indeed, while it is certain that the taxpayer takes part in the process of assessment/issuance of the DUC, triggering it, such participation does not assume the substantive character found, for example, in the context of IRC or VAT, and therefore one should not speak of self-assessment in the strict sense.

For all that has been stated, it is concluded that we are dealing with acts of tax assessment, for purposes of subparagraph a) of paragraph 1 of article 2 of the LRAT.

The exceptions raised by the Respondent are therefore without merit, the case does not suffer from the lack of subject matter pointed out, and the arbitral tribunal is competent to assess the merits of the question; which will be done below.

On the Merits

With the factual matter established, it is now necessary, by reference to it, to determine the applicable law.

Having examined the arguments presented by the Parties, it is easy to discern the underlying issue at hand: whether the norm contained in paragraph 1 of article 3 of the IUC Code contains or does not contain a legal presumption. It should be noted, moreover, that this question has been extensively raised, giving rise to abundant jurisprudence – including arbitral – which will be appropriately brought in.

Under the heading "subjective scope," article 3 of the IUC Code provides that:

"1. – The taxable subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private right, in whose names the same are registered.

– Being equated with owners are the financial lessees, the acquirers with reservation of title, as well as other holders of purchase option rights by virtue of the leasing contract."

Now, to dispel doubts about the meaning and scope to be attributed to a particular legal norm implies carrying out an interpretive task that permits extracting from the linguistic statement a concrete meaning or "content of thought". However, such a task can only be fulfilled – thereby apprehending the vis ac potestas legis – through the use of a specific method, which is based on literal interpretation, on the one hand, and on logical or rational interpretation, on the other.

It should be recalled, before we proceed, that in accordance with paragraph 1 of article 11 of the General Tax Law, tax norms are interpreted in accordance with the principles of legal hermeneutics commonly accepted, particularly those fixed, in our country, in article 9 of the Civil Code. Let us proceed.

Literal interpretation thus presents itself as the first stage of interpretive activity. As FERRARA states, "the text of the law forms the substratum from which and on which the interpreter must start and rest".

Indeed, since the law is expressed in words, the verbal significance they contain must be extracted from them, according to their natural connection and grammatical rules. However, if the words used by the Legislator are equivocal or indeterminate, it will be necessary to resort to logical interpretation, which attends to the spirit of the provision being interpreted.

Logical interpretation, as has been peacefully understood by doctrine, is based on the rational element, the systematic element, and the historical element; weighing them and deducing from them the value of the legal norm in question.

By rational element must be understood the raison d'être of the legal norm, i.e., the purpose for which the legislator instituted it. The discovery of the ratio legis thus presents itself as a factor of undoubted importance for determining the meaning of the norm.

However, a particular norm does not exist in isolation; rather, it coexists with other norms and legal principles in a systematic and complex manner. Thus, it naturally becomes the case that the meaning of a concrete norm results clearly from its comparison with others. As BAPTISTA MACHADO states, "this element comprises the consideration of other provisions that form the normative complex of the institute in which the norm being interpreted is integrated, that is, that 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 belongs to the norm being interpreted in the overall legal order, as well as its consonance with the spirit or intrinsic unity of the entire legal order."

The historical element, in turn, must refer to and include materials connected with the history of the norm, such as "the evolutionary history of the institute, figure, or legal regime in question (...); the so-called sources of the law, that is, the legal or doctrinal texts that inspired the legislator in elaborating the law (...); preparatory works."

Let us apply what has been stated to the case at hand.

Having examined the arguments of Claimant and Respondent, and as regards the literal element, it is easy to understand that the focus of disagreement resides in the expression "(...) being considered as such (...)", contained in paragraph 1 of article 3 of the IUC Code.

One asks – as was done in the Arbitral Decision rendered in the context of Case no. 73/2013-T: "Does the fact that the legislator chose the word 'being considered' destroy the possibility that we are dealing with a presumption?" No. This is the answer that we believe is called for. And let it not be said that this conclusion is undermined by the fact that the legislator did not use the word "are presumed," which it used in the old Vehicle Tax Regulation.

Nor can we fail to highlight what was said in that decision: "examining Portuguese legal order, we find countless norms that establish presumptions using the verb 'to consider,' many of which used in the gerund form ('considering' or even 'being considered'). Examples of this are the norms listed below: In the Civil Code, among others, articles 314, 369 paragraph 2, 374 paragraph 1, 376 paragraph 2, 1629 (...). Also in the tax legal order one can find the verb 'to consider,' namely the term 'it is deemed' with a presumptive sense. And there is added the teaching of LEITE DE CAMPOS, SILVA RODRIGUES, and LOPES DE SOUSA which, for the clarity of exposition, is equally transcribed. Thus, the Authors write that 'presumptions in tax scope matters can be explicit, revealed by the use of the expression 'it is presumed' or similar (...). However, presumptions can also be implicit in scope norms, particularly objective scope norms, when certain values of movable or immovable property are deemed to constitute taxable matter, in situations where it is not impossible to determine the real value'."

In this regard, JORGE LOPES DE SOUSA refers that in paragraph 1 of article 40 of the IRS Code the expression "it is presumed" is used, whereas in paragraph 2 of article 46 of the same diploma the word "it is deemed" is used, there being no difference between one and the other expression, both meaning, in the final analysis, the same thing: a legal presumption.

And what of paragraph 4 of article 89-A? Are there still doubts that it is a presumption? And is such conclusion weakened by the fact that the verb "to consider" is used there? We do not think so.

Thus, and as regards what concerns us here, it is admissible to assimilate the verb "to consider" to the verb "to presume." Indeed, we can be dealing with a presumption even when the legislator has chosen other verbs, namely "to consider." In fact, and contrary to what the Respondent argues, this is the conclusion that least damages the systematic coherence postulated by the legal order as a whole.

But furthermore: the rational element also authorizes such a conclusion.

Let us invoke the explanatory statement of Bill no. 118/X, of 07/03/2007, which gave rise to Law no. 22-A/2007, of 29 June. The ratio legis is clear.

It was intended to undertake a "global and coherent reform of taxes linked to the acquisition and ownership of motor vehicles" in light of the "imperative necessity of bringing clarity and coherence to this area of the tax system and the even more imperative necessity of subordinating it to the principles and concerns of an environmental and energy nature that nowadays mark the discussion of automobile taxation."

Thus, "the two new taxes that are now created, the tax on vehicles and the single circulation tax, constitute much more than the technical continuation of the figures created in the 70s and 80s that preceded them, directed predominantly toward revenue collection, indifferent to the social cost resulting from automobile circulation. They constitute something different, figures already of the century in which we live, with which it is intended, certainly, to collect public revenue, but to collect it in the measure of the cost that each individual causes to the community."

In accordance with that motivation, the legislator came to enshrine, in article 1 of the IUC Code, the principle of equivalence, making clear "that the tax, as a whole, is subordinated to the idea that taxpayers should be taxed in the measure of the cost they cause to the environment and the road network, this being the reason for being of this tax figure. It is this principle that dictates the taxation of vehicles in function of their respective ownership and until the moment of scrapping."

It can, moreover, be said that the environmental and energy concerns are so impressive in the context of IUC that the principle of equivalence shapes not only the taxable base, but also, and above all, the very subjective scope, provided for in article 3.

Once again reference is made to the Arbitral Decision rendered in Case no. 73/2013-T: "Taking into account both the systematic place that the principle of equivalence occupies (article 1 of the IUC Code) – systematic element – and the historical element embodied in Bill no. 118/X (source of law), and the rational (or teleological) element just analyzed, all point in the direction of the preliminary conclusion we reached when analyzing the grammatical element, only making sense to conceive, in the context of article 3 of the IUC Code, the expression 'being considered as such' as revealing the presence of a rebuttable presumption (...). Indeed, the ratio legis of the tax rather points in the direction of the actual users of the vehicles, the economic owner, as DIOGO LEITE DE CAMPOS would say, the actual owners or financial lessees being taxed, as it is these who have the polluting potential causing environmental costs to the community."

Now let us examine what solution applies when a vehicle is sold. Once the purchase and sale is concluded, the acquirer will be instituted, ex contratu, in the position of owner, consequently becoming applicable to it paragraph 1 of article 3 of the IUC Code; i.e., the new owner acquires, for purposes of IUC, the position of taxable subject of the tax.

And such a solution is necessary from the moment of perfection of the purchase and sale contract not only because the IUC Code determines it – by stating that the taxable subjects of the tax are the owners – but also because the principle of consensuality prevails in our country, which means that the transfer of ownership occurs by mere effect of the contract; as results primarily from paragraph 1 of article 408 of the Civil Code. See also, reinforcing what is stated above, subparagraph a) of article 879 of that diploma.

It should be noted that the understanding set out in the paragraph above is unanimously advocated by Doctrine and Jurisprudence and therefore requires no further development.

And what has been stated is relevant to sustaining our position as to the legal value of the vehicle register. It should be recalled, however, that in accordance with the general rule seen above, the transfer of the right is produced ex contratu, without need for any material act or publicity.

As is peacefully accepted by Doctrine and Jurisprudence, in the absence of any statement in Decree-Law no. 54/75, of 12 February, regarding the question of the legal value of the vehicle register, it becomes necessary to make use of the discipline of the real estate register; an operation moreover authorized by article 29 of that Decree-Law.

Now, considering the Real Estate Register Code – approved by Decree-Law no. 125/13, of 30 August – particularly its article 7, and combining this norm with article 1 of Decree-Law no. 54/75, it quickly appears that the primary function of the (vehicle) register is: to give publicity to the legal situation of motor vehicles.

It can therefore be stated that the register does not have a constitutive nature, but merely a declarative one, permitting only the presumption of the existence of the right and its ownership. Note: presume and not feign, and therefore can be rebutted by contrary proof.

And this is so precisely because, pursuant to the provisions of article 408 of the Civil Code, and saving the exceptions provided for in law, the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, with its validity not depending on any subsequent act, e.g., registration in the register.

Accordingly, the law not providing for any exception for the purchase and sale contract of a motor vehicle, the real efficacy produces its normal effects, with the acquirer becoming its owner, independent of registration. Now, if independent of registration the acquirer becomes the owner, the registered holder simultaneously ceases to be; notwithstanding appearing in the register as such.

In the present case, and notwithstanding the failure to register the transfers in the register, the transfers effected are enforceable against the Respondent, and it cannot avail itself of the provisions of paragraph 1 of article 5 of the Real Estate Register Code. First and foremost because it is not, for purposes of the provisions of that norm, considered a third party for purposes of registration.

The notion of third parties for purposes of registration is given to us by paragraph 4 of the same article 5: third parties, for purposes of registration, are those who have acquired from a common author rights that are incompatible with each other. Such is manifestly not the case in the proceedings at hand.

The same reasoning must, naturally, be applied to cases of financial leasing or long-term rental, in relation to which the register also has no constitutive efficacy, being nothing more than a presumption that the right exists. A rebuttable presumption, at the same time, through contrary proof.

And, in the same way, the failure to register the financial leasing contract does not mean that it does not exist.

Having reached this point, the Respondent defends that this interpretation of the norm contained in article 3 of the IUC Code, which was moreover advocated by the Claimant, is contrary to the Constitution, violating the constitutional principles of trust and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

We shall forthwith state that we do not endorse this understanding.

Let us see:

Article 46 of the TPPC provides that "the acts to be taken in the procedure shall be those appropriate to achieving the objectives, in accordance with the principles of proportionality, efficiency, practicality, and simplicity."

The principle of proportionality obligates the administration not to affect the rights or legitimate interests of those administered in terms not adequate and proportional to the objectives to be achieved.

In the words of FREITAS DO AMARAL, the principle of proportionality means that "the limitation of private goods or interests by acts of public powers must be adequate and necessary to the concrete purposes that such acts pursue, as well as tolerable when confronted with those purposes."

Through the principle of proportionality it is thus intended to limit the activity of the Public Administration, so as to guarantee that this, when it is necessary to limit private goods or interests with a view to pursuing the public interest, opts for the measures that are most balanced and adequate.

In the case at hand, the public interest that the Respondent is required to pursue – the obtaining of revenue – must necessarily be harmonized with the interests and rights of private parties that may be affected by acts of the Respondent.

And such harmonization necessarily passes through the non-subjection to IUC of private parties that are no longer owners of the vehicles and that in no way contribute to any possible aggravation of any road or environmental cost of its use, regardless of whether the vehicles are or are not registered in their name.

For which reason it is not apparent in what way the interpretation of the norm contained in article 3 paragraph 1 of the IUC Code defended by the Claimant does not violate the constitutional principle of proportionality.

As regards the principle of efficiency of the tax system, this is understood, in the field of tax procedure, as a corollary of the principle of proportionality, being commonly interpreted as the imposition that the TA achieve the objectives of pursuing the public interests with the use of the fewest means.

In this regard, the Respondent invokes that the interpretation given by the Claimant is offensive to this principle, "in that it results in a hindering and increased cost of the competences attributed to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent are part."

Notwithstanding what is alleged, the Respondent does not specify in what way the interpretation defended by the Claimant is apt to violate this principle of efficiency of the tax procedure.

But, understanding this principle as the necessity for the TA to rationalize the means it uses in pursuing the public interest of obtaining revenue, it will always be said that the better way to implement this rationalization would not pass through the "blind" obtaining of revenue, taxing those who are not owners of the vehicle or not even permitting those who are not owners to prove that they are not, but through changing the modus operandi of the TA.

Specifically, and taking into account that a significant part of the jurisprudence, including arbitral, understands that article 3 paragraph 1 of the IUC Code contains a rebuttable presumption through contrary proof, it would be more in accordance with the principle of efficiency of the tax procedure for the TA to begin by requesting documentation of vehicle ownership from taxpayers and not to base itself solely on existing registration elements.

Indeed, even though in the present case the Claimant did not submit a prior gracious objection to the institution of the request for arbitral pronouncement, through which one could argue that the TA did not know that it would not be the owner of the vehicles on which the challenged assessments fall, the truth is that, having been notified of the submission of the request by the Claimant, the TA could, under the provisions of article 13 paragraph 1 of the LRAT, revoke, ratify, reform, or convert the challenged acts, which it did not do.

Thus, we do not perceive any violation of this constitutional principle in the interpretation of article 3 paragraph 1 of the IUC Code defended by the Claimant.

Finally, the Respondent invokes that the interpretation defended by the Claimant is a violation of the principles of trust and legal certainty. Regarding these principles, GOMES CANOTILHO teaches that "legal certainty is connected with objective elements of the legal order – guarantee of legal stability, security of orientation and realization of law – while protection of trust is connected more with the subjective components of security, namely the calculability and foreseeability of individuals in relation to the legal effects of acts of public powers."

Explaining this concretely, the said Professor explains that the "general principle of legal certainty in the broad sense (thus encompassing the idea of protection of trust) can be formulated in the following manner: the individual has the right to be able to trust that to their acts or public decisions affecting their rights, positions, or legal relationships based on valid and in force legal norms are linked the legal effects foreseen and prescribed by those same norms."

Transposing this doctrine to the case at hand, the application of such principles will necessarily require that private parties, when selling their vehicles, are confident that, should the new owner not proceed with the necessary alteration of ownership in the vehicle register, the legal effects resulting therefrom will be those foreseen and resulting from the legal norms in force and their adequate interpretation, in light of the legal purposes of those same norms.

And the most adequate interpretation of the legal norms in force, specifically of the norm contained in article 3 paragraph 1 of the IUC Code, is that which understands that this norm contains a rebuttable presumption of ownership, and that it is not prohibited for private parties to rebut such presumption when the vehicle register does not reflect the reality existing.

Thus, the constitutional principles of trust and legal certainty, the efficiency of the tax system, and proportionality require, contrary to what was defended by the Respondent, the interpretation of the norm contained in article 3 paragraph 1 of the IUC Code according to which this norm contains a legal presumption, rebuttable through contrary proof, and in this way the Claimant can rebut the presumption resulting from the register.

In the case, the Claimant alleges that, on the date of the taxable event, it was no longer the owner of the vehicles in question, having already alienated them.

Thus, and since the presumption resulting from the register is, as we have seen, rebuttable, let us see whether the documents submitted by the Claimant are apt to accomplish this objective.

With the purpose of proving that the vehicles referred to in the present proceedings were alienated by it on a date prior to the occurrence of the taxable event, the Claimant submitted the respective sales invoices.

It should be noted that the Respondent alleged, in relation to each of the invoices submitted, that these are not regularly issued, not being a suitable document to prove the sale of the vehicle in question, as it is nothing more than a document unilaterally issued by the Claimant (cf. articles 127 to 157 of the response).

First, it is verified that the Claimant submitted, for each of the registrations in question, a sales invoice.

This being so, and as results from the proven facts, none of the 30 vehicles in question in the present proceedings belongs to categories F or G referred to in article 4 of the IUC Code, for which reason the taxable event occurs on the date of the respective registration or on each of its anniversaries.

It also results from the proven facts that, on the date of the occurrence of the taxable event, an invoice for the sale to a third party had been issued by the Claimant in relation to each of these 30 vehicles.

The Respondent sustains that the invoice is not a suitable document to prove the sale of the vehicle, being nothing more than a document unilaterally issued by the Claimant, alleging that "as is common knowledge, there is no lack of cases of issuance of invoices relating to transfers of goods and/or provision of services that never occurred."

It is true, as the Respondent invokes, that many situations exist in which invoices do not evidence any legal transaction. In the case at hand, however, no element permits us to conclude that the invoices submitted do not evidence any transaction, and it is certain that their falsity was not even argued by the Respondent, which merely invoked the existence of several such situations, without specifically referring that the situation in the case at hand subsumed to such.

In the absence of any elements or grounds permitting us to conclude otherwise, we must, naturally, accept the veracity of the documents submitted.

The veracity of the invoices submitted by the Claimant being established, we must consider, without need for any other considerations, that these are documents apt to prove the alienation of the vehicles in question.

Indeed, the law providing for no specific form for the conclusion of a purchase and sale contract of a movable good, it must necessarily be accepted as proof of said contract the invoice issued in accordance with law.

For which reason it is verified that, on the date of the taxable event (date of registration or each of its anniversaries), the Claimant had alienated all 30 vehicles, notwithstanding that said alienations were not reflected in the competent register.

Thus, taking into account the fact that, as has already been stated, the presumption resulting from the register is rebuttable through contrary proof, proof that is considered sufficient with the presentation of the sales invoices of the vehicles, it is verified that, in relation to these 30 vehicles, the Claimant is not their owner, and is therefore not the taxable subject of the IUC assessed.

In summary:

The norm contained in paragraph 1 of article 3 of the IUC Code contains a presumption;
Being that presumption contained in a norm of tax scope, it will always admit contrary proof, as results from article 73 of the General Tax Law;
When, on the date of the occurrence of the taxable event, a motor vehicle originally subject to a financial leasing contract has already been alienated, although the right of ownership remains registered in the name of the original owner, the taxable subject of IUC is the new owner, provided that he rebuts the presumption arising from the register;
The transfer of ownership occurs by mere effect of the contract, requiring no subsequent act;
The vehicle register does not have a constitutive nature, but is aimed at giving publicity to the situation of vehicles through rebuttable presumptions of the existence of the right and its respective ownership;
The TA cannot base itself on the failure to update the register to, questioning the perfection of the purchase and sale contracts, attribute to the original owner the quality of taxable subject of IUC and thus require from this party the fulfillment of the tax obligation.

From all that has been stated it is clear that there is no legal foundation for the acts of IUC assessment, their annulment being necessary, as well as of the respective compensatory interest, with the other legal consequences.

DISPOSITIF

In view of the foregoing, it is decided:

To judge the request for annulment of the IUC assessment acts and compensatory interest referred to in the Claimant's request as merited and proven;
To annul the IUC assessment acts and compensatory interest referred to in the preceding item;
To judge as merited the request for restitution of the amount of €2,333.23, paid by the Claimant, plus indemnificatory interest at the legal rate, counted from the improper payments, until full payment to the Claimant of the assessed amounts;
To condemn the Respondent in the costs of the case.

The value of the case is fixed at €2,333.23, pursuant to subparagraph a) of paragraph 1 of article 97-A of the Tax Procedure and Process Code, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the LRAT and paragraph 2 of article 3 of the Rules of Costs in Tax Arbitration Proceedings.

The arbitration fee is fixed at €612.00, pursuant to Table I of the Rules of Costs in Tax Arbitration Proceedings, in accordance with paragraph 2 of article 12 and paragraph 4 of article 22, both of the LRAT, and paragraph 4 of article 4 of the said Rules, to be paid by the Respondent as the losing party.

Lisbon, 14 March 2018.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, pursuant to paragraph 5 of article 131 of the CPC, applicable by remission of subparagraph e) of paragraph 1 of Decree-Law no. 10/2011, of 20/01.

The drafting of this decision is governed by the old orthography.

Arbitral decision replaced by the decision of 14 March 2018.

Arbitral Decision

REPORT

..., S.A., a company with registered office at Rua ..., Lisbon, holder of the unique registration and identification number for legal persons ..., hereinafter simply designated as Claimant, filed a request for constitution of an arbitral tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of subparagraph a) of paragraph 1 of article 2 and subparagraph a) of paragraph 1 of article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter abbreviated as LRAT), petitioning for the annulment of the acts of assessment of the Single Circulation Tax (IUC) relating to twenty-one (21) motor vehicles identified in the request for arbitral pronouncement and corresponding compensatory interest, relating to the years 2009 to 2012, in the total amount of €2,333.23, as well as reimbursement of the same amount and payment of corresponding indemnificatory interest.

To substantiate its request, it alleges, in summary:

The Claimant is a financial institution that, in the course of its activities, concludes long-term rental contracts and financial leasing contracts for motor vehicles;
On the date of the occurrence of the taxable event in the present proceedings, the Claimant was not the owner of the motor vehicles on which the paid tax was levied, which had already been sold;
Pursuant to article 3 of the IUC Code, the taxable subjects of the tax are the owners of the vehicles, being equated with owners the financial lessees, the acquirers with reservation of title, as well as other holders of purchase option rights by virtue of a leasing contract;
Paragraph 1 of article 3 of the IUC Code contains a rebuttable presumption;
Thus, the taxable subject of IUC is the owner, even if not appearing in the vehicle register, provided that sufficient proof is presented to rebut the legal presumption arising from the register;
In the case of crisis assessments, the Claimant is not a taxable subject of IUC;
The purchase and sale contract has real efficacy;
The Tax and Customs Authority (TA) is not a third party for purposes of registration, and therefore cannot avail itself of the failure to update the property register to call into question the full efficacy of the purchase and sale contract;
The Claimant paid the tax in question in the present proceedings, as well as the corresponding compensatory interest.

The Claimant attached 76 documents and did not call any witnesses.

The arbitral tribunal was constituted on 15 April 2014.

By exception:

Contrary to what was alleged by the Claimant, the assessments in question are not official assessments but rather IUC collection documents extracted by the Claimant from the Tax Portal;
Thus, the request for arbitral pronouncement lacks subject matter, and the arbitral tribunal is incompetent to assess this request, which constitutes a peremptory exception and gives rise to dismissal of the claim;
Should it be understood that the issued collection documents are self-assessments, subject to challenge before the arbitral tribunal under the provisions of subparagraph a) of paragraph 1 of article 2 of the LRAT, it will always be said that such challenge must be preceded by a gracious objection;
In the present case, the Claimant did not submit any gracious objection, and therefore such self-assessment acts are not subject to challenge before this tribunal;
The conduct of the Claimant, which, on the one hand, without having been notified of any official IUC assessment act, self-assessed the tax, issuing collection documents and paying, and on the other, came to challenge the very acts to which it gave rise, constitutes an abuse of rights, in the modality of venire contra factum proprium.

By challenge:

Article 3 of the IUC Code does not establish any presumption of ownership, but a true fiction of ownership – the legislator does not say that they are presumed to be owners, but that they are deemed to be owners;
The failure to register the changes of ownership in the register has the consequence that the obligation to pay IUC falls upon the registered owner, and the TA cannot assess the tax on the basis of elements not contained in the register;
IUC is owed by the persons appearing in the register as owners of the vehicles;
The invoices submitted by the Claimant as proof of the conclusion of the purchase and sale contract are not apt to prove such;
As regards the vehicle with registration number ..., the Claimant does not submit any invoice.

The Respondent attached a copy of the administrative file and did not call any witnesses.

The Parties waived arguments.

ISSUES TO BE DECIDED

In view of the positions assumed by the Parties, as expressed in the arguments presented, it is necessary:

To decide on the matter of exception raised by the Respondent;

If that does not prevent the examination of the matter of exception mentioned above,

To determine who is the taxable subject of IUC when, on the date of the occurrence of the taxable event, the motor vehicle has already been alienated;
To determine the legal value of the vehicle register in the context of IUC, particularly for purposes of the subjective scope of the tax;
To determine whether the failure to update the vehicle register permits considering, as taxable subjects of IUC, the persons in whose names the vehicles are registered; and
To determine whether the invoices submitted by the Claimant are or are not apt to prove the alleged alienations.

FACTUAL MATTER

Proven Facts

With relevance for the decision to be rendered in the present proceedings, the following facts were established as proven:

The Claimant is a credit financial institution whose corporate purpose is the practice of operations permitted to banks, with the exception of the receipt of deposits;
In the course of its activities, the Claimant concludes with its customers long-term rental contracts (ALD) and financial leasing contracts having motor vehicles as their object;
The 45 IUC payment documents refer to vehicles in relation to which, on the date of the occurrence of the taxable event, a sales invoice to a third party had been issued by the Claimant;
The Claimant paid the tax and the compensatory interest now under discussion.