IUC Tax on Leased and Sold Vehicles: Credit Institution Challenges Assessments (CAAD 158/2016-T)

ARBITRAL DECISION

I – Report

1.1. A… – Credit Institution, S.A., holder of Tax Registration Number …, with headquarters at Street …, …-…, …, …-… Porto (hereinafter referred to as "claimant"), having been notified of the Vehicle Circulation Tax (IUC) assessment acts relating to the months of August, September and October 2015, in the total amount of €5,091.56, and not conforming to the same, filed, on 16/3/2016, a request for constitution of an arbitral tribunal and for arbitral decision, in accordance with the provisions of article 3, no. 1, and 10 of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (AT) is required, with a view to declaring the "illegality of the assessments", "because they suffer from the defect of violation of law".

1.2. On 25/5/2016, the present Singular Arbitral Tribunal was constituted.

1.3. Pursuant to article 17, no. 1, of the RJAT, the AT was summoned, as respondent party, to submit an answer. The AT submitted its answer on 27/6/2016, having argued in the sense of the total rejection of the claimant's request and invoked exception, due to alleged illegal accumulation of claims. The claimant made pronouncements on the said exception in its request submitted on 5/7/2016, arguing, in summary, that the same should be considered inadmissible.

1.4. By order of 2/9/2016, the Tribunal considered, pursuant to article 16, paragraphs c) and e), and 19, both of the RJAT, that the production of testimonial evidence and the meeting of article 18 of the RJAT were dispensable, and that the case was ready for decision. The date of 9/9/2016 was also fixed for the pronouncement of the arbitral decision.

1.5. The Arbitral Tribunal was regularly constituted, is materially competent, the case does not suffer from defects that would invalidate it (see below, "preliminary issue") and the Parties have legal personality and capacity, being legitimate.

II – Allegations of the Parties

2.1. The claimant now alleges, in its initial petition, that: a) "it requests that the Tribunal assess the legality of the assessments relating to the months of August, September and October 2015, in the total amount of EUR 5,091.56"; b) "the assessments [...] referred to, all fully paid by the Claimant, concern a tax whose taxable event occurred: 1. At a moment when the Claimant was merely a beneficiary of a clause of reservation of ownership stipulated in the loan contract, in the amount of EUR 31.29, in accordance with Table no. 1; 2. At a moment when the Claimant had already proceeded to sell the vehicle, as a rule at the end of a financial leasing contract, in the amount of EUR 1,450.52, in accordance with Table no. 2; 3. At a moment when total loss of the vehicles in question had occurred by loss covered by an insurance contract, in the amount of EUR 282.95, in accordance with Table no. 3; 4. As to assessments of IUC on vehicles which were the object of financial leasing contracts and long-term rental and which entered into default, with proceedings in dispute and the said vehicles not having been recovered to date, in the amount of EUR 3,326.80, in accordance with Table no. 4"; c) "the taxpayer subject to IUC is the owner of the vehicle only in those cases in which the acquirer is not burdened with a clause of reservation of ownership or there are no other holders of the right of purchase option by virtue of a leasing contract. In fact, in such cases, the tax is owed by the one who holds the right of exclusive use of the vehicle, by reason of the user-payer principle that guides the taxation of motor vehicle circulation"; d) "in cases where the acquisition of vehicles is made using financing granted by the Claimant to the respective acquirers, a clause of reservation of ownership is established in its favor. Thus, the acquirer contracts the purchase of the vehicle with the supplier, the price being paid by the Claimant and, with a view to guaranteeing and ensuring full satisfaction of its credit, the ownership of the vehicle does not pass until the end of the loan contract"; e) "the reservation of ownership of the motor vehicles in question is constituted in favor of the financing company"; f) "the legislator provided for the equating to owners, for purposes of determining the passive subject of IUC, of acquirers with reservation of ownership, but did not provide for the necessity that such reservation be made in favor of the seller. This is sufficient to conclude that, in the cases provided for in no. 2 of article 3 of the Vehicle Circulation Tax Code, the requirements of the subjective incidence of the taxable event occur only in the sphere of acquiring users and solely in relation to these. [...]. Therefore, the tax act identified in Table no. 1 suffers from illegality"; g) "given that the ownership of the automobiles identified in Table no. 2 was transferred on the date on which the tax obligation matured, it is important to clarify the scope of the final part of no. 1 of article 3 and whether a true legal presumption regarding tax incidence is established there"; h) "concluding that the norm inherent in no. 1 of article 3 of the Vehicle Circulation Tax Code establishes a true legal presumption within the scope of the subjective incidence of the tax, the Claimant proceeds to demonstrate, in accordance with and for the purposes of article 73 of the General Tax Law (LGT), that it was not the owner of the motor vehicles subject to the tax here contested on the date of the occurrence of the taxable event"; i) "having the Claimant already proceeded to alienate the vehicles identified in Table no. 2 on the date of the anniversary of their respective registrations, it cannot be considered the taxpayer subject to the IUC owed. As follows from the invoices contained in Documents no. 2 to 23, on the date of the tax-generating event here in question, the ownership of the vehicles in question had already been transferred by the Claimant. Therefore, the assessed tax is the exclusive responsibility of their respective acquirers, to whom the property right over the vehicles in question was transferred, being these the corresponding passive subjects"; j) "the vehicles identified in Table no. 3 suffered, before the tax-generating event occurred, losses that caused their total loss. At that time, the Claimant, as owner of the vehicle, provided its insurer with the necessary documents to prove the occurrence of the loss and its respective effects, at which time it received, under the terms of the corresponding contract, the compensation owed [...]. It further provided the insurer with the necessary documents so that it would request, as is incumbent upon it by force of law (cf. no. 8 of article 119 of the Highway Code), the cancellation of the corresponding registration. For this reason, on the date when the tax here in question became due, the respective requirement for objective incidence was no longer present (cf. articles 2 and no. 3 of article 4 of the Vehicle Circulation Tax Code)"; l) "the vehicles identified in Table no. 4 were the object of financial leasing and long-term rental, and the respective lessees entered into default, with proceedings in dispute [...]. Moreover, to date, and despite the efforts of the Claimant in that direction, the vehicles in question have still not been recovered. For the reason stated above, on the date when the tax in question became due, the taxpayer subject to the tax is the Lessee"; m) "in the cases provided for in no. 2 of article 3 of the Vehicle Circulation Tax Code, it can only be concluded that the requirements of subjective incidence of the taxable event occur only in the sphere of lessees and solely in relation to these"; n) "considering that the taxation of motor vehicle circulation is intended to burden taxpayers in the measure of the environmental and road cost that they cause, the transfer of risks and advantages arising from the possession of the vehicle, in the manner in which it occurs and which transcends its exclusive use, justifies that for these purposes those lessees and not the leasing company be considered as true taxpayers. This is, moreover, the only plausible interpretation in respect of the principle of equivalence, as a realization of the general rule of equality, which governs the taxation of motor vehicle circulation"; o) "no [...] valid reasons are apparent for not applying [to ALD contracts] the same discipline provided for with respect to financial leasing contracts in matters of taxation of motor vehicle circulation"; p) "it remains only to conclude that for purposes of taxation of motor vehicle circulation, the lessees of the contracts in question should, similar to what occurs with respect to financial lessees, be equated to owners of the vehicles and thus considered passive subjects of the tax. Therefore, it is not the Claimant, in any case, the respective passive subject, so the tax acts identified in Table no. 4 must be annulled"; q) "notwithstanding its full conviction as to the illegality of the assessments here in question, the Claimant proceeded to their voluntary payment, as follows from the seal proving payment affixed to the assessments attached. In this way, should those acts be annulled, [...] the AT must proceed to reimburse the amount wrongly paid in that regard, which, arising from error attributable to the services, should, in accordance with articles 43 and 100 of the LGT, be increased with the corresponding indemnity interest."

2.2. The claimant requests that: a) "the illegality of the Vehicle Circulation Tax assessment acts identified in Tables no. 1 to 4 of article 4 of this initial petition be declared and, consequently, the same be annulled"; b) it be reimbursed of the amount considered wrongly paid plus indemnity interest.

2.3. For its part, the AT comes to argue, in its answer: a) by exception, that, "in the present case, the requirement of coincidence regarding the circumstances of fact is not met. Although it may be suggested that the factual procedures may be transversal to all assessments, what is certain is that we are faced with disparate factual situations embodied in: (i) different vehicles; (ii) with different transmission dates; (iii) different transmission grounds; (iv) different taxation grounds; and (v) different owners. Consequently, the accumulation carried out by the Claimant is illegal, and should not be admitted by the Singular Arbitral Tribunal, which should notify the Claimant, in accordance with and for purposes of article 47/5 and 5 of the CPTA, under penalty of dismissal of the claim"; b) that the "interpretation defended by the Claimant is based on a skewed reading of the letter of the law. In fact, no. 1 of article 3 of the CIUC establishes that 'The passive subjects 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'. Now, as is known, it is in the text of the law that the answer to any problem should be sought; this is the starting point of the hermeneutic process and also its limit, inasmuch as it is not possible to consider those meanings that do not have '(...) "In the letter of the law a minimum of verbal correspondence, even if imperfectly expressed"' (in MACHADO, João Batista – Introduction to law and to legitimizing discourse, 20th reprint, s.l., Almedina, 2012, p. 189.)"; c) "the tax legislator, in establishing in article 3, no. 1, who are the passive subjects of IUC, expressly and intentionally established that these are the owners (or in the situations provided for in no. 2, the persons mentioned there), being considered as such the persons in whose names the same are registered"; d) that "it is imperative to conclude that, in the case of the present tax arbitration proceedings, the legislator expressly and intentionally established that those are considered as such [as owners or in the situations provided for in no. 2, the persons mentioned there] the persons in whose names the same [the vehicles] are registered, because it is this interpretation that preserves the unity of the legal-fiscal system. To understand that the legislator established here a presumption would be unequivocally to carry out an interpretation against the law. In light of this wording it is manifestly not possible to invoke that it is a presumption, as the Claimant argues"; e) that, "in short, article 3 of the CIUC does not contain any legal presumption, and it is certain that the thesis propounded by the Claimant directs its objective to the wrong target"; f) that "also the systematic element of interpretation of the law demonstrates that the solution propounded by the Claimant is intolerable, the understanding supported by this not finding any support in the law, since this follows not only from the aforementioned no. 1 of article 3 of the CIUC, but also from other norms established in the referred Code"; g) that "from the articulation between the scope of the subjective incidence of IUC and the fact constitutive of the corresponding tax obligation, it unequivocally follows that only situations subject to registration (without prejudice, of the permanence of a vehicle in National territory for a period greater than 183 days, provided for in no. 2 of article 6) generate the birth of the tax obligation"; h) that, "for its part, no. 3 of the same article provides that 'the tax is deemed to be due on the first day of the taxation period referred to in no. 2 of article 4', that is, the moment from which the tax obligation is constituted has a direct relation with the issuance of the certificate of registration, in which the facts subject to registration must appear [...]. In the same direction, the legislative solution adopted by the fiscal legislator in no. 2 of article 3 of the CIUC works, by making the equations established there coincide with the situations in which the motor vehicle registration obliges the respective registration"; i) that, "even admitting that, from the point of view of the rules of civil law and land registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effects, in accordance with the established terms in the CIUC (which in the case in question constitutes special law, which, under general terms of law, derogates the general norm), the tax legislator expressly and intentionally wished that those considered as owners, lessees, acquirers with reservation of ownership or holders of the right of purchase option in long-term rental, were the persons in whose names [the vehicles] are registered"; j) that, "in light of a teleological interpretation of the regime established throughout the Vehicle Circulation Tax Code, the interpretation propounded by the Claimant in the sense that the passive subject of IUC is the effective owner, regardless of not appearing in the motor vehicle registration, the registration of that quality, is manifestly wrong, inasmuch as it is the very rationale of the regime established in the Vehicle Circulation Tax Code that constitutes clear proof that what the tax legislator intended was to create a Single Vehicle Circulation Tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle registration"; l) that "it is clear that the tax acts in question do not suffer from any defect of violation of law, in light of the provisions of article 3, nos. 1 and 2, of the CIUC and article 6 of the same code, it was the Claimant, in its capacity as owner, the passive subject of IUC. Hence the entire reasoning propounded by the Claimant is fraught with error, and it is not possible to exclude the legal presumption established"; m) that, "even if this is not understood – which is only admitted by mere academic hypothesis – and accepting that it be admissible to exclude the presumption in light of the case law already established in this arbitration center, it will still be necessary to assess the documents joined by the Claimant and their probative value with a view to such exclusion", n) that "the Claimant is not right, so articles 29 to 42 of the initial petition are contested, as well as the documentary amalgam joined to the initial petition is contested [because,] firstly, the Documents joined to the initial petition relate to contractual relationships established between the commercial company B… – Credit Financial Institution, S.A. and its customers [;] secondly, [because] from the said Documents the existence of reservations of ownership in favor of the Claimant is not extracted [;] thirdly, in order for the Claimant to be able to enjoy the regime of article 3/3 of the CIUC, it would be necessary that the alleged reservations of ownership had been registered. However, the Claimant has not demonstrated minimally that such fact (i.e., the existence of reservation of ownership) was registered in the motor vehicle registration. [...]. Now, just as the Claimant itself confesses in article 14 of its initial petition – confession which is hereby accepted so as not to be withdrawn again –, the alleged acquisitions with reservation of ownership were never registered"; o) that, "[as to assessments relating to vehicles alienated on the date of the tax-generating event], the Claimant is not right, so articles 43 to 68 of the initial petition are contested, as well as the documentary amalgam in which Documents no. 7 to 93 joined to the initial petition are embodied, are contested [because,] firstly, the Documents joined to the initial petition relate to contractual relationships established between the commercial companies B… – Credit Financial Institution, S.A., and C… – Trade and Vehicle and Equipment Rental, S.A. and their customers [;] secondly, [because] the Documents do not relate to financial leasing contracts [;] thirdly, [because] the purported invoices in the amalgam embodied in the Documents joined to the initial petition are not sufficient to undermine the (supposed) legal presumption established in article 3 of the CIUC"; p) that "invoices are not apt to prove the celebration of a synallagmatic contract such as purchase and sale, as such documents do not reveal by themselves an indispensable and unequivocal declaration of will (i.e., acceptance) by the purported acquirers", q) that "invoices do not constitute purchase and sale contracts. The unequivocal declaration of will of the purported acquirers could be indicated by the attachment of a copy of the referred official form for registration of motor vehicle property, as it is a document signed by the intervening parties"; r) that "the lack of the synallagmatic character of the invoices could be made up by proof of receipt of the price contained therein by the Claimant"; s) that "the Claimant has not joined sufficient means of proof to exclude the presumption resulting from the registration, so the request formulated by the Claimant must fail", t) that, "the Claimant not having joined sufficient documentary evidence when it could and should have done so, that is, in the request for the tax arbitration petition, it is now precluded from the possibility of doing so at a later time, in accordance with the referred interlocutory decision handed down in the context of arbitration process no. 75/2012-T, as well as in Process 212/2014-T. In light of the above, it is manifest that the arguments of the Claimant cannot succeed, on the one hand because they start from entirely wrong and illegal premises, not forgetting, on the other hand, the manifest lack of proof of what the same alleges"; u) that "[as to assessments relating to vehicles damaged or definitively lost] the Claimant is not right, so articles 78 to 81 of the initial petition are contested, as well as the documentary amalgam joined to the initial petition is contested [because] firstly, the said documents relate to contractual relationships established between the commercial companies B… – Credit Financial Institution, S.A., and C… – Trade and Vehicle and Equipment Rental, S.A. and their customers [;] secondly, because loss or total loss of vehicles does not determine, by itself or only for that fact, the end of ownership of the damaged or totally lost vehicle [...]. [...] the receipt of compensation for loss or total loss by the insured (in this case, the Claimant) does not result, without more, in a sale of the insured object or in the transfer of ownership of the insured object to the insurer"; v) that "[as to assessments relating to the object of financial leasing in case of default/dispute] the Claimant is not right, so articles 73 to 80 of the initial petition are contested, as well as the documents joined are contested [because] firstly, the Documents relate to contractual relationships established between the commercial companies B… – Credit Financial Institution, S.A. and C… – Trade and Vehicle and Equipment Rental, S.A. and their customers [;] secondly, [because] the Documents do not relate to financial leasing contracts [;] thirdly, [because,] even if it were concluded that we are faced with financial leasing contracts granted by the Claimant, it was still incumbent upon the latter to demonstrate compliance with the ancillary obligation imposed by article 19 of the CIUC. [...]. In simpler terms, in matters of financial leasing and for purposes of the exclusion of article 3 of the CIUC, it is necessary that the financial lessors (such as the Claimant) comply with the obligation inherent in article 19 of that code to exonerate themselves from the obligation to pay the tax [...]. [...] the Claimant not having complied with that obligation, it is necessary to conclude that it is the passive subject of the tax. [...]. [...] based on the documents joined, we understand that the Claimant has not proven having effected the transfer of ownership of the automobiles in question, the same is said regarding the vehicle identified in table no. 5, being therefore applicable the presumption of ownership provided for in no. 1 of article 3 of the Vehicle Circulation Tax Code"; x) that, "if the interpretation conveyed by the Claimant is accepted, then it shows itself to be contrary to the Constitution, insofar as such interpretation translates into the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality"; z) that "the transmission of ownership of motor vehicles is not susceptible to being controlled by the Respondent, as there exists no ancillary obligation declarative as to this matter, unlike the control that is capable of being carried out, for example, through the prior payment of Municipal Tax on Real Estate Transmission in matters of transmission of real property. This means, therefore, that IUC is assessed in accordance with registration information opportunely transmitted by the Institute of Registries and Notaries. In other words, IUC is not assessed in accordance with information generated by the Respondent itself [...]. [...] the Respondent [merely] complied with the legal obligations to which it is bound and, in parallel, followed the registration information that was provided to it by the proper party"; aa) that "the Claimant [must] be condemned to pay the arbitral costs arising from this tax arbitration petition, in accordance with article 527/1 of the CPC by reference to article 29/1-e) of the RJAT, in line, moreover, with a similar matter decided in the context of the process which, under no. 72/2013-T, took place in this arbitration center"; ab) that "the same reasoning applies to the request for condemnation to payment of indemnity interest formulated by the Claimant. [...]. [...] from all that has been set forth above it is clear that the tax acts in question are valid and legal, because compliant with the legal regime in effect on the date of the tax facts, so that, in this case, any error attributable to the services did not occur, all the more so as the Claimant never submitted any gracious complaint or exposition, which would have allowed the Respondent to pronounce itself on the assessments now contested and the respective documents. Thus, the legal requirements that confer the right to indemnity interest are not met"; ac) that "the production of testimonial evidence appears to be unnecessary, in the case in question, both because the case contains documentary elements that will provide proof of the facts, and because, regarding the remaining articles, these embody conclusive matter or law. Thus, the dispensation of testimonial evidence is requested, as the interrogation of witnesses would constitute a manifestly useless act."

2.4. Concludes, finally, the AT that "the dilatory exception invoked above must be judged well-founded, absconding the Respondent accordingly from the claim as to the respective request. If this is not understood, the present tax arbitration petition must be judged inadmissible, and, consequently, the Respondent absolved of all requests, all with the due and legal consequences."

III – Proven Factuality, Unproven Factuality and Their Grounds

3.1. The following facts are considered proven:

i) The object of the Claimant's business consists of the financing of credit acquisitions of consumer goods and equipment (financial leasing and credit), as well as the long-term rental (ALD) activity of motor vehicles without driver, motorcycles, and boats. Within the scope of the activity it develops, the Claimant concludes with its customers long-term rental contracts and financial leasing contracts, at the end of which the vehicle is transferred to the lessee, the object of which are motor vehicles and, also, loan contracts for the acquisition of motor vehicles in which a clause of reservation of ownership is established in its favor.

ii) On 7/12/2005, the claimant, then designated as B…, incorporated, by merger, C…. This merger produced accounting and fiscal effects from 1/1/2005. On 16/1/2013, the claimant changed its previous name to "A… – Credit Financial Institution, S.A.".

iii) The assessments now in question, in the amount of €5,091.56 (given their extension, reference is made to the list of the same for the table contained in point 3 of the initial petition), concern a tax whose taxable event occurred: 1) at a moment when the Claimant was merely a beneficiary of a clause of reservation of ownership stipulated in the loan contract (see table no. 1 of the initial petition, in accordance with doc. 1 attached); 2) at a moment when the Claimant had already proceeded to sell the vehicle, as a rule at the end of a financial leasing contract (see table no. 2, in accordance with docs. 2 to 23 attached); 3) at a moment when total loss of the vehicles in question had occurred by loss covered by an insurance contract (see table no. 3, in accordance with docs. 24 to 26 attached); 4) as to vehicles which were the object of financial leasing contracts and long-term rental and which entered into default, with respective proceedings in dispute and the said vehicles not having been recovered to date (see table no. 4, in accordance with docs. 27 to 65 attached).

iv) The claimant proceeded to payment of all the assessments referred to above.

v) The accumulation of claims, underlying the present tax arbitration petition, has legal support, since, in light of article 3, no. 1, of the RJAT, and article 104 of the CPPT, there is, regarding all of them, identity of tax, circumstances and grounds of fact and law invoked for their assessment and decision.

3.2. It is not shown to be proven that, regarding the IUC assessments relating to the vehicles identified in Doc. 1 and in Docs. 45 to 65 joined to the initial petition, the same were the object of rental contracts by virtue of which the lessee held the right of purchase option.

3.3. The facts considered pertinent and proven (see 3.1) are grounded in the analysis of the positions exposed by the parties and the documentary evidence joined to the case. The fact considered unproven (see 3.2) is grounded in the analysis of the documentary evidence joined to the case.

IV – Preliminary Issue

As mentioned in the report of this decision, the Respondent invoked, in the answer of 27/6/2016, exception due to alleged illegal accumulation of claims. It is therefore incumbent upon us to determine whether the same should be considered well-founded, taking into account, also, what appears in the request of the Claimant submitted on 5/7/2016, in which it pronounces itself on the said exception.

In this regard, it is appropriate to bear in mind, first of all, what is provided in article 3, no. 1, of the RJAT: "The accumulation of claims even though relating to different acts and the joinder of parties are admissible when the success of the claims depends essentially on the assessment of the same circumstances of fact and of the interpretation and application of the same principles or rules of law."

In the present case, the Respondent considers that "the requirement of coincidence regarding the circumstances of fact is not met", given that, in its understanding, "we are faced with disparate factual situations embodied in: (i) different vehicles; (ii) with different transmission dates; (iii) different transmission grounds; (iv) different taxation grounds; and (v) different owners". It is verified, however, that the Respondent is not right. As stressed by the Claimant, in the request submitted on 5/7/2016 – making reference to arbitral decisions relating to cases in which similar accumulations were requested – it is verified, also in the case now under analysis, that "the success of the claims depends on the assessment of the same circumstances of fact and of the interpretation and application of the same principles and rules of law. This is not prevented by the fact that the assessment acts sub judice relate to different vehicles, with different transmission dates, different transmission grounds and different owners, because the circumstances of fact are identical, relating to the transmission of ownership of vehicles.'"

For the above reasons, taking into account the identity of the tax facts in question (which is not equal to the absolute identity of the factual situations, as well noted by Jorge Lopes de Sousa in "Commentary on the legal framework for tax arbitration", in Guide to Tax Arbitration, 2013, p. 147), of the tribunal competent for the decision and of the grounds of fact and law invoked, nothing prevents, in light of article 104 of the CPPT and article 3 of the RJAT, the intended accumulation (see above, point v) of the matter of proven fact).

V – Law

In the present case, there are six contested questions of law: 1) whether article 3 of the CIUC contains a presumption and whether its exclusion was made; 2) whether, as alleged by the AT, the interpretation of the Claimant does not heed the systematic and teleological elements of interpretation of law; 3) whether, as to the IUC assessments on vehicles with reservation of ownership in favor of the Claimant, as well as to assessments on vehicles damaged/definitively lost on the date of the tax, the contested IUC is shown to be owed; 4) whether, as alleged by the AT, for purposes of the exclusion of the presumption of article 3 of the CIUC, it is necessary that the financial lessors (such as the Claimant) comply with the obligation inherent in article 19 of the CIUC to exonerate themselves from the obligation to pay the tax; 5) whether, as alleged by the AT, "the interpretation conveyed by the Claimant [...] shows itself to be contrary to the Constitution"; and 6) whether indemnity interest is owed to the Claimant. Finally, the matter of responsibility for payment of arbitral costs will be addressed.

Let us proceed then.

1. and 2) The first two questions of law converge in the direction of the interpretation of article 3 of the CIUC, so it is necessary: A) to determine whether or not the norm of subjective incidence, contained in the said article 3, establishes a presumption; B) to determine whether, by considering that this norm establishes a presumption, such violates the "unity of the regime", or disregards the systematic element and the teleological element; C) to determine – admitting that the presumption exists (and that it is a rebuttable presumption) – whether its exclusion was made.

A) Article 3, nos. 1 and 2, of the Code of the Single Vehicle Circulation Tax, has the following wording, which is reproduced here:

"Article 3 – Subjective Incidence

1 - The passive subjects 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 the financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract".

The interpretation of the cited legal text is, naturally, essential for the resolution of the case under analysis. To this extent, it is necessary to resort to article 11, no. 1, of the LGT, and, by reference to this, to article 9 of the Civil Code (CC).

Now, in accordance with the said article 9 of the CC, interpretation starts from the letter of the law and aims, through it, to reconstruct the "legislative thought". This means (regardless of the objectivism-subjectivism debate) that literal analysis is the basis of the interpretative task and the systematic, historical or teleological elements are guides for the orientation of the said task.

The literal apprehension of the legal text in question does not generate - even though the separation of this relative to the determination, even minimally, of its meaning is highly debatable - the notion that the expression "being considered as" means something other than "being presumed as". In fact, it would be very difficult to find authors who, in a pre-comprehension task of the said legal text, would instinctively reject the identity between the two expressions.

Confirming the indistinction (both literal and in meaning) of the words "considering" and "presuming" (presumption), see, for example, the following articles of the Civil Code: 314, 369, no. 2, 374, no. 1, 376, no. 2, and 1629. And, with particular interest, the case of the expression "is considered", contained in article 21, no. 2, of the CIRC. As point out Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, with respect to that article of the CIRC: "beyond this norm showing that what is at issue in taxation of capital gains is to ascertain the real value (market value), the limitation to ascertaining the real value derived from the rules for determining the taxable value provided for in the CIS cannot but be considered as a presumption regarding incidence, whose exclusion is permitted by article 73 of the LGT" (General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

B) These are just a few examples that allow us to conclude that it is precisely for reasons related to the "unity of the legal system" (the systematic element) that it cannot be asserted that only when the verb "presume" is used is there a presumption, given that the use of other terms or expressions (literally similar) may also serve as the basis for presumptions. And, among these, the expressions "is considered as" or "being considered as" assume, as has been seen, prominence.

If literal analysis is only the basis of the task, it is, naturally, essential to evaluate the text in light of the other elements (or sub-elements of the so-called logical element). In fact, the AT also argues that the interpretation of the Claimant does not heed the systematic element and that, in light of a teleological interpretation of the regime established throughout the CIUC, the interpretation propounded by the Claimant is wrong.

It is therefore appropriate to determine whether the interpretation that considers the existence of a presumption in article 3 of the CIUC collides with the teleological element, i.e., with the purposes (or with the sociological relevance) of what was intended with the rule in question. Now, such purposes are clearly identified at the beginning of the CIUC: "The single vehicle circulation tax obeys the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that they cause, in realization of a general rule of tax equality" (see article 1 of the CIUC).

What can be inferred from this article 1? It can be inferred that the close connection of IUC to the principle of equivalence (or benefit principle) does not allow the exclusive association of the "taxpayers" referred to therein with the figure of the owners but rather with the figure of the users (or economic owners). As well noted in the Arbitral Decision handed down in process no. 73/2013-T: "in truth, the rationale of the tax [IUC] rather points in the direction of the taxation of vehicle users, the 'economic owner' in the words of Diogo Leite de Campos, the effective owners or financial lessees, as these are the ones who have the polluting potential causing environmental costs to the community."

C) From the foregoing it follows the conclusion that limiting the passive subjects of this tax only to the owners of the vehicles in whose names the same are registered - ignoring the situations in which these no longer coincide with the real owners or the real users of the same – constitutes a restriction that, in light of the purposes of IUC, finds no basis of support. And, even if the intention of the legislator is alleged to have been that, for purposes of IUC, those considered as owners be those who, as such, appear in the motor vehicle registration, it is necessary to bear in mind that such registration, in light of what has been said previously, generates only a rebuttable presumption, i.e., a presumption that can be rebutted by the presentation of contrary proof. In this sense, see, for example, the Judgment of the Lisbon Court of Appeal of 19/3/2015, process 8300/14: "The [...] article 3, no. 1, of the CIUC, establishes a legal presumption that the holder of the motor vehicle registration is its owner, being that such presumption is rebuttable".

It would, moreover, be unjustified to impose a type of irrebuttable presumption, since, without an apparent reason, there would be imposed a (admittedly debatable) formal truth at the detriment of what could actually have been proven; and, on the other hand, to remove the duty of the AT to comply with the inquisitorial principle established in article 58 of the LGT, i.e., the duty to carry out the necessary proceedings for a correct determination of the factual reality upon which its decision must be based (which means, in the present case, the determination of the current and effective owner of the vehicle).

Furthermore, if the seller were not permitted to rebut the presumption contained in article 3 of the CIUC, there would be benefited, without a plausible reason, acquirers who, in possession of properly completed and signed acquisition contract forms, and enjoying the advantages associated with their condition as owners, attempted to exempt themselves, through a "registration formalism", from the payment of tolls or fines.

In this regard, it is also worth noting that motor vehicle registration does not have constitutive effect, functioning, as previously stated, as a rebuttable presumption that the holder of the registration is, in fact, the owner of the vehicle. In this sense, see, for example, the Judgment of the Supreme Court of Justice of 19/2/2004, process 03B4639: "Registration does not have constitutive effect, as it is intended to give publicity to the registered act, functioning (only) as a mere rebuttable presumption, (a "juris tantum" presumption) of the existence of the right (articles 1, no. 1 and 7, of the Constitution and article 350, no. 2, of the Civil Code) as well as of the respective ownership, all in accordance with its content."

In the same direction, referred, in this regard, the Arbitral Decision handed down in process no. 14/2013-T, in terms which are embraced here: "the essential function of motor vehicle registration is to give publicity to the legal situation of vehicles, registration not having constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all in accordance with its content. The presumption that the registered right belongs to the person in whose name it is inscribed can be rebutted by contrary proof. As the AT does not meet the requirements of the notion of third party for purposes of registration [a circumstance that could prevent the full effectiveness of executed purchase and sale contracts], it cannot avail itself of the lack of updating of the registration of the right of ownership to call into question the full effectiveness of the purchase and sale contract and to require the seller (former owner) to pay the IUC owed by the buyer (new owner) so long as the presumption of the respective ownership is rebutted by sufficient proof of the sale."

As well stressed in the Arbitral Decision handed down in process 845/2015-T, of 30/10/2015, "article 72 of the General Tax Law permits the use 'for the knowledge of facts necessary to the decision of the procedure all means of proof admitted in law'. The Respondent did not raise any incident of impugnation of the veracity of these means of proof. In fact, the same did not allege that this means of proof was false, in this case, but only that 'the invoices joined are not documents apt to prove, by themselves, the supposed sales of the vehicles here in question, since they are nothing more than documents unilaterally issued by the Claimant'. Not specifically referring to any case in which the sales were not effected. Moreover, all invoices must be drawn up through certified software, in accordance with Ordinance no. 22-A/2012, of 24 January. Being that the same are used for accounting for VAT and IRC. Therefore, if for purposes of these taxes invoices are accepted by the Tax Authority, there is no reason, in this case, not to permit their use as means of proof, on the basis of generic speculations."

Note also, with respect to the probative force of invoices, the Arbitral Decision handed down in process no. 27/2013-T, of 10/9/2013, where it is emphasized that "the documents presented, particularly copies of invoices that support, from the outset, the sales [of] vehicles [...] referred to, [...] embody means of proof with sufficient force and adequate to rebut the presumption based on registration, as established in no. 1 of article 3 of the CIUC, documents which, moreover, enjoy the presumption of veracity provided for in no. 1 of article 75 of the LGT."

In this same sense, see, finally, the Arbitral Decision handed down in process no. 230/2014-T, of 22/7/2014: "the documentary elements, consisting of copies of the respective sales invoices [...] enjoy the probative force provided for in article 376 of the Civil Code and the presumption of veracity which is conferred by article 75, no. 1, of the LGT, having, thus, aptness and sufficient force to rebut the presumption that supported the assessments made. These operations of transmission of ownership are opposable to the Tax and Customs Authority, inasmuch as, although the facts subject to registration only produce effects in relation to third parties when registered, in light of article 5, no. 1, of the Code of Land Registration [applicable by reference of the Motor Vehicle Registration Code], the Tax and Customs Authority is not a third party for purposes of registration, since it is not in the situation provided for in no. 2 of the said article 5 of the Code of Land Registration, applicable by virtue of the Motor Vehicle Registration Code, that is: it has not acquired from a common author rights incompatible with each other. As to proof of sale of vehicles, it can be made by any means, as the Law does not require specific form, in particular, written form."

In this sequence, it is therefore appropriate to further add that it is also evident, in light of the documentary evidence presented, that the Claimant should not be regarded as the owner, given the financial leasing/leasing contracts of the vehicles covered by them, and whose assessments are included in Table no. 4 of the initial petition (see docs. 27 to 44) – given that this documentary evidence is decisive for purposes of applying the provisions of article 3, no. 2, of the CIUC. In fact, the documentary evidence was made (see contracts contained in the said docs. 27 to 44, all attached to the case; whereas docs. 45 to 65, which relate to ALD contracts without right of purchase option for the lessee, will be subject to analysis below) and the veracity of these documents was not called into question by the Respondent, even though it considers that the Claimant should have demonstrated compliance with the obligation inherent in the (then applicable) article 19 of the CIUC [on this argument, see below, 4)].

The Respondent further alleges that the documents "do not relate to financial leasing contracts", but rather to "rental contracts" (see point 137 of the answer). In this regard, it is appropriate to note that, although in financial leasing the lessor is obligated to acquire the good to be leased (and, in long-term rental, the lessor is only obligated to provide the enjoyment of the thing), and the lessee, at the end of the contract, has the potestative right to acquire the leased good at the previously stipulated price (and, in long-term rental, such does not occur) – in this regard of these differences, see, for example, the Judgment of the Supreme Court of Justice of 20/11/2003, process 03B3725 – what is certain is that, in light of the final part of no. 2 of article 3 of the CIUC, are equated to the condition of owner taxpayers, the subjects of "financial lessees", "acquirers with reservation of ownership", and "other holders of purchase option rights by virtue of the leasing contract" (it may be a leasing, an ALD or a renting, but always with the said purchase option right associated). In summary: if the referred rental contracts contain this right of option, the provisions of the final part of no. 2 of article 3 of the CIUC are applicable to them.

In this sense, see, for example, Agostinho Cardoso Guedes (in "The subjective incidence of the single vehicle circulation tax within the scope of financial leasing contracts or other leasing contracts with purchase option", in: Journal of Business and Legal Sciences, 23, 2013, pp. 17-18): "The financial lessee is treated by law as a quasi-owner. [...]. It is thus understood that the obligation to pay IUC falls on the financial lessee and not on the lessor given the characteristics of its legal position. The same applies to the acquirer with reservation of ownership. [...]. Also similar to the position of the financial lessee is that of the lessee with purchase option. Here too the lessee has exclusive enjoyment of the leased good and has the right to acquire the respective ownership (without the lessor being able to oppose such acquisition). That is, in the three situations referred to by the legislator in article 3, no. 2, of the CIUC, we have two common aspects: the lessee/acquirer has exclusive enjoyment of the good and has the right (or expectation) of becoming the owner in the short or medium term."

However, it happens that, when analyzing the set of contracts associated with the assessments in Table no. 4, it is verified that there are rental contracts (ALD) in which the said right (or expectation) is not provided for. This is what occurs, in particular, in the cases that are documented (and can be verified) by docs. 45 to 65 joined to the case, relating to assessments in the global amount of €1,858.81. In such cases, instead, it is stated, for example, that it is the lessee's obligation to "return the vehicle at the end of the rental, in the state that derives from its normal use" (see the general conditions of the said contracts). For the above reasons, not discerning, in such documents, the indispensable right of purchase option by the lessee, it is concluded that the latter cannot be equated to the owner for purposes of payment of the tax now in question – so the Respondent is right, in this part.

In the same sense, see the Arbitral Decision handed down in process no. 244/2014-T, of 2/10/2014: "Despite the existence of rental contracts for these vehicles, the contracts in question do not fall within no. 2 of article 3 of the CIUC, since from the content of the same purchase option rights do not emerge, a circumstance provided for in the norm in question for purposes of its application, so that, in such cases, the passive subject is not the lessee but the owner of the vehicle, in accordance with no. 1 of this article."

The Respondent is also right regarding the assessment of IUC on vehicle with reservation of ownership in favor of the Claimant (see Table no. 1 and doc. 1 attached to the initial petition), in the amount of €31.29, since the legislator provided, in article 3, no. 2, of the CIUC, for the equating to owners, for purposes of determining the subjection to IUC, of acquirers with reservation of ownership – namely: of acquirers with reservation of ownership constituted in their favor [and not in favor of the seller, as occurred with the Claimant in this case: see points 15 and 16, i), of the initial petition, and point iii) of the proven facts].

1. In this regard, it is noted that: a) as to the IUC assessments on vehicles which the Claimant, on the date of the tax, had already sold, ordinarily at the end of their respective financial leasing contracts (see the contracts and invoices/receipts, which are considered, by what has been said above, as sufficient proof of the said sales, in docs. 2 to 23 attached to the initial petition, and whose veracity was not called into question by the Respondent), the corresponding tax is not, for that reason, required of it; b) regarding the IUC assessments on vehicles damaged/definitively lost on the date of the tax (see docs. 24 to 26 attached to the initial petition), the Claimant, on the said date, had already provided the Insurer with the necessary documents for it to request the respective cancellation of registration – a fact that constitutes sufficient proof to conclude that the tax was no longer required of it in light of the provisions of article 4, no. 3, of the CIUC.

It should also be noted that the circumstance that the documents joined to the initial petition relate to contractual relationships between the companies B… – Credit Financial Institution, S.A., and C… – Trade and Vehicle and Equipment Rental, S.A., and their customers (see the allegations made in points 75, 125 and 136 of the Respondent's answer) in no way affect the conclusions previously made, given that, as noted in point ii) of the proven factuality, "on 7/12/2005, the claimant, then designated as B…, incorporated, by merger, C…. This merger produced accounting and fiscal effects from 1/1/2005. On 16/1/2013, the claimant changed its previous name to 'A… – Credit Financial Institution, S.A.'".

1. The Respondent further argues (see points 138 et seq. of its answer) that – regarding the assessments relating to vehicles contained in Table no. 4, docs. 27 to 65 attached – for purposes of the exclusion of the presumption of article 3 of the CIUC, it is necessary that the financial lessors (such as the Claimant) comply with the obligation inherent in article 19 of the CIUC to exonerate themselves from the obligation to pay the tax.

However, such understanding of the AT does not hold, given that, as well stated, for example, in the Arbitral Decision handed down in process no. 14/2013-T, of 15/10/2013, "the financial lessee is equated to owner for purposes of no. 1 of article 3 of the CIUC, which is to say for being the passive subject of IUC (Cf. no. 2 of article 3). [...] the lessor not having, by legal and contractual imposition, the potential of use of the vehicle and having the lessee the exclusive enjoyment of the automobile, [and reaffirming] the conclusion to which we have already arrived that [...] the rationale of the CIUC mandates that, in accordance with the said no. 2 of article 3 of this Code, it be the lessee who is responsible for payment of the tax, since it is the one who has the potential of use of the vehicle and causes the road and environmental costs inherent to it. The same conclusion is reached when verifying the importance given to users of leased vehicles in article 19 of the CIUC. In fact, in accordance with the provisions of this article, entities that proceed, in particular, to the financial leasing of vehicles are obligated to provide to the AT (ex-DGCI), the tax identity of users of the leased vehicles for purposes of the provisions of article 3 of the CIUC (subjective incidence), as well as of no. 1 of article 3 of the Law of its approval, since in accordance with this norm of Law no. 22-A/2007, if the income generated by IUC is incident on vehicles object of long-term rental or operational leasing, it must be allocated to the municipality of residence of the respective user (underlined ours). [...] [But, despite this obligation, this does not prevent,] on the date of the occurrence of the tax-generating event, being in force[d] a financial leasing contract which has as its object an automobile, for purposes of the provisions of article 3, nos. 1 and 2, of the CIUC, [being that the] passive subject of IUC is the lessee even if the registration of the right of ownership of the vehicle is made in the name of the leasing entity, provided that the latter provides proof of the existence of the said contract." (Italics ours.)

For the above reasons, the allegation of the AT regarding article 19 of the CIUC does not hold, since the same seeks to superimpose a formal obligation over a substantial reality clearly demonstrative of the condition of the Claimant as leasing entity in the underlying contracts.

1. It is concluded, in light of the above set forth [see 1) and 2), to which reference is hereby made], that there has not been "interpretation [...] contrary to the Constitution", contrary to what was alleged by the Respondent in points 149 to 157 of its answer.

2. A final note to assess, under article 24, no. 5, of the RJAT, the request for payment of indemnity interest in favor of the Claimant (article 43 of the LGT and article 61 of the CPPT).

In this regard, notes the Arbitral Decision handed down in process no. 26/2013-T, of 19/7/2013 (which dealt with a situation similar to the one now under assessment): "The right to indemnity interest to which the norm of the LGT referred above alludes presupposes that there has been payment of tax in an amount higher than that owed and that such derives from error, of fact or law, attributable to the services of the AT. [...] even if it is acknowledged that the tax paid by the claimant is not owed, because it is not the passive subject of the tax obligation, determining, consequently, the respective reimbursement, it is not apparent that, at its origin, there is an error attributable to the services that determines such right [to indemnity interest] in favor of the taxpayer. In fact, by promoting the official assessment of IUC considering the claimant as the passive subject of this tax, the AT merely complied with the norm of no. 1 of article 3 of the CIUC, which, as abundantly stated above, imputes such quality to the persons in whose names the vehicles are registered." In the same sense, see, for example, the Arbitral Decisions handed down in the processes: no. 170/2013-T, of 14/2/2014; no. 136/2014-T, of 14/7/2014; no. 230/2014-T, of 22/7/2014; and no. 140/2014-T, of 29/8/2014.

In view of the justification cited, and with which agreement is expressed, it is concluded, equally in the present case, for the failure of the said request for payment of indemnity interest.

Responsibility for Payment of Arbitral Costs

In this regard, it is necessary to bear in mind that, as well referred, for example, in the Arbitral Decision handed down in process no. 241/2014-T, of 6/10/2014, "the law is categorical in imputing responsibility for payment of costs to the party that is condemned, in light of the provisions in nos. 1 and 2 of article 527 of the Code of Civil Procedure, applicable by virtue of article 29, no. 1, paragraph e), of the RJAT." (In the same sense, see, for example, the Arbitral Decision handed down in process no. 231/2014-T, of 4/11/2014, or the Arbitral Decision handed down in process no. 171/2014-T, of 17/11/2014.)

In the present case, having the Claimant's request partially succeeded, the Claimant and the Respondent shall be responsible, in the proportion of the defeats, for the payment of the arbitral costs.

VI – DECISION

In light of the above set forth, it is decided:

• To judge the tax arbitration petition well-founded, with the consequent annulment, with all legal effects, of the assessment acts relating to the vehicles identified in Docs. 2 to 44, in the global amount of €3,201.46, and the reimbursement of the amounts wrongly paid.

• To judge the tax arbitration petition inadmissible, with the tax assessment acts relating to the vehicles identified in Doc. 1 and in Docs. 45 to 65 joined to the initial petition, in the global amount of €1,890.10 (= €31.29 + €1,858.81), remaining in the legal order, absconding, accordingly, the entity respondent from the request as to the same.

• To judge the request inadmissible insofar as it concerns the recognition of the right to indemnity interest in favor of the claimant.

The value of the case is fixed at €5,091.56 (five thousand and ninety-one euros and fifty-six cents), in accordance with the provisions of article 32 of the CPTA and article 97-A of the CPPT, applicable by virtue of the provisions of article 29, no. 1, paragraphs a) and b), of the RJAT, and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

In accordance with Table I attached to the RCPAT, the costs are in the amount of €612.00 (six hundred and twelve euros), to be paid by the Claimant and the Respondent in the proportion of the defeats, which is fixed at ⅓ and ⅔, respectively, in accordance with articles 12, no. 2, and 22, no. 4, of the RJAT, and article 4, no. 4, of the RCPAT.

Notify.

Lisbon, 9 September 2016.

The Arbitrator

(Miguel Patrício)

Document prepared by computer, in accordance with the provisions of article 131, no. 5, of the CPC, applicable by reference to article 29, no. 1, paragraph e), of the RJAT.

The drafting of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.