IUC Tax Liability in Financial Leasing Contracts: CAAD Decision 137/2014-T

CLAIMANT: A..., s.a.

RESPONDENT: Tax and Customs Authority

Arbitral Decision[1]

I REPORT

A) The Parties and Constitution of the Arbitral Tribunal

1. A... s.a, legal entity no. …, with registered office at Rua …, in …, hereinafter referred to as the "Claimant", filed a request for constitution of a singular Arbitral Tribunal, pursuant to the provisions of article 10º and paragraph a), number 1 of article 2º, of the Legal Regime for Tax Arbitration, approved by Decree-Law no. 10/2011, of 20 January, hereinafter referred to as "LRTA" and articles 1º and 2º of Ministerial Order no. 112 – A/2011, of 22 March, to rule on the dispute opposing it to the Tax and Customs Authority, hereinafter referred to as "Respondent" or "TCA", with a view to the annulment, on grounds of illegality, of 147 acts of official assessment of the Single Vehicle Circulation Tax (IUC), referring to the years 2009 to 2012, in the total amount of €10,059.70, referring to 41 motor vehicles identified by their respective registration number in the assessments attached to the arbitral request and in accordance with the list attached as Annex A to the request for arbitral decision, which is hereby reproduced in full.

2. The request for constitution of the Arbitral Tribunal, filed on 14 February 2014, was accepted by His Excellency the President of CAAD and automatically notified to the Tax and Customs Authority on 18.02.2014. The Claimant chose not to appoint an arbitrator, therefore, pursuant to the provisions of number 1, article 6º of the LRTA, the undersigned arbitrator was appointed by the Deontological Council of the Administrative Arbitration Centre for the singular Arbitral Tribunal. The appointment was accepted and the parties, notified of the acceptance, on 4 April 2014, did not refuse the appointment, in accordance with the terms provided in paragraphs a) and b), number 1, article 11º, of the LRTA, in conjunction with articles 6º and 7º of the Code of Ethics.

Thus, in compliance with the provisions in paragraph c), number 1, article 11º, of Decree-Law no. 10/2011, of 20 January, with the wording introduced by article 228º, of Law no. 66-B/2012, of 31 December, the singular Arbitral Tribunal was constituted on 22 April 2014.

On 22 April 2014, the Respondent "TCA" was notified to present a response within the legal time period, in accordance with the provisions of numbers 1 and 2, article 17º, of the LRTA. On 23 May 2014 the TCA filed its Response in the case file.

On 13 June 2014, an arbitral order was issued requiring the parties to rule on the necessity of holding the meeting provided for in article 18º of the LRTA or the possibility of dispensing with it. Both parties ruled in favour of dispensing with the meeting, therefore a time period was set for written submissions by the parties, in accordance with the arbitral order issued on 24 June 2014. On 7 July 2014 the Claimant filed its written submissions in the case file. It remains to decide.

B) Procedural Requirements

1. The Arbitral Tribunal is properly constituted and has material competence, pursuant to article 2º, number 1, paragraph a) of Decree-Law no. 10/2011, of 20 January.

The Parties have legal personality and capacity, are legitimate and are properly represented (See Articles 4º and 10º, number 2, of DL no. 10/2011 and article 1º, of Ministerial Order no. 112/2011, of 22 March).

As regards the consolidation of claims, given that the joint assessment of the legality of 147 IUC assessments relating to the years 2009 to 2012 is sought, although they constitute autonomous acts, the requirements set out in number 1, article 3º, of the LRTA and article 104º of the Tax Procedure Code being verified, consolidation is to be admitted. Thus, the consolidation in the same arbitral request of claims for declaration of illegality of all tax acts for IUC assessment and the respective compensatory interest associated with them is accepted, given the identity of the tax and the assessment of the tax acts in question depending on the assessment of the same factual circumstances and the application of the same legal rules.

The proceeding does not suffer from nullities that would invalidate it and no exceptions were raised that would prevent judgment of the merits of the case, therefore the Tribunal is in a position to deliver the arbitral decision.

C) THE CLAIM FORMULATED BY THE CLAIMANT

1. The Claimant formulates the present request for arbitral decision seeking the declaration of illegality and consequent annulment of the acts of assessment of the Single Vehicle Circulation Tax, referring to the years 2009 to 2012, in the total amount of €10,059.70, with reference to forty-one vehicles, identified by their respective registration number in the list contained in the request for arbitral decision (Annex A), which is hereby reproduced, as well as in the statements of calculation of tax and the respective compensatory interest, all filed in the case and hereby reproduced in full.

It bases its claim on the illegality of the tax assessments and respective interest, alleging in summary the following:

a) The Claimant is a credit institution with strong presence in the national market, with financing to the automotive sector being one of the areas of activity of special relevance;

b) A substantial part of its activity relates to the celebration, among others, of financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles;

c) These contracts comply, as results from their own legal configuration, with a common script, characteristic of this type of financing: the Claimant, after being contacted by the customer – who, at that stage, 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 customer, and then proceeds to deliver it to the said customer – who thus assumes the status of lessee;

d) During the period to be stipulated in the contract, this lessee maintains the temporary enjoyment of the vehicle – which remains the property of the Claimant – through remuneration to be paid 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;

e) Thus, the key point of this type of contract lies in the fact that in no circumstance does the enjoyment of the acquired motor vehicle belong to the Claimant, the vehicle remaining in the exclusive enjoyment of the customer/lessee during the entire period of validity of the contract;

f) The motor vehicles identified in the list attached to the PI as ANNEX A (whose registration is in column C) were given in financial leasing by the Claimant to the customers also identified there (column K) in accordance with financial leasing contracts (identified in column N) attached to the arbitral request as documents nos. 42 to 82;

g) The Claimant never enjoyed as lessor of the vehicles which from the moment of their acquisition were being used (solely and exclusively) by the lessees;

h) Recently the Claimant was notified to proceed with payment of the IUC assessments contained in the present arbitral request (Annex A), having made payment in accordance with receipts filed in the case with nos. 1 to 41;

i) By having proceeded to payment under the exceptional regime instituted by Decree-Law 151-A/2013, it benefited from the exemption from payment of the corresponding compensatory interest;

j) The requirement for payment of the IUC in question, referring to the years 2009 to 2012, occurred even knowing the TCA – or ought to have known – that the motor vehicles in question were subject to financial leasing contracts and knowing even the identity of the lessees, for which reason the Claimant cannot assume the status of taxpayer of the tax that was assessed against it;

k) It provides an example with the case of the vehicle with registration number ..-..-.., contained in lines 1 to 4 of the table attached as ANNEX A;

1. The legal basis for the claim formulated in the request for arbitral decision rests, in summary, on the following:

a. The TCA in exacting the outstanding tax from the Claimant acts on the basis of a wrong foundation, as it considers the lessor entity as the taxpayer of the IUC;

b. Thus, underlying these proceedings is essentially a single issue which consists in determining who assumes the status of taxpayer of the IUC due during the validity of a financial leasing contract: the lessee, or the lessor entity (albeit owner).

c. The Claimant argues for the understanding that the IUC taxpayer is the lessee, invoking for this: the ratio underlying the IUC; the provisions of article 3º, numbers 1 and 2 and article 19º, all of the CIUC; concluding for the substantive legitimacy of the lessee and, consequently, for the illegitimacy of the lessor entities to pay the IUC;

d. Files in the case Legal Opinions issued by Doctors Professors … and …, issued, respectively, at the request of ALF - Portuguese Association of Leasing, Factoring and Renting and ASFAC – Association of Specialized Credit Institutions;

e. Invokes arbitral case law, with emphasis on arbitral decisions nos. 14/2013 T, 27/2013-T and 73/2013-T.

It concludes by petitioning for the declaration of illegality and consequent annulment of the acts of assessment relating to the IUC concerning the 41 vehicles identified by their respective registration number in the list attached as ANNEX A, as well as the reimbursement of the amount of €10,059.70, concerning the tax improperly paid by the Claimant and the payment of compensatory interest, in accordance with article 43º of the General Tax Law.

D) – THE RESPONDENT'S RESPONSE

1. The Respondent alleges in its response, in summary, that the Claimant's position is not well-founded as regards the grounds that form the basis of the arbitral request, as there is no illegality that would invalidate the acts of assessment, because:

a) The Claimant's understanding embodied in the present arbitral request incurs a skewed reading of the letter of the law, in an interpretation that does not heed the systematic element, which violates the unity of the regime established throughout the CIUC and, more broadly, in the entire legal-tax system which ignores the ratio legis of the regime established in the CIUC";

b) In the provisions of numbers 1 of article 3º of the CIUC the legislator did not use the expression "presumed", as it could have done, moreover in the same way as occurs in other legal norms, exemplifying some situations provided for in the law; the Respondent understands that in cases where the tax legislator uses the expression "considered", it is not establishing a presumption; it enumerates, merely by way of example, various norms contained in different tax codes that use the expression "considered". To understand that the legislator established a presumption here is based on an interpretation against the law, because "the legislator's clear choice was to consider that, for the purposes of IUC, those registered as such in the motor vehicle register should be considered owners;" it invokes, in defence of this understanding, the decision handed down in the course of Case no. 210/13.0BEPNF, by the Administrative and Tax Court of Penafiel;

c) This is the interpretation that respects the systematic element and preserves the unity of the legal-tax system, furthermore, another interpretation, namely that defended by the Claimant, would be to ignore the teleological element of interpretation of the law, the ratio of the regime established in the article in question, and indeed, throughout the CIUC;

d) It admits that the Claimant could only be exonerated from the tax had it complied with the specific obligation provided for in the norm contained in article 19º of the CIUC. It alleges, however, that the Claimant did not comply with the obligation contained in article 19º of the CIUC, from which arises responsibility for an administrative offence and for the costs due in the present arbitral proceeding;

e) In addition to all this, the Respondent alleges that the interpretation conveyed by the Claimant is contrary to the Constitution, insofar as it violates the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality. Finally, in light of the rules of burden of proof, it further alleges the lack of proof of the transfer of ownership of the vehicle, given that invoices are not, in the TCA's view, in themselves documents apt to prove the celebration of a bilateral contract such as a purchase and sale.

It concludes that the IUC assessment acts do not suffer from illegality, seeking the dismissal of the arbitral request and the absolution of the Respondent in the claim.

II. ISSUES TO BE DECIDED

1. In light of the positions assumed by the Parties in the arguments presented, the Tribunal must decide the following issues:

1st - On the subjective scope of the IUC during the validity of the financial leasing contract;

2nd – On the burden of proof

3rd - On the right to payment of compensatory interest and the responsibility for payment of arbitral costs.

III. FACTUAL BASIS

A) Established Facts

1. As factual matter relevant to the decision to be rendered, the Tribunal considers the following facts established:

1st) The Claimant is a credit institution whose substantial activity consists of financing to the sector, through the celebration, among others, of financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles;

2nd) The Claimant was notified to proceed with payment of the unique vehicle circulation tax assessments challenged here, relating to the years 2009 to 2012 concerning forty-one vehicles with the registration numbers duly identified in the IUC assessments filed in the case as documents nos. 1 to 41 in the appendix to the request, all duly itemized in the table attached to the PI as annex A, which are hereby reproduced in full;

3rd) All IUC assessments were paid within the indicated period for payment and total the amount of €10,059.70; (see Docs. nos. 1 to 41 attached to the PI);

4th) The said vehicles were acquired by the Claimant, in the course of its activity, to be immediately the subject of financial leasing with the respective holders, in accordance with documents nos. 42 to 82 attached in the appendix to the PI;

5th) At the date of the tax facts, the motor vehicles referenced in the IUC assessments challenged here were in the exclusive enjoyment of the lessee, despite being registered in the motor vehicle register in the name of the now Claimant, in the capacity of owner;

6th) At the date of the tax acts of assessment the TCA had the information elements contained in the Claimant's accounts, the registration database and, subsequently, those communicated to it in the course of the present request for arbitral decision.

B) SUBSTANTIATION OF THE ESTABLISHED FACTS

1. The decision on the factual matter as described above is based on the documentary evidence that the Parties filed in the proceeding and which form part of these case records. The Tribunal particularly considered the corporate purpose of the Claimant and the specific nature of its activity and the factual reality underlying the contractual situations relating to the various vehicles, proven by the documents filed in the appendix to the arbitral request concerning the vehicles subject to the disputed assessments.

C) UNESTABLISHED FACTS

1. There are no other facts found to be unestablished, since all facts relevant to the assessment of the claim were found to be established.

IV – LEGAL BASIS

1. Having established the factual matter, it is important to address the legal issues indicated above, corresponding, in summary, to the issues of illegality raised by the Claimant in the present arbitral request. Let us then examine the first issue to be decided.

1st - On the subjective scope of the IUC during the validity of the financial leasing contract

1. For analysis of the issue to be decided, it is important to verify whether the Claimant should be qualified as the taxpayer of the Single Vehicle Circulation Tax, assessed in relation to the years 2009 to 2012, concerning the vehicles identified in the request for arbitral decision.

As the Claimant itself states in the arbitral request, the fundamental issue to be decided is whether the fact that the vehicles identified in the table attached as ANNEX A are leased by virtue of the financial leasing contracts in force to their respective holders, who remain during the entire period of validity of the contract in exclusive and full enjoyment of the vehicles, has the effect of making the claimant illegitimate as the taxpayer of the IUC due, despite all the motor vehicles in question being registered in the Motor Vehicle Register in its name in the capacity of owner.

In the first place, the terms of the configuration of the subjective scope of the IUC must be assessed in light of the provisions of article 3º of the Single Vehicle Circulation Tax Code (CIUC), in particular, the question of whether the subjective scope is based strictly on the registration of vehicle ownership/title in the Motor Vehicle Register.

1. The fundamental legal framework applicable in this matter is provided for in articles 1º to 6º of the CIUC, approved by Law no. 22-A/2007, of 29 June.

Article 1º of the CIUC defines the objective scope of the tax, distinguishing vehicles by specified categories, a norm that appears clear and without difficulties of application. However, the same is not true of the norm on subjective scope contained in number 1 of article 3º of the CIUC, which is at the origin of the present dispute and thus constitutes the issue to be decided in the case under consideration.

The analysis of both provisions (articles 1º and 3º) allows us to conclude that in the operation of the IUC the motor vehicle register plays a fundamental role. What matters, then, is to determine the sense and scope of the norm on subjective scope contained in article 3º, number 1 of the CIUC and the eventual existence or non-existence of a rebuttable presumption, connected with the provisions of number 2 of the same legal provision.

Let us then see what results from the legal regime in force and its application to the concrete case at hand.

Article 3º of the CIUC provides that:

"ARTICLE 3º

SUBJECTIVE SCOPE

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

2 – Equated to owners are financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract".

Article 11º, number 1 of the LGT establishes that "in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

The interpretation and application of a legal norm presupposes the carrying out of an interpretative activity, which must be objective, balanced, and in accordance with the letter and spirit of the law. Any text, and the law is no exception, contains multiple meanings and frequently contains ambiguous or obscure expressions. For that reason, although the letter of the law is "the guide thread" for the interpreter, it must be interpreted taking into account the underlying objectives, "the ratio" or the motivation of the legislator in establishing the norm under analysis.[2]

To these elements is added another according to which the interpretation of the legal norm must respect the "unity of the legal system", its coherence and intrinsic logic. Article 9º of the Civil Code (CC) provides the rules and fundamental elements for the interpretation of the legal norm, to which the interpretation of tax law must also conform in accordance with that provision, which begins by saying that interpretation should not be confined to the letter of the law, but should reconstruct from it the "legislative intent".[3]

To these general principles are added the principles contained in the LGT, namely in article 73º, which establishes that the presumptions contained in tax scope norms always admit proof to the contrary.

As regards the matter under analysis, it is important to highlight the contribution of arbitral decisions already handed down in cases nos. 14/2013-T, of 15 October, 26/2013-T of 19 July, 27/2013-T, of 10 September, 217/2013-T of 28 February and, more recently, in the decisions handed down in cases 286/2013-T, of 2 May 2014 and 293/2013-T, of 9 June 2014, 46/2014-T and 89/2014-T of 5 September, among others, revealing a refined reflection on the fundamental issue under consideration, establishing a uniform understanding on this same issue, endorsed moreover by Arbitral Award 63/2014-T and by decisions 150/2014-T and 220/2014-T. In all of them, the understanding as to the sense and scope of the provision contained in number 1 of article 3º of the CIUC is unanimous: we are dealing with a rebuttable presumption.

1. Also on this matter, in light of the literal wording of the provisions of number 1 of article 3º of the CIUC, one may question the scope of the expression "being considered as such", given that in the current version the legislator did not use the term "presumed" (which was contained in the defunct Vehicle Tax Regulation). This Tribunal understands that it can only be the following: the legislator presumes (considers) that the owners are those in whose names the vehicles are registered. This means that such presumption, implicit, is naturally rebuttable in accordance with the provisions of article 73º of the LGT.

This Tribunal does not agree with what is alleged in the Respondent's response in the present case. It is not, then, a skewed interpretation of the law nor contrary to the Constitution, as the Respondent alleges. Indeed, contrary to what is alleged by the Respondent, the view that the provisions of art. 3º, no. 1 of the CIUC establishes a rebuttable presumption represents the best interpretation and the most in accordance with the Constitution, as results from the Constitutional Court ruling with no. 348/97, of 29.4.1997, a position reiterated in ruling no. 311/2003, of 28.4.2003, which declare the unconstitutionality of "the establishment by the tax legislator of a presumption "juris et de jure" since "it completely prevents taxpayers from the possibility of contradicting the presumed fact, subjecting them to taxation that may be based on a taxable matter determined against their will in violation of the principle of tax equality". In this regard, the Respondent's allegation does not appear to have any merit.

Moreover, the presumption established in article 3º, no. 1 of the current CIUC was already enshrined in the earlier versions of the codes abolished with the entry into force of the CIUC. Already article 3º of the Vehicle Tax Regulation (approved by Decree-Law no. 143/78) established that: "the tax is due by the owners of the vehicles, being presumed as such, unless proof to the contrary, the persons in whose names the same are registered or recorded". Similarly, art. 2º of the Regulation of Circulation Tax and Haulage Tax (approved by Decree-Law no. 116/94) established that: "the taxpayers of the circulation tax and the haulage tax are the owners of the vehicles, being presumed as such, unless proof to the contrary, the natural or legal persons in whose names the same are registered".

In truth, in the current version of the Code only the verb changed, the legislator now opting for the expression "being considered". It is certain that between the earlier legislative versions and the current one the LGT entered into force, which expressly established the principle contained in article 73º, from which it results that in matters of tax scope any presumption always admits proof to the contrary. Therefore, it becomes irrelevant the adoption of an express or implicit presumption, since one as the other are equally rebuttable.

And, also along this line of reflection, this Tribunal cannot follow the argument adduced by the Tax Authority. As regards the historical element, it must be noted that since the origin of the circulation tax, with the entry into force of Decree-Law no. 599/72 of 30 December, a presumption was explicitly established regarding the taxpayers of the tax as being those in whose names the vehicles were registered or recorded. That version of the law used the literal expression "presumed as such". [4]

Wherefore, the norm of article 3º, no. 1 of the CIUC establishes a rebuttable presumption admitting proof to the contrary.

1. Given this, for the decision of the case under consideration in the present proceedings it is important, then, to duly take into account the provisions of number 2 of article 3º of the CIUC, as it states: "Equated to owners are financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract"

In light of the purposes of the tax in question, it must be recognized that the legislator intended with this number 2 to recognize that the idea underlying the subjective scope of the tax is based on the environmental cost generated by the users of motor vehicles, which is why it expressly referred to the case of lessees equating them to owners for the purposes provided for in number 1 of the said legal provision.

If any doubt persisted on this point, it would always be said that, as for the elements of interpretation of rational or teleological character, the explanatory memorandum of Draft Law no. 118/X of 07/03/2007, underlying Law no. 22-A/2007, of 29/06, is quite explicit in clarifying that the reform of motor vehicle taxation is implemented by means of shifting part of the tax burden from the moment of vehicle acquisition to the circulation phase and aims to "form a coherent whole" which, although intended for the collection of public revenue, intends that it be collected "in the measure of environmental costs that each individual causes to the community", adding, with regard to the tax in question and the different types and categories of vehicles, that "as a structuring and unifying element (…) the principle of equivalence is established, thus making it clear that the tax, as a whole, is subordinated to the idea that taxpayers should be burdened in proportion to the cost they cause to the environment and to the road network, being this the raison d'être of this tax figure", also noting that "this principle dictates the taxation of vehicles according to their respective ownership and until the moment of scrapping (…)".

Thus, the logic and rationale of the new system of motor vehicle taxation presupposes and seeks a taxpayer coinciding with the owner of the vehicle, on the assumption that it is this, and not another, the real and effective subject causing the environmental damage, as follows from the principle of equivalence inscribed in art. 1º of the CIUC.

This principle of equivalence, which informs the current single vehicle circulation tax, is underlain by the polluter-pays principle, and embodies the idea contained therein that whoever pollutes must, therefore, pay. It is, after all, a matter of addressing the negative environmental externalities arising from the use of motor vehicles, such as to be borne by their owners and/or users as costs that only they should bear. [5]

Any other understanding would imply accepting the possibility of taxing legal or natural persons without responsibility in the production of any environmental damage (in the case the lessors), while the real causers of such damage (the lessees) would not be subject to the tax, completely frustrating the purposes of regulation of the law itself, that is to say, its true ratio legis.

Wherefore, during the validity of the leasing contract the lessee is equated to the owner for purposes of the subjective scope of the respective single vehicle circulation tax. In the case of the present proceedings, the forty-one vehicles mentioned in the disputed tax assessments were the subject of a financial leasing contract with a purchase option, and all of them remained in the full and exclusive enjoyment of the lessees in the taxation periods in question (years 2009 to 2012).

It can thus be said that, finding the vehicles registered in the ownership of the now Claimant as the owner, the presumption of number 1 of article 3º can be displaced by proof of the existence of the said contracts and their period of validity, as well as the identification of the respective lessees, since such presumption is rebuttable, whether by virtue of what is established in no. 2 of art. 350º of the Civil Code, whether in light of the provisions of art. 73º of the LGT. Hence, from the moment the said presumption is displaced by proof to the contrary, the TCA cannot persist in considering the lessor as the taxpayer of the IUC.

But, also on this matter, it should be noted that the provision in art. 19º of the CIUC, precisely for purposes of the provision in no. 2 of art. 3º of the said CIUC (that is, for purposes of subjective scope) imposes on entities engaging in financial leasing the obligation to provide the TCA with data relating to the tax identification of the users of the leased vehicles.

From this obligation it is possible to draw two conclusions: 1st) the legislator was clear as to the legal value of the register, requiring knowledge of the real users of the leased vehicles, which, moreover, is in perfect harmony with the understanding that no. 1 of art. 3º of the CIUC intends, solely, to establish a rebuttable presumption; 2nd) existing a financial leasing contract and during its validity it is the lessee who is the taxpayer of the tax.

The explanation for this second conclusion derives from legislative intent, as we are dealing with a tax with environmental purposes, which clearly aims to tax those who actually use, enjoy the goods, when at the same time they have the power to become owners of the same by effect of the contract in force. Only thus can the provision in no. 2 of article 3º of the CIUC be understood, which is in perfect harmony with the principle of equivalence inspiring the legal architecture underlying the IUC. In this matter the letter of the law is, moreover, very explicit.

2nd On the Burden of Proof

1. The respondent TCA alleges that the Claimant did not comply with the declaratory obligation provided for in article 19º of the CIUC and that for that reason it cannot now allege its condition as a lessor for the purposes sought. Also on this point the TCA is not well-founded, because, as financial leasing of motor vehicles falls within the economic activity carried out by the Claimant, all financial leasing contracts entered into must appear in its accounts, generate ongoing and abundant invoicing associated with the processing of rents in force, which in itself generates various tax obligations that must be complied with regularly. The TCA has knowledge of all of this, as this would only not be the case if the Claimant breached its most basic tax obligations.

But even if the eventual declaratory obligation provided for in article 19º of the CIUC is considered in isolation, and which the TCA now alleges was not complied with by the Claimant, it will always be said that whoever alleges a fact has the burden of proving it. The non-compliance with this obligation is alleged by the TCA, so it was incumbent upon it to demonstrate what it alleges and not upon the Claimant. Furthermore, as the TCA states in its Response, if in fact this non-compliance occurs then it is, indeed, necessary to initiate the appropriate procedures provided for in law to sanction with the eventual administrative offence.

1. For what is relevant in the present proceedings, it was sufficient for the Claimant to prove the existence of the leasing contracts in force during the period in which the tax facts occurred, in accordance with the general rules of burden of proof. This is the factuality invoked by it on the basis of which it seeks to demonstrate the substantive legitimacy of the lessee. This factuality is proven by all the documents filed in the case, particularly by all the financial leasing contracts which are filed in the appendix to the arbitral request (see docs. 41 to 82).

Finally, it must be said that in the particular case of lessors it is not credible that the TCA does not have access to any ancillary information about the existence of contracts entered into by these companies and about their respective users, not only because the provision in art. 19º of the CIUC imposes, precisely, for purposes of the provision in art. 3º of the said CIUC (that is, for purposes of subjective scope), on entities engaging in financial leasing the obligation to provide the TCA with data relating to the tax identification of the users of the leased vehicles, but by all the other tax consequences arising therefrom in respect of other taxes, which certainly the TCA monitors regularly.

Once again the legal solution leaves no doubt as to whom the legislator intended to impose the burden of paying the tax: the owner, equating to this financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract" (art. 3º, no. 2 of the CIUC).

Considering the factual matter proven in the case and the documents filed by the Claimant, it is verified that the presumption provided for in number 1 of article 3º of the CIUC has been displaced and the lessees properly identified as taxpayers of the tax in light of the provisions of number 2 of article 3º of the CIUC.

In these terms it is concluded that the means of proof filed in the case are sufficient to displace the presumption based on the motor vehicle register and to demonstrate that the Claimant cannot be considered a taxpayer of the tax but rather the lessees holding the respective financial leasing contracts in conformity with the provisions of number 2 of article 3º of the CIUC.

Consequently, the TCA's decision which led it to the issuance and collection of the tax assessments now challenged was based on a wrong assumption, according to which, in accordance with the provisions of number 1 of article 3º of the CIUC, the tax was due by the person registered in the motor vehicle register, independently of the subsequent demonstration of the existence of financial leasing contracts in force at the time the tax facts occurred, wherefore they suffer from the defect of violation of law due to error regarding the factual and legal assumptions.

In these terms they must be subject to annulment, with consequent reimbursement to the Claimant of the amount improperly paid.

3rd) Of the claim and the right to payment of compensatory interest and arbitral costs

1. Paragraph b) of number 1 of art. 24º of the LRTA provides that the arbitral decision on the merits of the claim from which no appeal or challenge lies binds the tax administration from the end of the time period provided for the appeal or challenge, and it must – in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the time period provided for the spontaneous execution of the sentences of tax court decisions – re-establish the situation that would exist if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose.

Such provision is in line with the provisions of art. 100º of the LGT, applicable to the case by virtue of the provisions of paragraph a) of number 1 of art. 29º of the LRTA, in which it is established that "the tax administration is obliged, in case of total or partial success of complaints or administrative appeals, or judicial proceedings in favor of the taxpayer, to the immediate and full re-establishment of the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided for in the law."

For its part, article 43º, number 1 of the General Tax Law provides that "compensatory interest is due when it is determined, in administrative complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due."

1. From the analysis of the evidentiary elements in the present case it is possible to infer that, by virtue of the provision in article 19º of the CIUC, which obligates lessors to communicate to the TCA (precisely for purposes of the provision in art. 3º of the said CIUC as regards subjective scope of the tax) the data relating to the tax identification of entities engaging in financial leasing and the users of the leased vehicles, it is possible to conclude that the TCA had knowledge of factual elements essentially sufficient to proceed with the correct assessment of the tax or, using the prerogatives of the investigative principle, to ascertain from the now Claimant all the missing elements to proceed with the correct assessment. But even if that were not the case, it will always be said that it had the possibility of revocation of the tax acts illegally performed, which it could have effected within the time period for response to the present request for arbitral decision.

The error for which it is obliged to provide indemnity arises, then, from the erroneous application of the law in force, so that the tribunal cannot support the Respondent's allegation according to which it merely applied the law so that, in the TCA's view, no error attributable to the services would result therefrom, or stated differently, the administration would never be held responsible for the illegal application of the norms in force nor for the damage caused.

Thus, in light of the provision in article 61º of the Tax Procedure Code and considering that the requirements for the right to compensatory interest are met, that is, verified the existence of error attributable to the services from which results payment of the tax debt in an amount greater than that legally due, as provided for in no. 1 of art. 43º of the LGT, the Claimant is entitled to compensatory interest at the legal rate, calculated on the amount of €10,059.70, from the date on which payment was made until its full reimbursement.

1. As for costs: the Respondent, in its response raises the issue of responsibility for payment of costs in the event the Tribunal comes to consider the arbitral request to be well-founded, seeking that it not be considered responsible for its payment, as it merely applied the provision of article 3º, no. 1 of the CIUC. The Respondent's argument is based on the same argument invoked to try to displace its responsibility as to the payment of compensatory interest, which is not well-founded for the same reasons.

Everything set out above as to the matter of condemnation regarding payment of compensatory interest also applies as the basis for the decision of condemnation in the matter of arbitral costs. The Respondent had the opportunity, as we mentioned above, to revoke the illegal tax acts, at least within the time period for response in the present case. The proceeding only continued because the TCA so understood, as it could have revoked the challenged acts in the same way as occurred in arbitral case no. 129/2014-T.

Moreover, in the matter of fixing costs due for the arbitral proceeding the rules specially provided for in the LRTA and in the respective Regulation of Costs in Tax Arbitration Proceedings (RCPAT) are to be applied, and recourse is to be had to

Wherefore, the request of the Respondent TCA as to responsibility for costs of the proceeding is found to be without merit.

It does not appear that there are any other relevant issues raised by the parties.

V - DECISION

Based on the foregoing, this Arbitral Tribunal decides:

A) - To find the claim for declaration of illegality of the IUC assessments challenged in the present case to be well-founded, as they suffer from the defect of violation of law due to error regarding the factual and legal assumptions, and to annul, consequently, the corresponding tax acts;

B) - To find the claim for condemnation of the Tax Administration for reimbursement of the amount improperly paid, in the sum of €10,059.70, plus compensatory interest at the legal rate, counted from the day of payment made until full reimbursement of the said amount, to be well-founded, condemning the Tax and Customs Authority to effect these payments.

Value of the case: In accordance with the provisions of articles 306º, nos. 1 and 2 of the Code of Civil Procedure, article 97º - A, no. 1, paragraph a) of the Tax Procedure Code and article 3º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €10,059.70.

Costs: In accordance with the provision in no. 4 of art. 22º of the LRTA and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, chargeable to the Respondent Tax and Customs Authority.

Let it be registered and notified.

Lisbon, 21 October 2014

The singular Arbitrator,

(Maria do Rosário Anjos)

		[1] This decision is drafted in accordance with old orthography.


	
		[2] In this sense, see BAPTISTA MACHADO, Introduction to Legitimating Discourse, p. 175 et seq.


	
		[3] See, among others, the Court of Administrative Appeals decisions of 05/09/2012 and 06/02/2013, respectively handed down in cases nos. 0314/12 and 01000/12, available at www.dgsi.pt.


	
		[4] In this sense, see Afonso, A. Brigas and Fernandes, M. (2009) Vehicle Tax and Single Vehicle Circulation Tax, Coimbra Editora, p. 187.


	
		[5] In this sense, and with regard to the principle of equivalence, see arbitral decision no. 286/2013 – T of 2 May 2014. In the same sense, see Arbitral Decisions nos. 14/2013-T, 26/2013-T of 19 July 2013, 27/2013 – T, 217-2013-T of 28 February and, more recently, 293/2013-T of 9 June 2014, 46/204 –T among others.