IUC Tax Arbitration: Annulment of €11,887 Unique Circulation Tax Assessment

ARBITRATION AWARD

I – REPORT

A. – PARTIES

A…, S.A., hereinafter referred to as Claimant, legal entity no. … … …, with registered office on … Street, no. …, …. -… Lisbon, requested on February 14, 2014 the establishment of a singular arbitral tribunal in tax matters, pursuant to the provisions of art. 2º, no. 1, paragraph a) of Decree-Law no. 10/2011, of January 20 (Legal Framework for Tax Arbitration - RJAT) and in arts. 1º, paragraph a) and 2º of Regulation no. 112-A/2011, of March 22, with the purpose of resolving the dispute that opposes it to the Tax and Customs Authority, hereinafter referred to as Respondent.

B. – CONSTITUTION OF THE TRIBUNAL

1. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the Claimant and the Tax and Customs Authority on 18/02/2014, having the President of the respective Deontological Council appointed the undersigned as arbitrator of the Singular Arbitral Tribunal, pursuant to the provisions of art. 6º, no. 1, of RJAT, which burden was accepted under the legally established terms.

2. On 04/04/2014, the Parties were notified of such appointment, in accordance with the combined provisions of art. 11º, no. 1, paragraph b) of RJAT and articles 6º and 7º of the Deontological Code, having manifested no intention to refuse the arbitrator's appointment.

3. In these circumstances, the Tribunal was constituted on 22/04/2014, in accordance with the prescribed in paragraph c), of no. 1, of art. 11º of Decree-Law no. 10/2011, which was notified to the Parties on that date.

C. – CLAIM

The Claimant seeks that the Arbitral Tribunal declare the illegality and consequent annulment of the Unique Circulation Tax in the amount of 11,887.96 euros, in accordance with the terms described in the Request for Arbitral Opinion, and, consequently determine the restitution of the tax that was paid by the Claimant, plus compensatory interest.

D. – PROCEDURE

Following the notification of the date of constitution of the Arbitral Tribunal, on 22/04/2014, the subsequent procedural steps followed as follows:

• On 29/04/2014 – The Respondent was notified to, in accordance with nos. 1 and 2 of art. 17º of RJAT, submit a Response within 30 days and, if desired, request production of additional evidence.

• On 21/05/2014 – The Respondent submitted a Response to the Request for Arbitral Opinion, sent a dispatch designating the legal representatives of the Respondent and inserted the administrative process in the CAAD online "Platform", and the Claimant was notified of all this.

• On 23/05/2014 – The Respondent, alleging an oversight, requested, as it was still timely, the substitution of the procedural document presented as a Response, with a Response addressing the present proceedings.

• On 27/05/2014 – The Tribunal designated June 16, 2014 for the meeting provided in art. 18º of RJAT, which was notified to the Parties.

• On 01/06/2014 – Upon gathering information that the Claimant had not yet been notified of the AT's request of 26/05/2014, the Tribunal ordered the joining to the record of the Tax Authority's request of 23/05/2014, and ordered the notification of the same to the Claimant, which occurred on 02/06/2014.

• On 04/06/2014 – The Claimant submitted a request stating that it does not object to the joining to the record of the new Response presented by the Tax Authority, as it was still within the deadline to do so, agreeing with the Respondent's proposal in the Response regarding the waiver of the meeting provided in art. 18º of RJAT scheduled for 16/06/2014, without renouncing the presentation of submissions.

• On 05/06/2014 – The Tribunal admitted the joining to the record of the Claimant's request of 04/06/2014 and ordered notification of the Respondent, which occurred on that date.

• On 16/06/2014 – The meeting provided in art. 18º of RJAT took place, from which resulted the following:

• The Parties, heard for that purpose, declared that they would not invoke any exception capable of being appreciated and decided before the examination of the claim and that additional evidence production was not necessary.

• In light of the parties' agreement regarding the presentation of written submissions, the Tribunal fixed a period of fifteen days from the date of this meeting for simultaneous and written presentation of the submissions.

• Setting the date for issuance of the decision on 14/07/2014.

• On 24/06/2014 – The Claimant presented written submissions.

• On 14/07/2014 – Issuance of the decision.

E. – CLAIMANT'S CLAIM AND ITS GROUNDS

The Claimant seeks that the Arbitral Tribunal declare the illegality and consequent annulment of 249 (two hundred and forty-nine) acts of assessment of Unique Circulation Tax, identified in the Table attached to the Request for Arbitral Opinion (Annex A) and made by the Tax and Customs Authority regarding the 98 (ninety-eight) motor vehicles also identified in the same Annex A, and relating to the years 2009 to 2012, in the total amount of € 11,887.96.

In support of the Request for Arbitral Opinion, the Claimant alleged, in summary, the following:

• The acts of assessment of VAT referred to are based on the same facts and, likewise, on the same legal grounds.

• All of them presuppose the same legal-tax understanding: that, pending the respective financial lease contracts, the Claimant herein, the lessor entity of the vehicles in question, is responsible for the payment of UCT, instead of the corresponding lessee.

• The determination of the (il)legality of the aforementioned assessments implies the analysis of the same factual grounds and the interpretation and application of the same rules and principles of Law.

• Considering this identity of tax facts, of factual and legal grounds and, likewise, of the court competent to decide, and also taking into account the high number of vehicles and the volume of documentation necessary to prove the alleged facts, the Claimant opted, under articles 3º of RJAT and 104º of the Code of Procedure and Tax Process, to aggregate the additional assessments whose legality it contests in a single request for arbitral opinion.

• For which reason it requests, under the cited provisions and taking into account the principle of procedural economy, the issuance within the scope of the present arbitration proceedings, a judgment of illegality regarding the 249 (two hundred and forty-nine) acts of tax assessment in question herein.

• On the other hand, the acts of assessment of UCT claimed were addressed to B…, S.A. BRANCH IN PORTUGAL, holder of NIPC … … … (hereinafter, simply "B"), previously designated as C…, SA.

• It was a branch in Portugal that was extinguished, and whose registration was consequently canceled on 10/01/2007.

• The set of assets and liabilities that was held by this branch was, prior to its extinguishment, incorporated into the Claimant.

• That thus assumed the position of lessor in all leasing contracts that were then in effect in the legal sphere of SCFEC, among which were those regarding the vehicles identified in Annex A, which came to be part of the Claimant's asset portfolio – which acquired all rights and obligations inherent to the position of financier and lessor, namely, but not limited to, the right to receive all amounts due by the acquirers, due and due in the future, and by the lessees of the contracts to the respective lessor, as title of future rents, residual value and any other amounts that, by virtue of the contracts, must be paid to the lessor.

• It being incumbent upon it the procedural standing to contest any tax liabilities that may be charged to (or that derive from) the referred contracts.

• The Claimant paid the amount of UCT assessed in the acts of additional assessment identified in Annex A.

• The Claimant is a credit institution with strong presence in the national market.

• Among its areas of activity, special relevance is assumed by financing in the automotive sector, being currently one of the largest Portuguese banks specialized to operate in that particular area of financing.

• For which reason, a substantial part of its activity is reducible to the celebration – among others – of financial lease contracts intended for the acquisition, by companies and individuals, of motor vehicles.

• These contracts generally follow a common script, proper to this type of financing: the Claimant, after being contacted by the client – which, at that phase, has already chosen the type of vehicle it wishes to acquire, its characteristics (brand, model, accessories, etc.), and even its price – acquires the vehicle from the supplier indicated to it by the client, and proceeds, subsequently, to its delivery to the said client – which thus assumes the status of lessee.

• During the period that is to be stipulated in the contract, this lessee maintains the temporary enjoyment of the vehicle – which remains property of the Claimant – through remuneration to be delivered to the Claimant in the form of rents, and may acquire the vehicle at the end of the contract, through payment of a residual value.

• The vehicle that is subject to the contract remains at all times, during the term of the contract, in the exclusive enjoyment of the client/lessee.

• The motor vehicles identified in the list attached as Annex A (whose registration appears in column C) were given in financial lease, by the Claimant, to the clients also identified in column L).

• A lease that was in effect in the years (or, more specifically, in the months of the years) when the obligation to pay UCT associated with the respective vehicle became due.

• The use of the referred motor vehicles was always exclusively in charge of the lessee, although its ownership continued to belong to the Claimant, as lessor entity.

• Recently, the Claimant was notified to proceed with the payment of the UCT that are the subject of the acts of additional assessment identified in the table attached as Annex A.

• Which it came to do, under the exceptional regime established by Decree-Law 151-A/2013 (Exceptional Regime for Regularization of Tax Debts and Social Security).

• The Respondent had knowledge of the existence of the financial lease contracts in question and the identity of the lessees.

• In cases of financial lease, acquisition with reservation of ownership, etc. – the legislator chose, to burden with the tax obligation not the owners, but the individuals to whom the exclusive enjoyment (potential use) of the automobiles falls: the financial lessees, acquirers with reservation of ownership or lessees with purchase option.

• Under no. 2 of art. 3º of the UCT Code, the obligation to pay UCT is of the lessee.

• Which is in conformity with the assumption underlying this tax: the potential capacity for pollution associated with the use of the motor vehicle upon which taxation falls, which, under the legal terms (Decree-Law no. 149/95, of June 24, and its amendments) is attributed to the lessee, namely in art. 9º, no. 1, paragraph b) and 10º, no. 2.

• During the term of the financial lease contract, the lessor is owner of the vehicles instrumentally, as a guarantee.

• Because they are subject to financial lease contracts, and during its term, the motor vehicles (identified in Annex A) at no time were used by the Claimant, but rather by their respective lessees, namely at the moment when the UCT was assessed.

• The motor vehicles identified in the list attached as Annex A were in the possession of their respective lessees at the end of the month of registration or, in the case of the year of registration of the vehicle, ninety days after the date of registration, for which reason the responsibility for the assessment of the tax belonged not to the lessor entity, the Claimant herein, but to the lessees.

• The identity of the lessees is of the full knowledge of the Respondent, as, as a result of the provision of article 19º of the UCT Code, it is timely and promptly informed of the existence of the referred financial lease contract, as well as of the identity (notably, tax identification number) of the "user of the leased vehicle".

• And, even if that were not the case, the truth is that the referred lessee is equally, furthermore, perfectly identified with the Motor Vehicle Registration Conservatory.

• The Claimant concludes that, with a financial lease contract in force at the moment when UCT becomes due, it is the lessee, and not the lessor (even though this one holds ownership of the vehicle), that is required to assess it.

• For which reason, the Claimant is not a taxable person regarding UCT in relation to the financial lease contracts of which it is part, and for that reason the acts of additional assessment of which it was target, identified in the list attached as Annex A, are illegal.

F. – RESPONDENT'S RESPONSE AND ITS GROUNDS

The Respondent alleged, in summary:

• Does not dispute the tax acts of assessment of UCT identified in ANNEX A to the Request for Arbitral Opinion, having as subject matter 98 motor vehicles, relating to the years 2009 to 2012.

• Contests the alleged lack of standing of the Claimant as the taxable person of the UCT, in the situations in question, insofar as, in its understanding:

• The Claimant makes a biased reading of the letter of the law, given that the legislator expressly and intentionally established that the taxable persons of the UCT are the owners (or those found in the situations indicated in no. 2 of art. 3º of CIUC) considering them as such the persons in whose name the vehicles are registered, reason for which the expression "are presumed" was not used in this legal provision, but rather "are considered".

• The tax normative is full of provisions analogous to that consecrated in the final part of no. 1 of article 3º, in which the tax legislator, within its freedom of legislative configuration, expressly and intentionally, consecrates what must be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others, as for example in articles 2º of the Code of the Municipal Tax on Onerous Transfers of Real Property (CIMT), 2º, 3º and 4º of the Code of Income Tax on Natural Persons (CIRS) and 4º, 17º, 18º and 20º of the Code of Income Tax on Legal Persons (CIRC).

• Concludes, affirming that the interpretation made by the Claimant that the legislator consecrated in art. 3º, no. 1 a presumption, and that of no. 2, is an interpretation against legality.

• Also alleges the Respondent that that interpretation does not take into account the systematic element, violating the unity of the regime that imposes the requirement of motor vehicle registration, so as to prevent the Tax Authority from falling into absolute uncertainty regarding the taxable person of the UCT, even putting at risk the running of the limitation period, reason for which it was opted to establish that owners for the mentioned tax purposes are the persons in whose name the vehicles are registered, the same applying to the equated.

• Also alleges the Respondent that the mentioned interpretation of the Claimant ignores the teleological element of the interpretation of the law: the ratio of the regime established not only in the legal provision in question, but also throughout the CIUC.

• Considers the Respondent that the CIUC proceeded to a reform of the regime of taxation of vehicles in Portugal, substantially altering the regime of vehicle taxation, with the taxable persons of the tax being the owners appearing in the property register, regardless of the circulation of the vehicles on the public road. That is, the Unique Circulation Tax became due by the persons appearing in the register as owners of the vehicles.

• Such conclusion results from the tenor of the parliamentary debates around the approval of Decree-Law no. 20/2008, of January 31, of Recommendation no. 6-B/2012 of the Ombudsman and the spirit of CIUC which, having been motivated, in the essential, by an environmental concern, its "ratio" is to tax the users of the vehicles, which, by force of their use cause an environmental cost.

• The tax acts in crisis do not suffer from the alleged error regarding the factual assumptions, to the extent that in light of the provision of article 3º, nos. 1 and 2 of CIUC and article 6º of the same code, it was the Claimant, in the capacity of owner, the taxable person of the UCT.

• In the case in question where financial lease contracts are underlying, the Claimant has not even demonstrated having complied with the ancillary obligation imposed by article 19º of CIUC.

• And it is important to recall that the application of article 3º of CIUC must be combined with the provision of article 19º of the same Code, in which it is established that "for purposes of article 3º of this code (…), the entities that proceed to financial leasing, operational leasing or long-term rental of vehicles are obligated to provide to the Tax and Customs Directorate the data relating to the identification of the users of the leased vehicles."

• Concludes that, if the thesis propounded by the Claimant regarding article 3º/2 of CIUC is followed, then it is unavoidable to conclude that the functioning of that article equally depends on compliance with what is established in article 19º of CIUC, as is drawn from its literal element ("for purposes of article 3º of this code(…)").

• Alleges that, in matters of financial leasing and for purposes of the functioning of article 3º/2 of CIUC, it is necessary that the lessors (as the Claimant) comply with the obligation inherent in article 19º of that code in order to exonerate themselves from the obligation of payment of the tax.

• The Claimant has not provided proof of compliance with this obligation.

• In matters of financial leasing, the Claimant could only exonerate itself from the tax if it had complied with the specific obligation provided in that norm of CIUC.

• Being responsible for the arbitration costs relating to the present request for arbitral opinion, given that the lack of provision of the data inevitably gave rise to the issuance of the assessments sub judice.

• The interpretation conveyed by the Claimant is contrary to the Constitution, to the extent that it violates the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

• Insofar as it devalues the registration reality to the detriment of an "informal reality" and not susceptible to minimal control by the Respondent, it is offensive of the basic principle of trust and legal certainty that should inform any legal relationship, here including the tax relationship.

• Being, also, offensive of the principle of efficiency of the tax system, to the extent that it results in an obstruction and increase in costs of the competencies attributed to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent are part.

• Representing a violation of the principle of proportionality, to the extent that it completely disregards it in comparison with the principle of taxpaying capacity, when in reality the Claimant has the necessary and adequate legal mechanisms to safeguard that capacity (e.g., motor vehicle registration and the duty of communication consigned in article 19º of CIUC), without, however, having exercised them in due time.

• As to responsibility for the payment of arbitration costs, if UCT is assessed in accordance with the registration information timely transmitted by the Institute of Records and Notary, and not in accordance with information generated by the Respondent itself, and if the Claimant did not observe the duty of communication consigned in art. 19º of CIUC, the Respondent is not responsible for such payment.

• The same reasoning applies regarding the request for condemnation to the payment of compensatory interest, there not being met the legal presuppositions that confer the right to be petitioned.

• In light of articles 43º of LGT and 61º of CPPT, the right to compensatory interest depends on the verification of the following presuppositions: The tax having been paid, its respective assessment having been annulled, in whole or in part, in gracious or judicial proceedings, determination, in gracious or judicial proceedings, that the annulment is based on error imputable to the services, which would not occur in the case, since the tax acts in crisis are valid and legal, because in conformity with the legal regime in force at the date of the tax facts, reason for which no error imputable to the services occurred.

G. – QUESTIONS TO BE DECIDED

In light of the positions assumed by the Parties in accordance with the arguments presented, the following are the questions that are incumbent upon appreciating and deciding:

1 – Main Question – Interpretation of art. 3º of CIUC, so as to be determined whether the norm of subjective incidence inscribed therein, admits, or not, the subjection of the lessee to the payment of UCT, during the term of the lease contract.

2 – Compensatory interest – Existence, or not, of the right to compensatory interest, under art. 43º of LGT, in case the assessments are annulled and the reimbursement of the amount petitioned is determined, which would have been unduly paid.

3 – Responsibility for the payment of arbitration costs.

H. – PROCEDURAL PRESUPPOSITIONS

1. The Arbitral Tribunal is regularly constituted and is materially competent, in accordance with the provision in paragraph a), of no. 1, of art. 2º of RJAT (Decree-Law no. 10/2011, of January 20).

2. The Parties enjoy legal standing and capacity, are legitimate and are regularly represented, in accordance with articles 4º and 10º, no. 2 of RJAT and art. 1º of Regulation no. 112/2011, of March 22.

3. Considering the identity of the taxed fact, of the court competent to decide and of the factual and legal grounds invoked, the Tribunal admits the cumulation of requests for declaration of illegality of the tax acts that are the object of this proceedings, since the requirements established in art. 3º, no. 1 of RJAT are fulfilled.

4. The proceedings do not suffer from vices that affect its validity.

I. – FACTUAL MATTER

I. 1 – PROVEN FACTS

With relevance for the appreciation of the raised questions, the Tribunal establishes as proven the following facts:

1 – The Claimant is a credit institution in which, among its areas of activity, special relevance is assumed by financing in the automotive sector.

2 – A substantial part of its activity is reducible to the celebration of financial lease contracts intended for the acquisition, by companies and individuals, of motor vehicles.

3 – The motor vehicles identified in the list attached as Annex A to the Request for Arbitral Opinion (whose registration appears in column C) were subject to financial lease contracts entered into between B…, S.A., Branch in Portugal, to whom the Claimant legally succeeded, assuming in all of them the position of lessor, and the entities identified in column L of the referred Annex A, in the capacity of lessees.

4 – The use of the vehicles in question was always in charge of the said lessees, during the term of the contracts.

5 – Recently, the Claimant was notified to proceed with the payment of the UCT, to which the acts of additional assessment identified in the table attached to the Request for Arbitral Opinion as Annex A relate.

6 – The Claimant paid the amount of UCT assessed in the acts of additional assessment identified in Annex A, having as subject matter 98 vehicles and relating to the years 2009 to 2012, in a total of 11,887.96 euros.

7 – On February 14, 2014, the Claimant presented the Request for Arbitral Opinion that gave rise to the present proceedings.

I. 2 – GROUNDS OF PROVEN FACTS

The facts established as proven are based on the documents indicated regarding each of them, and on the factual elements brought to the proceedings by the Parties, to the extent that their adhesion to reality was not questioned.

I. 3 – UNPROVEN FACTS

The Claimant has not provided proof of having complied with the obligation imposed by the provision of art. 19º of CIUC, regarding the financial lease contracts sub judice.

J. – LEGAL MATTER

With the factual matter established, we proceed, next, to its legal subsumption and to the determination of the Law to be applied, taking into account the questions to be decided that were enunciated.

In the Request for Arbitral Opinion, the Claimant alleges that, at the time when the tax facts that originated the UCT assessments occurred, it was the lessor of the vehicles in question, since the same had been subject to financial lease contracts, which were in force and, consequently, was not the taxable person of the tax that was assessed to it.

The Respondent Tax Authority assumes an opposite position regarding this question of subjective incidence of UCT, defending that:

Under art. 3º, no. 1 of CIUC, the taxable person of UCT is the person in whose name the vehicle is registered in the Motor Vehicle Registration Conservatory, a fact that occurred with the Claimant, in the period in question.

And, even if it is not understood thus, the application of the provision of no. 2 of art. 3º of CIUC, which equates financial lessees to owners for purposes of subjection to UCT, depends on compliance with what is established in art. 19º of CIUC.

Article 3º of CIUC establishes, under the heading "Subjective incidence", in its number 1: The taxable persons of the tax are the owners of the vehicles, considering as such the natural and legal persons, of public or private law, in whose names they are registered.

In turn, number 2 of the same provision provides: Equated to owners are the financial lessees, the acquirers with reservation of ownership, as well as other holders of rights of option by force of the lease contract.

From the positions assumed by the Parties in the present proceedings, it is clear that, in essence, the question is reduced to knowing whether on the date of the occurrence of the taxable event of UCT a financial lease contract is in force, having as object an automobile, the taxable person of UCT is the lessor, its owner, or, by force of the provision of no. 2 of art. 3º of CIUC, is the lessee, even in the case where the obligation imposed by art. 19º of CIUC has not been complied with, that is, where the lessor-owner has not provided the Tax Authority with the tax identification of the lessee.

The orientations claimed by the Claimant and by the Respondent regarding this matter and its grounds are exposed in summary, or with partial transcription, in E. and F. of the Report of this Decision.

It is fitting, then, to decide:

For a correct and rigorous interpretation of the provisions in question, it is necessary to inquire into the principles informing the institutes disciplined by them.

As for UCT, it is worth noting that, currently, its structuring principle is the principle of equivalence, in its sense of compensation for the harmful effects in environmental and energy areas caused by the circulation of motor vehicles.

This means that the legislator, when it disciplined UCT, took into account the road and environmental costs that motor vehicle circulation causes, and that this is underlying this tax.

In effect, the current and new framework of vehicle taxation consecrates this principle, aiming to subject the owners of the vehicles, in principle, their users, to bear the costs resulting from damage to roads and environmental damage caused by them, as is clear from the tenor of art. 1º of CIUC.

Thus, its incidence should be on whoever uses the motor vehicle, that is, whoever causes the said damage, which entirely precludes an interpretation that aimed to prevent the taxation of others, other than those who enjoy the use of motor vehicles.

As a rule, the legislator attributed this situation to the owner, which is understandable since it is the most common, in which the owner is simultaneously the user of the vehicle.

However, verifying the situations to which no. 2 of art. 3º of CIUC alludes, in which the owner, although maintaining that quality, cedes the exclusive use of the vehicle to a third party, the law equated that situation to that of the owner, for purposes of subjective incidence of UCT, because this one is the potential "polluter".

Such is what occurs during the term of financial lease contracts in which, although the lessor maintains ownership of the leased good, it is the lessee who has exclusive use of the same, using it exactly in the same terms as the owner would use it, had the said contract not been celebrated.

In effect, from the Legal Framework of the Financial Lease Contract (approved by Decree-Law no. 149/95, of July 24, with later amendments), it results, namely from the combined provisions of arts. 9º and 10º, that the use of the leased vehicle is attributed in an exclusive manner to the lessee, with a view to using and enjoying it, as if it were the owner.

In this conformity, there is no doubt that it follows from the letter of art. 3º of CIUC, namely from its no. 2, and also from its ratio, that it is the lessee who is responsible for the payment of UCT, given that it is equated to the owner by having exclusive use of the motor vehicle and, for that reason, causing the environmental and road damage that the tax intends to compensate.

It results from the record that the Claimant will not have complied with the provision of art. 19º of CIUC, which establishes that: For purposes of the provision of article 3º of this code, as well as in no. 1 of article 3º of the law of its approval, the entities that proceed to financial leasing, operational leasing or long-term rental of vehicles are obligated to provide to the Tax and Customs Directorate the data relating to the tax identification of the users of the leased vehicles.

In effect, the lessors, in accordance with this provision, are subject to the obligation to provide to the AT the elements relating to the tax identity of the users of the leased vehicles, for purposes of the provision of art. 3º of CIUC.

However, this does not mean that the subjective incidence of UCT, prescribed in the terms already referred to in art. 3º, no. 2 of CIUC, depends on such communication.

In truth, it is this provision (art. 3º of CIUC) that establishes the rules of subjective incidence of UCT, with the obligation of communication of the tax identification of the lessee (art. 19º of CIUC) having a merely complementary and ancillary nature.

In truth, if on the date of the occurrence of the taxable event of the tax a financial lease contract is in force, having as object a motor vehicle, the taxable person of the tax is the lessee, regardless of whether their tax identification has been communicated to the AT.

The argument of the Respondent therefore does not hold, to the effect that the owner only relieves itself of its obligation to pay UCT, in the situations where financial lease contracts are in force, if it proceeds to the communication referred to in said art. 19º.

In effect, the provision of art. 3º, no. 2 of CIUC is very clear regarding the subjective incidence of UCT, during the term of financial lease contracts, subjecting the lessee to this obligation, when it equates it to the owner for this purpose.

Thus, since the law does not assign this obligation to the lessor-owner, there will be no place for any relief on the part of this, with the communication provided in said art. 19º of CIUC, for the simple reason that it was never subject to the payment of the tax.

The subjective incidence of UCT is established, in all its elements, in art. 3º of CIUC, and it will be through the application of this provision that the taxable person will be ascertained, with the non-compliance of the mentioned ancillary obligation not being relevant for purposes of the incidence of the tax.

In this conformity, we are in a position to conclude that, verifying, as has been proven, that, on the dates of the occurrence of the taxable events of UCT to which the assessments in question relate, financial lease contracts were in force, the lessees were the taxable persons of the same.

For which reason, the mentioned assessments should be annulled and, consequently, the tax that was unduly charged to the Claimant should be restituted by the Tax Authority.

As to compensatory interest, this matter is regulated in art. 24º of RJAT, which expressly determines in its no. 1, paragraph b) that the arbitral award obligates the tax administration, in the cases there consigned, to "Restore the situation that would exist if the tax act subject of the arbitral award had not been executed, adopting the acts and operations necessary for that purpose", and further provides, in its no. 5, that "Payment of interest, regardless of its nature, is due in accordance with the terms provided in the general tax law and in the Code of Procedure and Tax Process".

Also art. 100º of LGT, whose application is authorized by the provision of art. 29º, no. 1, paragraph a) of RJAT, provides in an identical manner, in the sense of the immediate reconstitution of legality, understanding the same the payment of compensatory interest, if applicable.

For its part, art. 43º, no. 1 of LGT conditions the right to compensatory interest to the cases in which "there was error imputable to the services from which results payment of tax debt in an amount greater than legally due".

In this conformity, the question arises as to, in light of the tenor of the provision of art. 3º, nos. 1 and 2 of CIUC, whether it can be considered that there was, or not, an error imputable to the services in the situation at hand.

Upon analysis of the situation, it is verified that the Tax Authority in assessing UCT in the manner in which it did, complied with the legal dictum established in the referred provision, since it attributed the quality of owner, for the referred purposes, to the taxpayer in whose name the vehicle is registered in the Motor Vehicle Registration Conservatory and the lessor-owner would not have complied with the provision of art. 19º of CIUC.

For which reason it is concluded regarding the non-existence of error imputable to the services, as the Tax Authority had the right to assess the tax in the manner in which it did, since it would be in ignorance of the existence of financial lease contracts, which were not communicated to it, namely for purposes of identification of the lessees, as required by art. 19º of CIUC.

As to responsibility for arbitration costs, the Respondent alleges that it is not responsible for their payment, by being unaware of the tax identification of the lessees, as a consequence of the Claimant not having complied with the provision of art. 19º of CIUC, reason for which it proceeded to the assessments of the tax with the elements at its disposal, and cannot be held responsible for what it calls the "lack of diligence" of the Claimant.

This argument cannot proceed, however, since the law is peremptory in the imputation of responsibility for payment of costs to the party that is condemned, in accordance with the provision of nos. 1 and 2 of art. 527 of the Code of Civil Procedure, applicable by force of art. 29º, no. 1, paragraph e) of RJAT.

Thus, responsibility for the payment of arbitration costs is that of the Respondent.

L. – DECISION

In view of the foregoing, the present Arbitral Tribunal decides:

a) To judge as well founded, on the ground of violation of law, the request for declaration of illegality of the assessment of UCT relating to the years 2009 to 2012, regarding all the vehicles whose registrations are identified in the record, and, in consequence,

b) To annul the corresponding tax acts of assessment.

c) To judge as unfounded the request for recognition of the right to compensatory interest in favor of the Claimant.

d) To condemn the Respondent to pay the costs of the present proceedings (art. 527º, nos. 1 and 2 of the Code of Civil Procedure, ex vi art. 29º, no. 1, paragraph e) of RJAT).

Value of the proceedings: In conformity with the provision of articles 306º, no. 2 of CPC (ex. 315º, no. 2) and 97º-A, no. 1 of CPPT and in article 3º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at 11,887.96 euros.

Costs: In accordance with no. 4 of art. 22º of RJAT, the amount of costs is fixed at 918.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Notify the parties.

Lisbon, July 14, 2014

The Arbitrator

José Nunes Barata

(Written in old orthography)