IUC Subjective Incidence in Financial and Operational Leasing - CAAD Arbitration 141/2018-T

ARBITRAL DECISION

I – REPORT

A..., hereinafter referred to as "Claimant", legal entity no. ..., domiciled at Rua..., ..., Lisbon, within the area of the ... Tax Service (SF) of Lisbon, hereby, in its capacity as the incorporating company through merger of company B... – FINANCIAL CREDIT INSTITUTION, SA, hereinafter "B...", former legal entity no. ..., which had its registered office at the same address, submits a request for constitution of an arbitral tribunal to challenge the dismissal dispatch of the Gracious Appeal, issued on 27.11.2017 by the Tax Authority of Lisbon, filed against 161 self-assessments of Unique Circulation Tax (IUC) and respective compensatory interest (JC), relating to the years 2016 and 2017, in the total amount of € 12,691.35.

The request for constitution of the arbitral tribunal was presented on 23-03-2017, in accordance with the provisions of articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework of Arbitration in Tax Matters, hereinafter only referred to as RJAT), in conjunction with article 102 of the CPPT, whereby the Tax and Customs Authority (hereinafter referred to only as Respondent or TA) is requested.

The Claimant intends, with its request, the declaration of illegality of the dispatch dismissing the Gracious Appeal, already identified above, filed against 161 assessments of Unique Circulation Tax (IUC) and compensatory interest (JC), relating to the years 2016 and 2017, seeking the illegality of the tax assessments, with the consequent annulment and reimbursement of the amounts improperly paid.

The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 26-03-2018. The claimant did not proceed to appoint an arbitrator, therefore, under the provisions of paragraph a) of article 6(2) and paragraph b) of article 11(1) of RJAT, the President of the Ethics Council designated the undersigned as arbitrator of the sole arbitral tribunal, who duly communicated acceptance of the designation. The parties were notified of the arbitrator's designation, with no impediments raised. Thus, and in accordance with the provisions of paragraph c) of article 11(1) of RJAT, the sole arbitral tribunal was constituted on 05-06-2018.

Also on 05-06-2018, an arbitral dispatch was issued, in accordance with the provisions of article 17 of RJAT, and the respondent was notified to submit a reply, which occurred on 2 July 2018. The respondent also attached the Administrative Process (AP) found in the case file.

On 18-09-2018, an arbitral dispatch was issued, following the request by the TA in its submitted reply, consulting the claimant regarding the possibility of waiving the meeting provided for in article 18 and the waiving of witness examination, given that the matter under discussion in the case appears to be exclusively of law. To this arbitral dispatch, the claimant responded that it had no objection to the said waiver, waiving the examination of the indicated witnesses. Accordingly, an arbitral dispatch was issued on 23-10-2018, which set a period of 10 days, equal and successive, for the parties to produce written submissions. In this dispatch, 4 December 2018 was also indicated as the date for rendering the arbitral decision.

To substantiate the claimant's request for arbitral pronouncement, the Claimant seeks the declaration of illegality of the dismissal of the gracious appeal and the respective underlying assessments, for which it alleges, in summary, the following:

Indeed, notwithstanding having made such payment, A... and the Claimant opposed and oppose such self-assessments, to the extent that A... was not the taxpayer of the IUC and inherent JC under discussion here.

According to the TA, A... owes IUC and JC with reference to the vehicles listed in document 4 attached to the arbitral request and for the years 2016 and 2017, totalling € 12,691.35, based on articles 3, no. 1, 4, no. 2, 6, nos. 1 and 3 of CIUC. The Claimant alleges, however, that the assessments, as well as the dispatch dismissing the gracious appeal filed. According to the Claimant, the dispatch dismissing the gracious appeal here impugned, as well as those self-assessments of IUC and JC, suffer from error in the factual assumptions and a defect of violation of law, given that all vehicles referenced in the assessments were contracted with their respective lessees through financial and operational lease contracts, in force at the time of the facts (2016 and 2017), whereby the illegality of that dispatch and those self-assessments should be declared, with their consequent annulment.

The Claimant further alleges that the TA/TDF of Lisbon, in dismissing that Appeal, relied solely and exclusively on the presumption of the Vehicle Register. In fact, it was based solely and exclusively on the information contained in the Vehicle Register (IRN – Institute of Registers and Notary, and IMTT – Institute of Mobility and Land Transport), namely the lack of "annotation" of any lessee and the fact that the vehicles were registered in the name of A... on the dates of IUC exigibility (anniversary dates of the vehicles in relation to the initial registration date).

The following documents were attached to the Gracious Appeal: "Document no. 1: Summary table relating to the 161 IUC Self-assessments regarding the vehicles identified by their respective registration number, in which the allocation of the vehicles to their respective financial lease contracts and operational lease contracts with promise of sale can be verified; Document no. 2: Dossier regarding each of the vehicles under analysis which includes copies of the financial lease contracts as well as operational lease contracts with promise of sale, as the case may be".

It being certain, the Claimant alleges, that in the financial lease contracts and operational lease contracts with promise of sale (renting) the users of the vehicles in question are clearly identified, and that, in accordance with article 58 of LGT, "The tax administration must, in the procedure, carry out all necessary measures to satisfy the public interest and discover material truth, and is not subordinate to the initiative of the party making the request." The dispatch here impugned was preceded by the draft decision dismissing, a copy of which the Claimant attached to the arbitral request (document no. 2), for the purpose of any exercise of the right to be heard.

The Claimant invokes in defence of its position numerous arbitral jurisprudence, having attached to the arbitral request filed in the case some of the invoked arbitral decisions, and also some jurisprudence from our superior courts. It concludes by petitioning the annulment of the dispatch dismissing the gracious appeal and, consequently, of the underlying IUC and JC assessments.

According to the Respondent TA, the Claimant owed IUC and JC with reference to the vehicles listed in the PI, being the holder in the vehicle register of those vehicles, in accordance with the provisions of articles 3 no. 1, 4 no. 2, 6 nos. 1 and 3 of CIUC. Thus, from the TA's perspective, because it is registered in the vehicle register as owner of the vehicles in question, it is the debtor of the tax. From its perspective, the tax legislator, in establishing in article 3, no. 1 who are the taxpayers of the IUC, expressly and intentionally established that these are the owners (or in the situations provided for in no. 2, the persons listed there), considering as such the persons in whose name the same are registered. It stresses that the legislator did not use the expression "it is presumed", as it could have done, had it been its intention to establish a presumption. It further alleges that the Claimant did not comply with the obligation provided for in article 19 of CIUC, whereby it has no doubts about the legality of the tax assessments in question and seeks their maintenance with all legal consequences. It makes some remarks on the strength of the arbitral jurisprudence invoked by the Claimant and, in conclusion, seeks the validity of the impugned tax acts and the total lack of foundation of the requests.

In summary, these are the positions in conflict in the case, from which emerges the fundamental legal question to be decided, namely to know who is obliged to pay the IUC for the vehicles identified in the assessments and in the dispatch dismissing the gracious appeal issued and here impugned, such vehicles having been the subject of financial and operational lease contracts, in the tax periods of 2016 and 2017.

II – CASE MANAGEMENT

1. The tribunal is competent and was regularly constituted.

The parties have legal capacity and standing, are properly represented (articles 4 and 10(2) of RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March).

The process does not suffer from any nullities.

III – MATTERS OF FACT AND LAW

10. Matters of Fact

The Tribunal need not pronounce on everything alleged by the parties; rather, it has the duty to select the facts that matter for the decision and distinguish proven facts from unproven facts (cf. article 123(2) of CPPT and article 607(3) and (4) of CPC, applicable ex vi article 29(1), paragraphs a) and e), of RJAT), taking into account the positions assumed by the parties, the documentary evidence attached to the case and the witness testimony produced, the following facts are considered proven:

Thus, in light of the elements in the case file, the means of documentary proof attached to the case by the Claimant and contained in the Administrative Process (AP) attached to the case by the Respondent, it is important to establish the proven and unproven factual matter.

11. PROVEN FACTS

The following facts are considered proven:

The claimant A... (A...) incorporated B..., through cross-border merger, with global transmission of assets (assets and liabilities), allocation of the same assets to the Claimant (branch in Portugal), and consequent extinction of A....

A... is a Financial Institution which, within the scope of its corporate purpose, carries out operations permitted to Banks, with the exception of receipt of deposits, entering into lease contracts with its clients, specifically Long Duration Lease (LDL), renting and Financial Lease (leasing) contracts for motor vehicles, vehicle rental contracts without driver with promise of sale, renting (operational lease contracts with promise of sale), financial lease contracts and financing contracts.

A..., in the course of its activity, acquires new vehicles from domestic importers C... and D... and normally leases – leasing (financial lease), renting (operational lease) or LDL (long-term rental) – those same vehicles in favour of third parties.

By consultation in its reserved area of the Tax Portal, the claimant verified the existence of IUC in self-assessment phase relating to the vehicles identified in documents nos. 4 to 7, attached to the arbitral request, which are hereby given as fully reproduced.

It proceeded to self-assess the said IUC assessment values and respective compensatory interest, which in total comprise 161 assessments and a total value of €12,691.35 (twelve thousand, six hundred and ninety-one euros and thirty-five cents);

The claimant paid the amounts of all the mentioned assessments (IUC and JC) as evidenced by the documents attached to the case, to the gracious appeal procedure and to the administrative process (AP);

The claimant submitted, on 11-07-2017, a Gracious Appeal which was processed at the competent Tax Service with case no. ...2017...;

The following documents were attached to the Gracious Appeal:

• Document no. 1: Summary table relating to the 161 IUC Self-assessments regarding the vehicles identified by their respective registration number, in which the allocation of the vehicles to their respective financial lease contracts and operational lease contracts with promise of sale can be verified;
• Document no. 2: Dossier regarding each of the vehicles under analysis which includes copies of the financial lease contracts as well as operational lease contracts with promise of sale, as the case may be, in which the lessees and users of the vehicles in question are identified.

From the documentation attached to the gracious appeal procedure and to the present case (contained in the arbitral request and in the administrative process attached by the TA), it is evident that on the dates of IUC exigibility for the vehicles in question, A... had already leased those vehicles in favour of third parties, through financial lease contracts or operational lease contracts with promise of sale, as results from the content of document no. 5 attached to the arbitral request whose content is hereby given as fully reproduced for all legal purposes;

The Claimant was notified of the draft decision dismissing the gracious appeal filed, for the purposes of exercising its right to prior hearing;

A final decision dismissing the gracious appeal was issued, notified to the claimant on 27-11-2017, with the grounds contained in document no. 2 attached to the arbitral request and hereby given as fully reproduced;

The grounds for dismissal rest on the information contained in the Vehicle Register (IRN – Institute of Registers and Notary, and IMTT – Institute of Mobility and Land Transport), namely the lack of "annotation" of any lessee and the fact that the vehicles were registered in the name of A... on the dates of IUC exigibility (anniversary dates of the vehicles in relation to the initial registration date).

n) The Claimant submitted a request for constitution of an arbitral tribunal on 23-03-2018.

10.1. There are no facts found not proven that are relevant for the assessment of the request.

10.2. The matter found proven and unproven was based on the documents attached to the process by the Claimant and to the administrative process attached by the Respondent, as well as the facts resulting from the express agreement of the parties regarding the factual matter, with their disagreement only regarding the underlying legal question.

11. Matters of Law

1. With the factual matter established, it is necessary to address the essential legal question raised by the Claimant, which consists of assessing the terms of the configuration of the subjective incidence of IUC in light of the provisions of article 3 of the Code of Unique Circulation Tax (CIUC), namely, in cases where vehicles are being used by third parties holding financial lease, operational lease, or renting contracts, as well as the question of whether subjective incidence is based strictly on the registration of vehicle ownership in the Vehicle Register, or whether registration operates only as a rebuttable presumption of tax incidence, in accordance with the provisions of article 73 of the General Tax Law. In connection with this essential question arise the questions of knowing whether, if it is merely a presumption, how it can be rebutted by the taxpayer, to whom the burden of proof falls.

On this matter, arbitral jurisprudence is already abundant and well-established in various arbitral decisions, noting that in each case the specific circumstances resulting from the proven factual matter must be considered.

Finally, depending on the decision of the previous questions, it will be important to decide the question raised by the Claimant regarding compensatory interest. Let us examine this.

1. As a preliminary matter, it should be noted that the contentious regime provided for in RJAT is merely one of legality, aimed only at declaring the illegality of acts of the types provided for in paragraphs a) and b) of article 2(1). Therefore, the legality of the impugned acts as practiced by the TA must be assessed, with the reasoning used in them, other possible grounds that could support other acts, with decisional content totally or partially coinciding with the act practiced, being irrelevant. Thus, grounds invoked afterwards, after the end of the tax procedure in which the act whose declaration of illegality is sought was practiced, including those raised in the jurisdictional process, are irrelevant.

On the other hand, it should again be noted that Courts (which obviously include arbitral tribunals) need not assess all arguments formulated by the parties, but only those determinative of the decision of the case. (Cf., inter alia, Judgment of the Plenary of the 2nd Section of STA, of 7 June 95, appeal 5239, in DR – Appendix of 31 March 97, pp. 36-40 and Judgment STA – 2nd Series – of 23 April 97, DR/AP of 9 Oct 97, p. 1094).

This being said, it is necessary to decide the legal questions essential to the final decision to be rendered on the (il)legality of the impugned acts: the dismissal of the Gracious Appeal and the underlying assessments.

Regarding Subjective Incidence:

1. On this question, this tribunal follows the numerous, majoritary arbitral tax jurisprudence, set out in numerous arbitral proceedings. [See, in particular, decisions rendered in CAAD proceedings nos. 14/2013, 26/2013, 27/2013, 73/2013, 170/2013, 154/2014, 212/2014 and, more recently, in proceedings nos. 539/2016-T, 580/2016-T, 623/2016-T, 109/2017-T; 145/2017-T, 185/2017-T, all published at www.caad.org.pt]. To these are added, among others, the arbitral decisions invoked by the Claimant in its arbitral request, of which it attached to the case the following: Arbitral decision rendered in proceedings no. 455/2017 T; 374/2017 T; 7/2018, T.

Let us examine this:

On this question, article 3 of CIUC (Code of Unique Circulation Tax) provides as follows:

"Article 3

Subjective Incidence

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

2 – The following are equated to owners: financial lessees, buyers with reservation of ownership, as well as other holders of purchase option rights by virtue of lease contracts".

Regarding the interpretation of the fiscal legal norm, article 11(1) of LGT establishes that "in determining the meaning of fiscal norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

In accordance with this, promoting the necessary interpretive activity of the norms in question, it is necessary to scrutinize the best interpretation of article 3(1) of CIUC, in light of fundamental hermeneutic principles. Thus, and first, attention should be paid to the literal element, that is the one aimed at detecting the legislative thought that is objectified in the norm, to verify whether it contemplates a presumption, or whether it definitively determines that the taxpayer of the tax is the owner appearing in the register.

The question that arises is whether the expression "shall be considered" used by the legislator in CIUC, instead of the expression "shall be presumed", which was what appeared in the diplomas preceding CIUC, would have removed the nature of "presumption" from the legal provision in question.

In our view, and contrary to what the TA defends, the answer must necessarily be negative, since from the analysis of our legal system it is clear that the two expressions have been used by the legislator with equivalent meaning, whether at the level of rebuttable presumptions, or in the context of irrebuttable presumptions, such that nothing enables the conclusion sought by the Tax Authority based on a mere semantic reason.

In fact, this occurs in various legal norms that establish presumptions using the verb "to consider". See, for example, within civil law – paragraph 3 of article 243 of the Civil Code, when it provides that "a third party who acquired the right after the registration of the nullity action is always considered in bad faith, when such registration takes place". Also in the field of industrial property law the same applies, when article 59(1) of the Industrial Property Code provides that "(…) inventions whose patent has been requested during the year following the date on which the inventor left the company, are considered made during the execution of the employment contract (…)". Now, also in the field of tax law, when paragraphs 3 and 4 of article 89-A of LGT provide that it is the taxpayer's burden to prove that the declared income corresponds to reality, and that, if such proof is not made, it is presumed ("it shall be considered" in the wording of the Law) that the income is what results from the table contained in paragraph 4 of that article.

This conclusion that there is complete equivalence of meanings between the two expressions, which the legislator uses interchangeably, satisfies the condition established in article 9(2) of the Civil Code, since the minimum correspondence of wording for the purpose of determining legislative thought is assured.

Furthermore, on this question, arbitral jurisprudence is already so abundant, accompanied by the jurisprudence of our superior Courts. It is therefore a rebuttable presumption.

Furthermore, this conclusion is equally reinforced when revisiting the other elements of interpretation, namely, the historical element, the rational or teleological element, and the systematic element.

Writing on interpretive activity, FRANCESCO FERRARA states that this "is the most difficult and delicate operation to which the jurist can dedicate himself, and requires fine touch, refined sense, happy intuition, much experience and perfect mastery not only of positive material, but also of the spirit of a certain legislation. (…) Interpretation must be objective, balanced, without passion, sometimes bold, but not revolutionary, keen, but always respectful of the law" (Cf. Essay on the Theory of Interpretation of Laws, translation by MANUEL DE ANDRADE, (2nd ed.), Arménio Amado, Publisher, Coimbra, 1963, p. 129).

As BAPTISTA MACHADO notes, "the legal provision presents itself to the jurist as a linguistic statement, as a set of words that constitute a text. To interpret consists evidently in drawing from that text a certain meaning or content of thought. The text comprises multiple meanings (polysemy of text) and frequently contains ambiguous or obscure expressions. Even when apparently clear at first reading, its application to concrete cases of life very often gives rise to unforeseen and unforeseeable interpretation difficulties. Besides, even though apparently clear in its verbal expression and bearing only one sense, there is still the possibility that the verbal expression has betrayed legislative thought – a phenomenon more frequent than would appear at first sight" (Cf. Introduction to Law and Legitimizing Discourse, pp. 175/176).

"The purpose of interpretation is to determine the objective meaning of the law, the vis potestas legis. (…) The law is not what the legislator wished or wished to express, but only that which he expressed in the form of law. (…) Furthermore, the legal command has an autonomous value that may not coincide with the will of the architects and drafters of the law, and may lead to unforeseen and unanticipated consequences for legislators. (…) The interpreter should seek not what the legislator wished, but what appears objectively desired in the law: the mens legis and not the mens legislatoris (Cf. FRANCESCO FERRARA, Essay, pp. 134/135).

Understanding a law "is not merely to grasp mechanically the apparent and immediate meaning that results from verbal connection; it is to inquire deeply into legislative thought, descend from the verbal surface to the intimate concept contained in the text and develop it in all its possible directions" (loc. cit., p. 128).

With the objective of unveiling the true meaning and scope of legal texts, the interpreter makes use of interpretive elements that are essentially the grammatical element (the text, or the "letter of the law") and the logical element, which, in turn, is subdivided into the rational (or teleological) element, the systematic element, and the historical element. (Cf. BAPTISTA MACHADO, loc. cit., p. 181; J. OLIVEIRA ASCENSÃO, The Law – Introduction and General Theory 2nd Ed., Calouste Gulbenkian Foundation, Lisbon, p. 361).

Among us, it is article 9 of the Civil Code (CC) that provides the rules and fundamental elements for the correct and adequate interpretation of norms. The text of article 9(1) of the CC begins by saying that interpretation must not be limited to the letter of the law, but must reconstruct, from it, the "legislative thought". On the expression "legislative thought" BAPTISTA MACHADO tells us that article 9 of the CC "did not take a position in the controversy between subjectivist doctrine and objectivist doctrine. It is evidenced by the fact that it refers neither to the "will of the legislator" nor to the "will of the law", but rather points as the scope of interpretive activity the discovery of "legislative thought" (art. 9, 1st). This expression, purposefully colorless, means exactly that the legislator did not want to commit itself" (loc. cit., p. 188).

In the same sense are PIRES DE LIMA and ANTUNES VARELA in annotation to article 9 of the CC (Cf. Annotated Civil Code – vol. I, Coimbra ed., 1967, p. 16).

And on paragraph 3 of article 9 of the CC that author notes: "(...) this paragraph 3 proposes to us, therefore, a model of ideal legislator who has enshrined the most correct solutions (most correct, just or reasonable) and knows how to express himself in correct form. This model clearly bears objectivist characteristics, as the concrete legislator (so often incorrect, hasty, unfortunate) is not taken as a point of reference, but rather an abstract legislator: wise, far-seeing, rational and just(...)" (loc. cit. p. 189/190). Immediately thereafter, he draws attention to the fact that paragraph 1 of article 9 refers to three more elements of interpretation: "the unity of the legal system", "the circumstances in which the law was elaborated" and "the specific conditions of the time in which it is applied" (loc. cit, p. 190).

As to the "circumstances of the time in which the law was elaborated", BAPTISTA MACHADO explains that this expression "(...)represents what is traditionally called the occasio legis: the conjunctural factors of political, social and economic order that determined or motivated the legislative measure in question(...)" (loc. cit., p. 190).

Regarding the "specific conditions of the time in which it is applied", this author says that this element of interpretation "decidedly has an actualist connotation (loc. cit., p. 190), which coincides with the opinion expressed by PIRES DE LIMA and ANTUNES VARELA in annotations to article 9 of the CC.

With respect to "the unity of the legal system", BAPTISTA MACHADO considers this the most important interpretive factor: "its consideration as a decisive factor would always be imposed on us by the principle of axiological or value coherence of the legal order" (loc. cit., p. 191). It is also this author who tells us, regarding the literal or grammatical element (text or "letter of the law"), that this "is the starting point of interpretation. As such, it immediately has a negative function: to eliminate those senses that have no support, or at least some correspondence or resonance in the words of the law. But it also has a positive function, as follows: if the text comprises only one sense, that is the sense of the norm – with the caveat, however, that it can be concluded based on other norms that the wording of the text has betrayed the legislator's thought" (loc. cit., p. 182).

Referring to the rational or teleological element, this author says that it consists "in the reason for being of the law (ratio legis), in the end aimed at by the legislator in elaborating the norm. Knowledge of this end, especially when accompanied by knowledge of the circumstances (political, social, economic, moral, etc.,) in which the norm was elaborated or of the political-economic-social conjuncture that motivated the legislative decision (occasio legis) constitutes a subsidy of the greatest importance for determining the meaning of the norm. Suffice it to recall that the clarification of the ratio legis reveals to us the valuation or weighing of the various interests that the norm regulates and, therefore, the relative weight of those interests, the choice among them expressed by the solution that the norm expresses" (loc. cit., pp. 182/183).

It is still BAPTISTA MACHADO who tells us, now regarding the systematic element (context of law and parallel provisions) that "(...)this element comprises the consideration of the other provisions that form the normative complex of the institute in which the interpreted norm is integrated, that is, which regulate the same matter (context of law), as well as the consideration of legal provisions that regulate parallel normative problems or kindred institutes (parallel provisions). It also comprises the systematic place that corresponds to the interpreted norm in the overall order, as well as its consonance with the spirit or intrinsic unity of the entire legal order.

This interpretive subsidy is based on the postulate of intrinsic coherence of the order, namely on the fact that the norms contained in a codification generally obey a unitary thought(...)" (loc. cit., p. 183).

As JOSEF KOHLER teaches, cited by MANUEL DE ANDRADE "(…) in particular we must take into account the concatenation of the various laws of the country, because a fundamental requirement of all sound legislation is that the laws adjust themselves to one another and do not result in a jumble of disconnected provisions (...)" (Essay, p. 27).

In conclusion, through the analysis of the historical element, the conclusion is drawn that, from the entry into force of Decree-Law 59/72, of 30 December, the first to regulate the matter, until Decree-Law no. 116/94, of 3 May, the last to precede CIUC [cf Law no. 22-A/2007, as amended by Laws 67-A/2007 and 3-B/2010], the presumption was enshrined that the taxpayers of IUC are the persons in whose name the vehicles are registered on the date of their assessment.

14 – It is evident that fiscal law has always had, for the case that now interests us, the objective of taxing the true and effective owner and user of the vehicle, by force of the principle of equivalence underlying IUC. Thus, the legislator, in adopting the principle of equivalence, chose to impose a burden on the subject using the vehicle to the extent of the cost caused due to the negative externalities caused by motorized vehicles. In the letter of the law it only establishes the presumption that the owner appearing in the Vehicle Register also coincides with its user and that the register evidences the reality relating to vehicle use. This choice of extrafiscal policy also justifies the solution set out in paragraph 2 of article 3 of CIUC regarding lessees, elected by the legislator as the subjects burdened with the payment of the tax even during the term of a lease contract from which it may not necessarily result in the acquisition of vehicle ownership. In fact, the current and new framework of vehicle taxation enshrines principles aimed at subjecting vehicle owners to bearing the cost of damages caused by road and environmental damage caused by these, as is apparent from the content of article 1 of CIUC.

Now, the consideration of these principles, in particular the principle of equivalence, which merit constitutional protection and recognition in community law, and are also recognized in other branches of the legal order, determines that the aforesaid costs be borne by the real owners, the causers of the said damages, which entirely rules out an interpretation that sought to prevent the presumed owners from making proof that they no longer are because ownership is in the legal sphere of another. Thus, also, from the interpretation made in light of elements of a rational and teleological nature, bearing in mind what the rationality of the system ensures and the ends pursued by the new CIUC, it is clear that paragraph 1 of article 3 of CIUC establishes a rebuttable legal presumption. Whereby, also the interpretation of a rational or teleological nature leads us to an identical conclusion.

Given the foregoing, it must be concluded that the ratio legis of the tax points toward the taxation of the actual owner-users of vehicles, so the expression "shall be considered" is used in the regulatory provision in question in a sense similar to "shall be presumed", by reason of which there is no doubt that a legal presumption is enshrined.

1. This being so, it must be considered, finally, but with great care for the specific case, the provision of article 73 of LGT, which establishes that "(…) presumptions established in tax incidence norms always admit contrary evidence, whereby they are rebuttable (…)".

Accordingly, establishing article 3(1) of CIUC a rebuttable presumption, the person who is registered in the register as the vehicle owner and who, for that reason, was considered by the Tax Authority as a taxpayer of the tax, may present evidence aimed at demonstrating that the owner of the property, on the date of the tax event, is another person, to whom ownership has been transferred, or whose use is, under a lease contract or equivalent, transferred to another.

This last part is, in the case at hand, particularly relevant given the fact proven by the existence of financial lease contracts and equivalent ones in favor of third parties clients of the claimant. And, given the provision of paragraph 2 of article 3, there is no doubt that, once the existence of this type of contract is proven, the lessees are treated as equated to owners for the purposes of IUC subjective incidence. Now, regarding the provision in this paragraph 2, no reasonable doubt can remain, given the clarity of the law, about the debtors of IUC, in this case, the lessees using the vehicles.

However, in the case at hand, as is established in the agreed factual matter, there was no annotation in the vehicle register that identified the holders of the respective lease contracts or equivalent. This failure is attributable to the Claimant, without margin for doubt. But, even so, in the absence of annotation in the vehicle register, we are referred to the provision of paragraph 1 of the said article 3 and, consequently, we are facing a rebuttable presumption.

Now, the issuance of the self-assessments was based on the obligation generated automatically by the system contained in the Tax Portal, which led the Claimant to proceed with the respective self-assessment. Being that until that moment the TF had no knowledge, nor could it have, of the true users of the vehicles. All the more so because, in addition to the failure of annotation contained in the vehicle register, there is non-compliance with the obligation provided for in article 19 of CIUC. Only with the presentation of the Gracious Appeal does the Claimant give knowledge and provide all the documentation and information relating to the contractual situation of the motor vehicles subject to IUC taxation, and identifies the respective lessees.

The obligation to proceed with registration falls on the buyer – the active subject of the fact subject to registration (cf. article 8-B – 1, of the Land Register Code, applicable to the Vehicle Register by force of article 29, of DL no. 54/75, of 12/2, in conjunction with article 5-1/a), of the latter diploma).

However, the Vehicle Register Regulations contain a special regime, in force since 2008, for entities that, by virtue of their commercial activity, regularly proceed with the transmission of vehicle ownership. According to this regime, which is established in article 25-1/d), of DL no. 55/75, of 12/2 (version resulting from DL no. 20/2008, of 31/1), registration may be promoted by the seller, by means of a request signed only by him.

IUC is legally configured to function in integration with the vehicle register, which is inferred, from the outset, from the cited article 3-1 of CIUC, a norm where it is established that taxpayers of the tax are the owners of vehicles, further adding that they are considered as such the natural or legal persons, of public or private law, in whose name they are registered.

The departure from the legal presumption obeys the rule contained in article 347 of the Civil Code, whereby legal full proof can only be contradicted by means of proof showing that it is not true the fact that is its object. This means that it is not sufficient for the opposing party to put forward mere counter-proof – which is intended to cast doubt on the facts (cf. article 346 of the Civil Code) that make the presumed facts doubtful; rather, it has to show that it is not true the presumed fact, in such a way that there remains no uncertainty that the facts resulting from the presumption are not real.

Let us examine, therefore, whether it achieved this in such a way as to rebut the presumption contained in paragraph 1 of article 3 of CIUC.

On the Burden of Proof and Suitable Means of Proof to Rebut the Presumption

16 – Moving now to the question of the burden of proof, there is no doubt that it falls on the taxpayer to present suitable means to promote the proof necessary for rebutting the presumption. It can achieve this objective by two routes, or by "proof to the contrary", that is, proof that it was not the owner on the date of the tax event, or by proof of who was, on the date of the tax event, the lessee and user of the vehicle in question, by virtue of a financial or operational lease contract or equivalent celebrated and in force at the moment of the tax events.

Let us examine how it could achieve this objective.

17 – It is important first to note that the Legal Framework of the Financial Lease Contract, approved by Decree-Law no. 149/95, of 24 June, with the last amendment introduced by Decree-Law no. 30/2008, of 25 January, provides in its article 9 that the lessor's obligations include, in particular, granting the use of the good for the purposes intended and selling the good to the lessee, should the latter wish, upon completion of the contract, as respectively paragraphs b) and c) of its paragraph 1.

On the other hand, in light of what is established in article 10 of the said legal instrument, namely in paragraphs a) of its paragraphs 1 and 2, we learn that the lessee's obligations are to pay the rents and use and enjoy the leased good, which means that, during the term of a financial lease contract having a vehicle as its object, only the lessee has its exclusive use.

18 – The lessee's obligations, in light of the referred norms, clearly point to the fact that it is this contractual subject that has exclusive use of the vehicle object of the financial lease contract, being the one who uses it as if it were the true owner of that good. The lessor is, thus, the formal owner of the vehicle, not having, consequently, any potential polluting effect, which means that the damages arising to the community, resulting from the use of motor vehicles, should be assumed by their real users, as costs that only they should bear. The financial lessee, being equated to an owner in the sense of being a taxpayer of the tax (article 3, paragraphs 1 and 2 of CIUC), has full use and enjoyment of the vehicle, as legally established, and is therefore its true user and effective generator of environmental damages, and should thus respond for the corresponding tax, this being the understanding that should be drawn from the provision of paragraph 2 of article 3 of CIUC, which, in our view, makes perfect sense.

It is a matter of implementing and giving useful meaning to the principle of equivalence, which informs and shapes the current CIUC, a principle that concretizes the idea, underlying the polluter-pays principle, that whoever pollutes should, therefore, pay.

1. In any of the cases referred to in the case (financial lease, operational lease, renting, or financing with reservation of ownership), the lessees are considered as taxpayers of the tax. In fact, the financial lessee is expressly provided for in paragraph 2 of article 3 of CIUC as a taxpayer of the IUC, the same being true for "other holders of purchase option rights by virtue of a lease contract". Whereby, in light of what has been set out and in conformity with numerous arbitral jurisprudence already indicated above, it is the understanding of this Arbitral Tribunal that, if a financial lease contract, or an operational lease, renting, vehicle rental without driver (ALD) with promise of sale, or other financing contract with reservation of ownership, is in force on the date of tax exigibility, having a motor vehicle as its object, the taxpayers of that tax are, in light of the provision of paragraph 2 of article 3 of CIUC, the lessees, and not the lessor.

2. Having arrived here, it is still important to note that the provision of article 19 of CIUC, when, precisely, for the purposes of article 3 of the said Code, that is, for the purposes of subjective incidence, comes to impose on entities that proceed with financial lease, operational lease, or long-term rental of vehicles the obligation to provide the TA with data relating to the tax identification of the users of the leased vehicles, which reveals, in particular, that, for the purposes of the said incidence, it was intended to know who are, in fact, the real users of the leased vehicles, so that they, and not the lessor, bear the unique circulation tax, which, moreover, reveals itself in complete harmony with the principle of equivalence, as a structuring principle of CIUC.

As to non-compliance with the information obligation provided for in article 19 of CIUC, it is settled that although it may be an eventual ground for the application of some fine or procedural penalty, it cannot result in the consequence that the owner is obliged to pay the tax, that is, by the formal owner, or by the lessor.

1. Finally, the lease contracts presented by the Claimant attached to the Gracious Appeal process cannot but be considered as suitable means and with sufficient force to make proof of the quality of the lessees, namely, for the purposes of paragraph 2 of article 3 of CIUC, that is, for the purposes of their binding to the payment of the tax in question. There are, moreover, no elements that allow understanding that the data inscribed in such contracts do not correspond to contractual truth, it also being certain that the law, in this case, paragraph 1 of article 75 of LGT, attributes to these documents a presumption of truthfulness.

2. Accordingly, and for all that has been set out, the TA, when it understands that, in this case, the Claimant is the taxpayer of the IUC, without duly considering the provision of paragraph 2 of article 3 of CIUC, nor taking into account the validity of the financial lease contracts, operational lease contracts, and vehicle rental contracts without driver with promise of sale or other financing contract with reservation of ownership, on the date of IUC exigibility, is proceeding with the illegal assessment of that tax, based on the wrong interpretation and application of the said norm of subjective incidence of the Unique Circulation Tax, which constitutes the practice of a tax act that is illegal due to error as to factual and legal assumptions, which leads to the annulment of the corresponding tax acts, by violation of law.

3. Furthermore, presumptions of tax incidence can be rebutted through the proper adversarial procedure provided for in article 64 of CPPT or, alternatively, by means of a gracious appeal, revision of a tax act, or judicial impugnation of tax acts based thereon.

In the case at hand, the Claimant did not use that proper procedure, instead choosing to file a Gracious Appeal, followed by the arbitral request, in both of which it invoked and attached evidence to demonstrate that it was only the formal owner of the vehicles on the date the tax event occurred, by virtue of the lease contracts in force, identifying all lessees and holders of rights of use over the vehicles. Whereby, the documents attached to the gracious appeal case file and to the present arbitral request, which formed the basis for the agreed factual matter, in accordance with the grounds set out above, constitute the proper means to rebut the presumption of subjective incidence of IUC, on which the tax assessments whose annulment is requested in this case are based.

The documentary elements attached to the case enjoy the presumption of truthfulness conferred on them by the aforesaid article 75(1) of LGT, and thus have suitability and sufficient force to rebut the presumption that supported the assessments made based solely, as the Law provides, on the vehicle register.

1. The TA, when it understands that the taxpayers of the IUC are, definitively, the persons in whose name the motor vehicles are registered, without considering the provision of article 3, paragraphs 1 and 2 of CIUC, and by disregarding the evidentiary elements that were presented to it, as results, in particular, from the tax administrative process, is proceeding with the illegal assessment of the IUC, relating to the vehicles mentioned above, based on the wrong interpretation and application of the norms of subjective incidence of the Unique Circulation Tax, contained in the said article 3 of CIUC, which constitutes the practice of tax acts lacking legality due to error as to factual and legal assumptions, determining the annulment of the corresponding tax acts, by violation of law.

Regarding the Request for Compensatory Interest:

25 – In the arbitral request the Claimant petitions, as a consequence of the illegality and annulment of the impugned assessments, the right to compensatory interest.

It is thus necessary to determine whether, under article 24(5) of RJAT, the request for payment of compensatory interest in favor of the Claimant (Cf. article 43 of LGT and 61 of CPPT), should proceed.

On this question, paragraph 1 of article 43 of LGT establishes that compensatory interest is due when it is determined that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due. In response to this, the TA invokes the jurisprudence set out in the arbitral decision rendered in proceedings no. 26/2013-T, of 19/7/2013 (which dealt with a situation similar to the one now under consideration), that is, that "(...) the right to compensatory interest referred to in the above-mentioned norm of LGT presupposes that tax has been paid in an amount greater than that due and that such derives from error, of fact or law, attributable to the TA services. [...] even if it is recognized that tax is not due by the claimant, as not being the taxpayer of the tax obligation, determining, consequently, its reimbursement, it is not evident that, at its origin, there is error attributable to the services, which determines such right [to compensatory interest] in favor of the taxpayer. In fact, by promoting the official assessment of IUC considering the claimant as a taxpayer of this tax, the TA merely complied with the norm of paragraph 1 of article 3 of CIUC, which, as abundantly referred to above, attributes such quality to the persons in whose name the vehicles are registered."[4]

On this question, it is necessary to determine whether the grounds for annulment are based or not on error attributable to the services.

Let us examine, therefore, whether the Claimant is correct in this matter.

In the case at hand, it was the Respondent that proceeded, in a first moment, on its own initiative, to the self-assessments (avoiding loss and impairment of rights resulting from the existence of tax debts registered in the system). It subsequently proceeded to their payment and, only later, came in the gracious appeal procedure to expose its reasons of fact and law for which it claims the annulment of the assessments, previously self-assessed and paid. So much so that the Claimant only then became aware of the failure to annotate the lessees in the respective vehicle register, which was exclusively its responsibility. Responsibility for this failure cannot be attributed to the TA.

In conformity with this factuality, it cannot be concluded, from the outset, from the existence of error attributable to the TA in the assessments in question.

However, after the presentation of the Gracious Appeal request by the Claimant, the TA had the opportunity to verify the correct factuality and conclude that the previously paid tax was undue. At that moment, taking into account the information it had, it should have remedied the error. By not doing so and having decided as it did for the dismissal of the appeal, it became responsible from that moment on for the payment of compensatory interest, to be calculated, note it well, only after the date on which it became aware of that factuality, that is, from 27-11-2017, the date on which it rendered the decision dismissing the gracious appeal filed by the Claimant. Only from this moment can we consider the assumptions contained in article 43 of LGT to be met.

In the case, the errors affecting the assessments are attributable to the Tax and Customs Authority, in that it should have remedied the act when confronted with this reality and with the underlying proof. By dismissing the gracious appeal request filed by the Claimant, the TA decided based on error as to the factual and legal assumptions underlying it, and in that measure, and only after that date, the illegal assessment acts subsisted by its initiative.

On the other hand, there is grounds for reimbursement of the tax paid by the Claimant, by force of the provisions of the aforesaid articles 24(1)(b) of RJAT and 100 of LGT, as such is essential to "restore the situation that would have existed if the tax act object of the arbitral decision had not been practiced".

In conclusion, the Claimant has the right to be reimbursed the sum improperly paid (in accordance with the provisions of article 100 of LGT and paragraph 1 of article 24 of RJAT), and furthermore, to be indemnified for the improper payment through the payment of compensatory interest by the Respondent, from the date of dismissal of the request for gracious appeal of the tax act, until reimbursement, at the legal suppletive rate, in accordance with paragraphs 1 and 4 of article 43 and paragraph 10 of article 35 of LGT, article 559 of the Civil Code and Ordinance no. 291/2003, of 8 April.

Finally, regarding the costs of the process, it is a consequence that payment of costs at the end of the process falls on the losing party, in the proportion in which it loses. However, it will not be if, despite losing, this party did not cause the action, which is not the case, as the TA had, as stated in the previous point, the opportunity to revoke the act after being called to decide the question in the gracious appeal procedure. Therefore, by choosing not to do so, it gave rise to the present arbitral request, and, in that measure, it is responsible for payment of the process costs.

Consequently, the TA must bear the costs in their entirety.

IV – DECISION

In accordance with the foregoing, this Arbitral Tribunal decides:

1. To find the requests well-founded for the declaration of illegality of the dismissal of the Gracious Appeal request and of the tax acts embodied in the self-assessments of IUC and compensatory interest object of the case file, in the total value of 12,691.35€, with the consequent annulment of the said assessments;

2. To find the request well-founded for the payment of compensatory interest by the Tax and Customs Authority, to be calculated from the date of dismissal of the Gracious Appeal (27-11-2017) until full payment;

3. To condemn the Tax and Customs Authority to payment of the costs of the present process.

V – VALUE OF PROCESS

The value of the process is fixed at 12,691.35 €, in accordance with article 97-A(1)(a) of the Code of Tax Procedure and Process, applicable by force of paragraphs a) and b) of article 29(1) of the Legal Framework of Tax Arbitration and paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Processes.

VI – COSTS

The arbitration fee is fixed at 918.00€, in accordance with Table I of the Regulation of Costs in Tax Arbitration Processes, in accordance with articles 12(2) and 22(4), both of the Legal Framework of Tax Arbitration, and article 4(4) of the said Regulation.

Let notification be made.

Lisbon, 4 December 2018

The Sole Arbitral Tribunal,

(Maria do Rosário Anjos)

[1] The genesis of the legal relationship of tax presupposes the cumulative verification of the three assumptions necessary for its emergence, namely: the real element, the personal element and the temporal element. (In this sense see, inter alia, Freitas Pereira, M. H., Taxation, 3rd Edition, Almedina, Coimbra, 2009).

[2] Or equated as is the case with financial lessees, buyers with reservation of ownership, as well as other holders of purchase option rights by virtue of a lease contract (article 3(2) of CIUC).

[3] Under the heading "principle of equivalence" article 1 of CIUC establishes: "The unique circulation tax obeys the principle of equivalence, seeking to burden taxpayers to the extent of the environmental and road cost that they cause, in concretization of a general rule of tax equality". On the notion of the principle of equivalence, SÉRGIO VASQUES tells us: "In obedience to the principle of equivalence, the tax must be shaped in attention to the benefit that the taxpayer derives from the public activity, or in attention to the cost that he imputes to the community by his own activity" (Cf. Special Consumption Taxes, Almedina, 2000, p. 110). And, further on, this Professor explains, regarding motor vehicles: "a tax on motor vehicles based on a rule of equivalence would only be equal if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different wear and environmental cost, pay different tax as well.

[4] (Cf also in this sense, e.g., the arbitral tax decisions rendered in CAAD proceedings nos. 170/2013-T, of 14/2/2014, 136/2014-T, of 14/7/2014, 230/2014-T, of 22/7/2014 and 140/2014-T, of 29/8/2014.