IUC Subjective Tax Incidence: Vehicle Owner Liability in Leasing and Long-Term Rental Contracts (CAAD 168/2014-T)

ARBITRAL DECISION

I – Report

CAAD: Tax Arbitration

1. On 24.02.2014, the Claimant, A ("A" or "Claimant"), legal entity no. …, with registered address at …, requested the CAAD to constitute an arbitral tribunal, pursuant to Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), wherein the Respondent is the Tax and Customs Authority, with a view to the annulment of 45 Official Assessments of Unique Circulation Tax ("IUC"), identified in documents no. 2 to no. 46, attached to the initial petition, relating to the tax periods of 2009, 2010, 2011 and 2012, totalling the amount of € 1,697.39. The Claimant further requests payment of compensatory interest at the legal rate from the date of payment of the taxes in question until actual reimbursement.

2. The request to constitute the arbitral tribunal was accepted by His Excellency the President of the CAAD and notified to the Tax and Customs Authority.

Pursuant to the provisions of No. 1 of Article 6 of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the applicable legal time limits, the signatory was appointed as arbitrator, who communicated acceptance of the appointment to the Deontological Council and to the Administrative Arbitration Centre within the applicable time limit.

The Arbitral Tribunal was constituted on 30.04.2014.

1. The meeting provided for in Article 18 of the RJAT took place on 3.07.2014, at 15.30 hours.

2. The grounds presented by the Claimant in support of its claim are, in summary, as follows:

4.1. The Claimant is a financial institution whose corporate purpose is to carry out the operations permitted to banks, with the exception of deposit-taking, having for this purpose all legally required authorisations.

4.2. In the context of its activity, the Claimant enters into contracts with its customers for Long-Term Vehicle Leasing and Financial Leasing Contracts for motor vehicles, upon completion of which it transfers ownership thereof to the respective lessees or third parties.

4.3. Between 10 and 20 December 2013, the Claimant was notified of Official Assessments of IUC relating to the vehicles identified in the present request for arbitral determination and to the tax periods of 2009, 2010, 2011 and 2012.

4.4. The Claimant proceeded to voluntary payment of the allegedly outstanding IUC.

4.5. Notwithstanding the foregoing, the Claimant disagrees with the practice of the said assessment acts, insofar as the vehicles in relation to which IUC payment was required were not owned by it on the date identified by the Tax Authority as the date of occurrence of the taxable event.

4.6. In accordance with the provisions of Article 3, No. 1 of the IUC Code, "the passive subjects of the tax are the owners of vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered."

4.7. The recourse to motor vehicle registration as a structural element in the functioning of the IUC is evident, furthermore, throughout the Code.

4.8. From the dependence of the IUC taxation regime on motor vehicle registration, one cannot fail to conclude that the subjective incidence rule insofar as it considers as owner the person in whose name the vehicle is registered constitutes a mere (legal) presumption of incidence.

4.9. It is true that the current text did not use the term "are presumed," unlike what was contained in the extinct Regulation of the Tax on Vehicles.

4.10. However, examining the Portuguese legal order, we find various examples of norms that establish presumptions using the verb "to consider."

4.11. Also in the tax legal order we can find the verb "to consider" with a presumptive sense, as is the case with Article 21, No. 2 of the IRC Code and Article 89-A, No. 4 of the General Tax Law, and given that the legal system must form a coherent whole, the examples mentioned above, accompanied by the doctrine and jurisprudence indicated, by recourse to the systematic element, permit the conclusion that it is not only when the verb "to presume" is used that we are dealing with a presumption, but also the use of other terms or expressions can equally serve as the basis for presumptions, namely the term "is considered," thereby showing that the condition established in Article 9, No. 2 of the Civil Code is fulfilled.

4.12. If it is true, however, that the literal element, by itself, cannot be considered entirely decisive, when accompanied by other elements it is quite relevant and indicative of the true meaning of the norm in question, pointing to the fact that the expression "being considered as such" is equivalent to the expression "being presumed as such."

4.13. Under the heading "principle of equivalence" Article 1 of the IUC Code establishes that "The unique circulation tax is governed by the principle of equivalence, seeking to burden taxpayers in proportion to the environmental and road costs that they cause, in implementation of a general rule of tax equality."

4.14. As is, moreover, referred to in Bill No. 118/X, vehicles should, therefore, be taxed according to, in particular, their polluting potential and the safety levels presented.

4.15. For all the foregoing, and taking into account, on the one hand, the systematic place that the principle of equivalence occupies in the IUC Code, the historical element embodied in the mentioned Bill, and also the rational element underlying the reform of motor vehicle taxation referred to in the preceding paragraphs, it only makes sense to conceive the expression "being considered as such," in the context of Article 3 of the IUC Code, as revealing the presence of a rebuttable presumption.

4.16. The ratio legis of the IUC rather points towards the taxation of vehicle users, the actual owners or, even, financial lessees, since these, as users of the vehicles, have the polluting potential that causes the environmental and road costs to the community and symmetrically obtain the benefit of the use of the vehicles.

4.17. These being presumptions of tax incidence, these are always rebuttable.

4.18. Thus, one cannot fail to understand that the expression "being considered as such" used in No. 1 of Article 3 of the IUC Code configures a legal presumption, which is rebuttable, in accordance with general terms and, in particular, by virtue of the provisions of Article 73 of the General Tax Law.

4.19. For all the foregoing, as well as from the elements now provided by the Claimant, it is concluded that at the date of exigibility of the tax to which the assessments in question relate, the Claimant was not the owner of the vehicles identified therein, because the respective transfers had already previously taken place, in accordance with civil law.

4.20. In accordance with the provisions of Article 874 of the Civil Code, "sale" is defined as "(…) the contract by which ownership of a thing, or another right, is transferred, by means of a price."

4.21. In turn, Article 879 of the Civil Code provides that "(…) sale has as essential effects: (a) the transfer of ownership of the thing or the ownership of the right; (b) the obligation to deliver the thing; (c) the obligation to pay the price."

4.22. Although this provision contributes to answering the question under analysis, Decree-Law No. 54/75 is, however, silent as to the legal effect of motor vehicle property registration.

4.23. It is therefore important to have recourse to the provisions relating to land registration as indicated in Article 29 of that decree.

4.24. Thus, and in accordance with the provisions of Article 7 of the Land Registration Code, "the final registration constitutes a presumption that the right exists and belongs to the registered titleholder, in the precise terms in which the registration defines it."

4.25. Now, from the combined reading of both legal provisions, it results that the essential function of registration is, precisely, to give publicity to the situation of vehicles, that is, to the act registered, the registration not having, as pointed out in the Supreme Administrative Court Decision of 19 February 2004 "(…) constitutive force operating (only) as a mere rebuttable presumption, (presumption juris tantum) of the existence of the right (Articles 1, No. 1 and 7, of the Land Registration Code and Article 350, No. 2, of the Civil Code) as well as of the respective ownership, all in accordance with its contents."

4.26. This interpretation has, moreover, received legal consecration in No. 4 of Article 5 of the Land Registration Code, pursuant to which "third parties, for purposes of registration, are those who have acquired from a common author mutually incompatible rights."

4.27. Having regard to the legal and jurisprudential notion of "third party," we cannot fail to conclude that the Tax Authority does not fulfill the requirements of the said notion of "third party," and therefore cannot invoke the absence of registration to justify the ineffectiveness of motor vehicle sales contracts.

4.28. Should the purchaser (new owner of the vehicle) fail to provide for the registration of its property right, it is presumed that this right continues to belong to the seller; this presumption may, however, be rebutted by contrary proof.

4.29. In light of the foregoing, it is legitimate to conclude that the Tax Authority cannot avail itself of the failure to update the registration of the property right in order to require payment of the tax from the former owner in whose name the vehicle is registered if and when, by any means, sufficient proof of the respective sale is presented to it.

1. The Tax and Customs Authority – Respondent, called to respond, contested the Claimant's claim, defending itself by counter-claim and by way of exception.

As a preliminary matter, the Respondent also invoked the irregularity of the power of attorney conferred on the Claimant's representative, on the ground that it was certified by the same lawyer to whom the legal powers were conferred, which, in its view, was contrary to the opinion of the General Council of the Bar Association no. …-G, of 2008-07-30.

On the other hand, with regard to the motor vehicle with registration number …, it stated that it found that ownership of the same has been registered in the name of another person than the Claimant since 13.12.2006, a date prior to the date of exigibility of the tax in question, and therefore, as to this vehicle it stated that it would proceed to the revocation of the "purported official assessment in question."

In its defence by way of exception, the Respondent invoked, in summary, the following:

5.1. The Claimant labours under an error when it came to react against what it itself calls "official assessments" of IUC.

5.2. The documents submitted by the Claimant do not constitute official assessments. To be so, they would have to be generated and sent by the Respondent to the Claimant, which did not occur in the present case.

5.3. In reality, documents 2 to 46 attached to the initial petition constitute mere collection notes generated and extracted by the Claimant itself in the Finance Portal via the Internet, and therefore, with regard to the motor vehicles sub judice, the Respondent did not generate nor send to the Claimant any official assessments of IUC with a view to the tax relating to the years 2009 to 2012.

5.4. It was the Claimant that, without having been notified for such purpose, proceeded to issue the collection notes in question here with respect to each of the vehicles and for the years 2009 to 2012, and therefore the subject-matter of the present request for arbitral determination is not based on "official assessment" acts issued by the Respondent, but rather on collection notes that the Claimant of its own volition extracted from the Finance Portal on which it proceeded to make payment.

5.5. Assessment and collection are distinct realities and only the first (and not the second) is susceptible to challenge by means of a request for arbitral determination.

5.6. Not constituting the collection note a tax act, naturally a situation of lack of subject-matter is verified in the present case, which constitutes a peremptory exception, since the means of challenge to the collection notes, as mere tax acts, should be the Special Administrative Action.

5.7. Concluding, thus, that the Arbitral Tribunal is materially incompetent to appreciate and decide upon the request which is the subject-matter of the dispute sub judice.

5.8. Even if it were not so held – which is only admitted by mere hypothesis – and it were understood that, in reality, one is dealing with self-assessments generated by the Claimant itself in the Finance Portal, it would still be said that the present request for arbitral determination could not proceed.

5.9. It is true that self-assessments configure tax acts, but the challenge to the same, through a request for arbitral determination depends on a prior and necessary submission of a Gracious Objection within a period of 2 years from the submission of the declaration, as established by Article 131, No. 1 of the Tax Procedure Code.

5.10. Now, the Claimant did not submit any Gracious Objection with respect to the self-assessment acts sub judice, and therefore for this reason also such acts are not susceptible to review.

1. By counter-claim, the Respondent further alleged, in summary, the following:

6.1. The tax legislator, in establishing in Article 3, No. 1 who are the passive subjects of the IUC, established expressly and intentionally that these are the owners, being considered as such the persons in whose name the same are registered, the legislator not having used the expression "are presumed," as it could have done.

6.2. The tax rule is full of provisions analogous to that enshrined in the final part of No. 1 of Article 3, in which the tax legislator, within his freedom of legislative discretion, expressly and intentionally, establishes what must be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others.

6.3. Also the systematic element of interpretation of the law demonstrates that the solution advocated by the Claimant is untenable, Article 6, No. 1, of the IUC Code establishing that "The taxable event of the tax is constituted by ownership of the vehicle, as attested by the registration number or registration in national territory."

6.4. In the same sense operates the legislative solution adopted by the tax legislator in Article 3, No. 2 of the IUC Code by making the equiparations enshrined therein coincide with the situations in which motor vehicle registration requires the respective registration.

6.5. Should the position defended by the Claimant be accepted, the Respondent would have to proceed to the assessment of IUC with respect to another person indicated by the person appearing in the motor vehicle register as owner, who in turn could allege and prove that it had meanwhile already sold to a third party, who could declare the same and thus on and on indefinitely, with the result that the tax period of limitation would also be in question.

6.6. The approval of Decree-Law 20/2008, of 31 January had as its objective the establishment of procedures tending to adapt motor vehicle registration to the new taxation regime, so as to avoid the existing problems, namely those related to the fact that there are many vehicles not registered in the name of the real owner.

6.7. Even accepting that, from the perspective 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 effect, in accordance with what is established in the IUC Code, the legislator intentionally and expressly wanted that those in whose name vehicles are registered, lessees, purchasers with reservation of ownership or holders of the right of option to purchase in long-term leasing be considered as owners.

6.8. The non-updating of the registration, in accordance with Article 42 of the Motor Vehicle Registration Regulation, will be attributable in the legal sphere of the passive subject of the IUC and not in that of the Portuguese State, as the active subject of this tax.

6.9. The interpretation proposed by the Claimant of Article 3, No. 1 of the IUC Code is contrary to the Constitution of the Portuguese Republic insofar as it devalues the registration reality as against an "informal reality," violating the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

6.10. Even if it were not thus understood, the 33 invoices submitted by the Claimant do not constitute sufficient proof to shake the (supposed) legal presumption established in Article 3 of the IUC Code, since it is not apt to prove the conclusion of a synallagmatic contract such as sale, since they do not reveal the essential declaration of intent of the purported purchaser, all the more so since the invoices themselves submitted to the request for determination expressly state that they are only valid as a receipt "after good collection."

6.11. On the other hand, the invoices embodied in documents 47 and 75 raise serious doubts about their veracity, and it may be speculated that their submission constitutes a hasty attempt to demonstrate a non-existent reality, since they include value-added tax rates that did not exist at the time or do not even include any rate, because:

a) The invoice attached as document 47, supposedly issued on 2007-03-08, does not even indicate the VAT rate, when at that date the rate should be 21% (Law 39/2005, of 24 June);

b) The invoice attached as Document 75, supposedly issued on 2004-03-09, indicates a VAT rate of 23%, when at that date the rate should be 19% (Law No. 16-A/2002, of 31 May).

6.12. In summary, the Claimant has failed to prove the purported transmission of the vehicle in question here.

1. Notified of the response presented by the Respondent, the Claimant came to present a written response to the exception raised alleging, in summary:

7.1. The Claimant was confronted in its private section of the Finance Portal with a series of IUC debts, documented in what the Tax Authority calls collection notes (collection documents).

7.2. For purposes of its tax situation, the IUC debts documented by the said collection notes were already susceptible to payment, and were paid by the Claimant as appears from the documentation attached to the request for constitution of an Arbitral Tribunal.

7.3. It was a priority for the Claimant to proceed to payment of those IUC debts appearing in the system, since the harmfulness resulting from the impossibility of obtaining, for the most varied purposes of its commercial activity, a negative debt certificate (certificate of regularized tax situation), far exceeded the harmfulness of the concrete tax assessments, presupposed in those debts and which are logically antecedent to them.

7.4. Furthermore, the Claimant does not know, has no way of knowing, and finds it highly worrying that the Tax Authority, with respect to a plurality of situations of IUC debts of which the Claimant was unaware and did not invent, contained in the Tax Authority's information system at a stage that permitted and permitted their payment, now comes to say that it has nothing to do with it, and that it would have been the Claimant that was responsible for the generation of the collection notes.

7.5. The IUC debts appearing in the Tax Authority's information system (in the area of access reserved for the Claimant) are an undeniable fact of the Tax Authority's creation, the possibility of their payment is also an undeniable fact of the Tax Authority's responsibility, and the quantification of their very concrete amounts, year and vehicle registration number of the tax, is also entirely the responsibility of the Tax Authority and its information system.

7.6. These IUC debts logically and necessarily presuppose a series of IUC assessments, and it is irrelevant to the case the means by which the Claimant became aware of them: the fact is that it became aware, and in the most harmful manner possible (imputation by the Tax Authority of a tax debt to the Claimant), and the fact is that it challenged them via a request for constitution of an Arbitral Tribunal.

7.7. In conclusion, the Claimant further notes that it paid the IUC debts in December 2013 and, as of the date in question (June 2014), it has not yet been notified directly or ex officio of the assessments.

1. In the same procedural document the Claimant presented a new power of attorney and requested ratification of the proceedings, which was granted by arbitral order of 3.07.2014.

2. The parties submitted written submissions in which they maintained their positions.

3. The cumulation of claims relating to the tax acts of assessment which is the subject-matter of the present request for arbitral determination is admissible in light of Article 3, No. 1 of the RJAT, since the success of the claims depends essentially on the assessment of the same factual circumstances and on the interpretation and application of the same rules of law.

4. The tribunal is materially competent and is regularly constituted in accordance with the RJAT.

The parties have legal personality and capacity, are legally entitled, and are legally represented.

The proceedings are not affected by defects that would invalidate them.

II – The Relevant Facts

1. The Tribunal considers the following facts to be proven:

12.1. The Claimant is a financial institution whose corporate purpose is to carry out the operations permitted to banks, with the exception of deposit-taking, having for this purpose all legally required authorisations.

12.2. In the context of its activity, the Claimant enters into contracts with its customers for Long-Term Vehicle Leasing and Financial Leasing Contracts for motor vehicles, upon completion of which it transfers ownership thereof to the respective lessees or third parties.

12.3. On a date not specifically ascertained, but falling between 16.10.2013 and 20.12.2013, the Claimant became aware, by accessing its private section of the Finance Portal, of a set of IUC debts, documented by forty-five collection notes, associated with an equal number of assessment statements and statement of compensatory interest assessments, as per documents numbers 2 to 46 attached with the initial petition which are incorporated herein in their entirety.

12.4. These assessments and collection documents related to the tax periods of 2009, 2010, 2011 and 2012.

12.5. The collection documents in question are dated 16.10.2013.

12.6. In the assessments, the compensatory interest was recorded up to 16.10.2013.

12.7. The Claimant paid the assessments in question, with reference to the respective collection documents, on 10.12.2013, with the exception of the assessment corresponding to doc. no. 29, corresponding to the vehicle with registration number …, which was paid on 20.12.2013.

12.8. The Claimant was not notified of the assessments.

12.9. The end of the period for assessment and payment of the taxes in question by the passive subject occurred between 2.03.2009 and 2.11.2012.

12.10. The vehicles to which the assessments contained in documents numbers 3 to 40 and 42 to 46 attached with the initial petition relate were not owned by the Claimant on the dates of occurrence of the taxable events of the tax obligations at issue in the present case, having been sold previously.

12.11. On the dates of occurrence of the taxable events of the tax obligations at issue in the present case, all vehicles to which the assessments at issue in the present case relate were registered in the Motor Vehicle Registration Office in the name of the Claimant.

1. Facts not proven.

With relevance to the decision of the case, it is not considered proven, with respect to the assessments to which documents 2 and 41 attached with the initial petition relate, that the vehicles to which they relate were sold by the Claimant on a date prior to the occurrence of the taxable events of the respective tax obligations.

1. The Tribunal's conviction concerning the decision on the facts was based on the documents attached with the initial petition under numbers 3 to 40 and 42 to 79, as well as on the positions manifested by the parties in their pleadings and submissions with respect to the facts.

The facts referred to in items 12.1 and 12.2 of the proven facts were admitted by agreement and result also from the documents submitted by the Claimant.

From the documents attached by the Claimant in the initial petition under numbers 2 to 46, which were not challenged in any way by the Respondent (quite the contrary, the Respondent maintains in Article 13 of its response that these documents support the position it defends, which presupposes their acceptance), results the proof of the existence not only of the collection notes, but also of the assessments that gave rise to them.

In this regard, the Respondent's thesis that "documents 2 to 46 attached to the initial petition constitute mere collection notes" finds no support in such documents. These explicitly contain both the assessment of the tax and the assessment of the respective interest, with explicit mention, both of the rate and of the date of beginning and end of counting and of the number of days.

The fact that it has not been proven that such assessments were legally notified to the Claimant (who in the response to the exceptions corrected a statement contained in the initial petition in that sense, clarifying that it only became aware of them by consulting its reserved area of the "Finance Portal" and that it was not notified of them) does not militate against the proof of the tax act, but only with its notification to the interested party.[1]

The essential of the facts given as proven under numbers 12.3 to 12.7 and 12.9 result from the said documents attached with the petition under numbers 2 to 46 and not challenged, the proof of fact no. 12.8 resulting from agreement of the parties to that effect (considering the said correction made by the Claimant).

Fact no. 3 of the probation, furthermore, results from the combination of the admission by agreement of the absence of notification of the assessment, with the said documents nos. 2 to 46 attached with the initial petition. In fact, since the assessments bear the date of 16.10.2013, as results from the documents and the payments were made on 10.12.2013 (forty-four assessments) and 20.12.2013 (one assessment), the knowledge of the assessments by the Claimant could only have occurred in such interval of time.

The proof of the facts set out in no. 12.10 results from the invoices attached by the Claimant under numbers 48 to 74 and 76 to 79.

Although such documents are issued unilaterally by the seller, according to the rules of experience, nothing points, quite the contrary, to the non-coincidence of such invoices with the reality they represent.

On the other hand, the Respondent does not point out any concrete lack of correspondence between the invoices and the transactions represented therein, and it is further added that, in the same, value-added tax was assessed, and it has not been alleged that the same was not carried to the respective declarations, or that the acquirers, the recipients thereof, did not take them into consideration for tax-legal purposes.

Fact no. 12.11 results from agreement of the parties, expressly stated in their pleadings.

With respect to the factual matter considered not proven, differently from what occurs with the other invoices, it is not considered that from invoices numbers 47 and 75 results the proof that the vehicles in question were sold on the dates mentioned therein.

On this point the Respondent came in its response to raise doubts about their veracity by alleging that:

a) The invoice attached as Document 47, supposedly issued on 2007-03-08, does not even indicate the VAT rate, when at that date the rate should be 21% (Law 39/2005, of 24 June);

b) The invoice attached as document 75, supposedly issued on 2004-03-09, indicates a VAT rate of 23%, when at that date the rate should be 19% (Law 16-A/2002, of 31 May)."

Invited to comment on these observations at the arbitral meeting held, the Claimant explained that the anomaly was due to a problem of a computer nature but that, in reality, the VAT value assessed corresponds to the rate in force on the dates in question.

It happens that invoice no. 75 refers only to the rate of 23% and does not break down the VAT assessed, and therefore it is not possible to ascertain whether the VAT assessed corresponds to the rate in force on the date of the taxable event (19%) or to that indicated in the invoice (23%) and as for invoice 47, it has no VAT assessed.

The explanations given by the Claimant were not, therefore, suitable to overcome the intrinsic inconsistencies, accurately pointed out by the Respondent.

Thus and because no other proof was presented with respect to the alleged sales, the facts that such documents were intended to prove are considered not proven.

III - The Applicable Law

A. As to the Exceptions

1. The Respondent raised the question of the material incompetence of the arbitral tribunal, invoking that the collection notes do not constitute tax acts and that the means of challenge to the same, as mere tax acts, should be the special administrative action.

The Respondent's position is that documents 2 to 46 attached to the initial petition constitute mere collection notes, generated and extracted by the Claimant itself in the Finance Portal via the Internet and that the same do not constitute official assessments.

It further contends that "Even if it were not so held – which is only admitted by mere hypothesis – and it were understood that, in reality, one is dealing with self-assessments generated by the Claimant itself in the Finance Portal, it would still be said that the present request for arbitral determination could not proceed," since "the Claimant did not submit any Gracious Objection with respect to the self-assessment acts sub judice, and therefore for this reason also such acts are not susceptible to review."

1. As results from the proven factual matter, the Respondent's main thesis of the non-existence of assessments, but only of collection notes, lacks adherence to reality since such assessments appear in the documents submitted by the Claimant to the initial petition, which were expressly accepted by the Respondent.

On the other hand, the Respondent's subsidiary thesis (whose foundational facts the Respondent itself denies but then admits only by mere hypothesis), that one is dealing with self-assessments by the Claimant, in addition to being in contradiction with the statement of the non-existence of any assessment and the mere existence of collection notes, has no adherence to reality.

The assessments in question are unequivocally the work of the Tax Authority, containing, in addition to the assessment of the tax, the statement of assessment of compensatory interest.[2]

1. It is thus verified that the Tax Authority committed the assessment acts in question and that these, although not notified to the Respondent, gave rise to collection notes contained in the reserved area of the Claimant in the Finance Portal, and therefore they constitute harmful acts and, therefore, are open to challenge by the Claimant.

Thus, the exception of incompetence of the Arbitral Tribunal does not hold, and the exception of lack of procedural presupposition, consisting of the prior necessary gracious objection against the hypothetical self-assessment, also does not hold, since it has not been demonstrated that the same has occurred.

B. As to the Merits of the Case

1. Pursuant to Article 3, No. 1 of the IUC Code, "the passive subjects of the tax are the owners of vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered."

No. 2 of the same provision provides that "Financial lessees, purchasers with reservation of ownership, as well as other holders of rights of option to purchase as a result of the leasing contract shall be equiparated to owners."

The legal problem to be decided relates to the question of whether the person in whose name the vehicle's property is registered may prove, despite such circumstance, that he was not the owner thereof on the date of the taxable event, in order to remove the quality of passive subject of the tax.

1. In order to answer the problem in question, it seems pertinent to inquire whether Article 3, No. 1, of the IUC Code establishes a presumption, a position sustained by the Claimant, or whether, differently, it is merely the configuration of the legal type of tax, within the scope of legislative discretion, as the Respondent contends.

The answer to this question could be decisive, given that, in accordance with Article 73 of the General Tax Law, "Presumptions established in provisions on tax incidence always admit contrary proof." Furthermore, as stated in the Arbitral Decision rendered in case 286/2013-T, the "understanding of the Constitutional Court, affirmed in Decision No. 348/97, of 29.4.1997 and reiterated in Decision No. 311/2003, of 28.4.2003, as to the unconstitutionality of 'the establishment by the tax legislator of a presumption juris et de jure' since it 'completely denies to taxpayers the possibility of contravening the presumed fact, subjecting them to taxation which may be founded on a taxable matter fixed in disregard of the principle of tax equality'".[3]

1. In legal scholarship the distinction between fictions and presumptions has been analyzed, from the perspective of tax law.

Thus, ANA PAULA DOURADO, (O Princípio Da Legalidade Fiscal: Tipicidade, Conceitos Jurídicos Indeterminados e Margem de Livre Apreciação", Almedina Editor, Theses collection, 2007) writes:

"With respect to fictions, as a technique used in tax laws, and to their function, Karl Larenz tells us that 'legal fictions normally have the purpose of applying the rule given for a provided fact (F1) to another provided fact (F2)... the law "pretends" that F2 is a case of F1' (p. 603).

"Fiction is distinguished from simple presumption and absolute presumption by not being based 'on a probability that normally becomes truth,' since it 'deforms ('a legal truth') consciously' (p. 604)."

Also on this question, in terms convergent with ANA PAULA DOURADO, JOÃO SÉRGIO RIBEIRO, ("PRESUMPTIVE TAXATION OF INCOME, A Contribution to Reequating Indirect Methods of Determining Taxable Matter, Almedina, Theses, 2010, pp. 48-49) considers that the criterion of distinction between the two realities should be "eminently legal" and that "In light of that criterion the essential difference between presumption and legal fiction comes to reside in the fact that the former has as its starting point the truth of a fact, that is, a connection to the natural order of things, given that from a known fact an unknown probable fact is inferred; whereas fiction, by contrast, is born of a falsity or something unreal, disconnected from the natural order of things. That is, in fiction a legal truth distinct from the real is created; in presumption a causal relationship is created between two natural realities or facts.(…).

Despite both presumption and fiction being the result of legislative techniques, through which consequences are drawn from legal facts taken as true, what truly distinguishes them is the circumstance that, in legal presumption, the presumed fact has a high degree of probability of existing, and that, in fiction, the presumed fact is very improbable."

CASALTA NABAIS, has also addressed this question ("The Fundamental Duty to Pay Taxes", Almedina, 2004, p. 500-501) writing that "(...) it is necessary to separate the situations in which we are faced with legal presumptions, in which from a known fact (real or even legal) a naturally probable legal fact is inferred, a case in which contrary proof must be admitted, to make them compatible with the principle of taxpaying capacity, from the situations in which we are faced with the assumption of common experience rules as taxation rules, thus verifying the construction of legal norms (or legal types) with the (possible) recourse to legal fictions. In these, the principle of taxpaying capacity suffers the natural impact of the principles of practicability and effective fight against tax evasion, having to settle for a safety valve with respect to those cases that, by reaching such degrees of iniquity, cannot but allow the removal of the said rules of experience."

1. In the case at hand, and in light of the respected scholarship cited, it appears clear that, in Article 3, No. 1, of the IUC Code, we are dealing with a presumption, insofar as it results (very) probable from the fact of a person having a vehicle registered in their name, that they are, in fact, the owner thereof.

It is this same probability that underlies the presumption derived from registration enshrined in Article 7 of the Land Registration Code, applicable by reference in Article 29 of the Motor Vehicle Registration Regulation.

It is true that the law does not use the expression "being presumed as such, until proof to the contrary," which appeared in Article 3, No. 1 of the Regulation of the Municipal Tax on Vehicles (approved by Decree-Law No. 143/78, of 12 June and revoked by Law No. 22-A/2007, of 29 June), ("the tax is due by the owners of vehicles, being presumed as such, until proof to the contrary, the persons in whose name the same are registered or matriculated." But this does not appear to prevent us from being materially dealing with a presumption.

As written in the Arbitral Decision already cited rendered in arbitral case No. 286/2013-T, "as is already noted in other arbitral decisions rendered in this CAAD on the same matter (see the decisions rendered in cases nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of legislative provisions, distinct from those invoked above, in which equally the use of the expression 'being considered' or 'is considered' with the meaning of presumption occurs), it cannot be said, in any way, that the attribution of a presumptive meaning to the expression 'being considered' does not possess 'a minimum of verbal correspondence, albeit imperfectly expressed' (No. 2 of Article 9 of the Civil Code), and more than that, such term should even be recognized as having a current and normal correspondence to such presumptive sense.

Therefore, the fact that, differently from what occurred with the literal statement 'being presumed' which previously appeared in Article 3 of the Regulation of the Tax on Vehicles, the legislator has passed to use in the IUC Code the formula 'being considered' that appears in the current Article 3 of that Code, does not assume decisive weight, since this expression has perfect semantic virtuosity to involve the establishment of a presumption".[4]

1. The Supreme Administrative Court Decision of 4-11-2009, rendered in case 0553/09, applying Article 73 of the General Tax Law, in the context of income tax, goes even further by considering that this rule "does not appear to be applicable only to provisions on tax incidence in the strict sense, but also to all provisions that establish fictions that influence the determination of taxable matter (either directly, through fictitious values for taxable matter, or indirectly, by fictitiously fixing the values of income relevant to its determination). This, it seems, is the scope of the adverb 'always' used in Article 73 of the General Tax Law, which elevates this rule to a basic principle of the whole of the tax legal order, a corollary of the principle of equality in the distribution of public charges, based on the principle of taxpaying capacity."

It is true that the IUC is not, essentially, subordinated to the principle of taxpaying capacity, but rather to the principle of equivalence. However, this does not appear to impose different solutions insofar as both principles are intrinsically connected to the general principle of tax equality, where they find their foundation.

In fact, "The principle of taxpaying capacity represents the material criterion of equality appropriate to taxes,"[5] whereas "The principle of equivalence represents the material criterion of equality appropriate to fees and contributions."[6]

1. It should further be noted that, in addition to Article 1 of the IUC Code providing that "The unique circulation tax is governed by the principle of equivalence, seeking to burden taxpayers in proportion to the environmental and road costs that they cause, in implementation of a general rule of tax equality," other provisions reinforce and concretize the weight of this principle in the internal system of this tax.

First and foremost, Article 3, No. 1, of the Law that approved the IUC Code (Law No. 22-A/2007, of 29 June), concretizing this idea of equivalence, determines that: "The income generated by the IUC levied on vehicles of categories A, E, F and G is vested in the municipality of residence of the passive subject or equiparated, as well as 70% of the component relating to displacement of vehicles of category B, unless that income is levied on vehicles subject to long-term leasing or operational leasing, in which case it must be allocated to the municipality of residence of the respective user."

And, for purposes of effective implementation of this legislative intent, Article 19 of the IUC Code provides that: "For the purposes of the provision in Article 3 of the present code, as well as in No. 1 of Article 3 of the law of its approval, entities that proceed to financial leasing, operational leasing or long-term leasing of vehicles are obliged to provide to the General Directorate of Taxes the data relating to the tax identification of the users of the leased vehicles."

On the other hand, this principle of equivalence is further concretized by No. 2 of Article 3 of the same Code by providing that "Financial lessees, purchasers with reservation of ownership, as well as other holders of rights of option to purchase as a result of the leasing contract shall be equiparated to owners."

1. It thus becomes clear the decisive importance conferred by the Law to the principle of equivalence, both on the side of the causer of environmental and road costs, and on the side of the Municipality which tends to bear such costs and which, for that reason, is the beneficiary of the tax revenue.

As Sérgio Vasques emphasizes: "The structure of the new unique circulation tax is also clearly commutative, which since 2007 burdens motor vehicles according to CO2 emission levels, openly appealing to the principle of equivalence and to a relationship of exchange with taxpayers."[7]

Should it not be possible for the person registered as owner in the motor vehicle register to remove the quality of passive subject, by means of proof that he was not the owner on the date of the taxable event, this idea of equivalence could be decisively undermined, taxing those who did not cause the environmental and road costs and not allocating the revenue to the Municipality which tended to bear those costs.

1. The Respondent contends that the interpretation proposed by the Claimant of Article 3, No. 1 of the IUC Code is contrary to the Constitution of the Portuguese Republic, insofar as it devalues the registration reality as against an "informal reality,"[8] violating the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

It is not discernible, with due respect, how the position that maintains we are dealing with a rebuttable presumption could place at risk the principles of trust and legal certainty, these imposing duties and restrictions on public legal action.[9]

The same may be said, in essence, of the principle of proportionality.[10]

Indeed, with respect to this principle, we would even say that the question that could be raised would be whether such principle would not be violated by the interpretation advocated by the Respondent, insofar as, if it were admitted that the citizen could be prevented, for taxation purposes, from proving that despite the registration he is not the actual owner of the vehicle, this would be equivalent to suffering the consequence of the omission of an act (motor vehicle registration) whose interested party, in terms of legal certainty, from the civil legal perspective is another person (the buyer).

In fact, even if it is admitted that such a solution is apt to achieve the public purpose in view, it does not result clearly from the absence of alternative measures equally apt.

On the other hand, from the perspective of balance or proportionality in the strict sense, it is understood that a rule with the interpretation sustained by the Respondent would have excessive costs, from the perspective of the rights and interests of private parties (in this case of former owners of vehicles) as against the benefits that are sought to be achieved with the public interest, and this fundamental requirement of the principle of proportionality is not met.

In reality, the benefit achieved, from the perspective of tax management, with the rebuttable presumption, is already significant, and the cases of absence of registration by purchasers are certainly situations in a number certainly not significant in the universe of vehicle transactions, given the natural motivation of purchasers to carry out registration, since such is in their own interest.

It should be noted, also, that the rebuttable presumption already represents some sacrifice for the legitimate interests of the seller, insofar as, in order to exempt himself from a taxation offensive to the principle of equivalence, he bears the burden of rebutting the presumption.

However, weighing, in particular, the requirements of practicability of tax management, it is considered that the same is apt, necessary and reasonable from the perspective of the principle of proportionality, which would not be the case with an absolute presumption, explicit or implicit, which would not even permit the citizen to make proof contrary to the presumption.

1. The Respondent further invoked that the rule in question, in the interpretation sustained by the Claimant, would violate the principle of efficiency of the tax system.

It appears to us that the Respondent may have in mind the idea of efficiency in tax law, related to administrative efficiency.[11] It should be observed, however, that the relevance of a principle in the solution of a concrete case should not operate in isolation but in joint weighing with the other principles, and, in consequence of what has been said above, with respect to the principles of equality, equivalence and proportionality, the idea of efficiency is not sufficient to postpone the possibility of the taxpayer removing the presumption resulting from motor vehicle registration. Furthermore, efficiency and practicability are sufficiently safeguarded by the existence of a rebuttable presumption, as stated above.

1. Thus being, it is concluded that Article 3, No. 1, of the IUC Code, establishes a rebuttable presumption, the interested party bearing, in order to remove it, the burden of proving that, despite the registration, he was not the actual owner, having in the meantime sold it.

In this sense, were the decisions rendered in arbitral cases numbered 26/2013-T, 27/2013-T, 14/2013-T, 170/2013-T, 256/2013-T, 286/2013-T and 289/2013-T, whose understanding is thus endorsed.

Thus being, as to the taxes levied on vehicles which have been proven to have been sold by the Claimant before the taxable event, the request for arbitral determination cannot fail to proceed.

The challenge only fails with respect to the taxes levied on vehicles as to which such proof was not made, assessments contained in document no. 2 attached with the initial petition, concerning the vehicle with registration number … in the amount of 16.40 € and in document number 41, concerning the vehicle with registration number …, in the amount of 29.00 €.

1. The Claimant further requested the right to compensatory interest.

The Claimant's claim also warrants consideration in light of Article 43 of the General Tax Law.

No. 1 of that article provides that "Compensatory interest is due when it is determined, in a gracious objection or judicial challenge, that there was an error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally due."

In the case sub judice, it was not demonstrated (nor even alleged by the Claimant) that the Respondent had knowledge, at the date of the assessments, that the vehicles in question had been sold on a date prior to the date of the taxable event.

In making the assessments, the Respondent complied with the provisions of Article 3, No. 1, of the IUC Code, applying the presumption established in this legal provision.

Having limited itself to applying the presumption, in the absence of proof removing it, one cannot conclude that there is the occurrence of "error attributable to the services."

Thus being, the claim for condemnation of the Respondent to pay compensatory interest to the Claimant does not hold.

IV - Decision

                                                       Thus, the arbitral tribunal decides:

To hold the challenge partially successful in the following terms:

a) To hold the challenge unsuccessful with respect to the assessments contained in document no. 2 attached with the initial petition, concerning the vehicle with registration number … (in the amount of 16.40 €) and in document number 41, concerning the vehicle with registration number … (in the amount of 29.00 €).

b) To hold the challenge successful, with respect to all other assessments, declaring the annulment thereof.

Value of the action: 1,697.39 € (One thousand six hundred ninety-seven euros and thirty-nine cents) in accordance with the provisions of Article 315, No. 2, of the Code of Civil Procedure and 97-A, No. 1, subsection a), of the Tax Procedure Code and Article 3, No. 2, of the Regulation of Costs in Arbitration Proceedings.

Costs incurred by the Claimant in the proportion of three percent and by the Respondent in the proportion of ninety-seven percent, in accordance with No. 4 of Article 22 of the RJAT.

Lisbon, CAAD, 8 September 2014

The Arbitrator

(Marcolino Pisão Pedreiro)

[1] As written by Jorge Lopes de Sousa, "the notification of an act is an act external to it, and therefore the defects that affect notification, which may determine the invalidity of the notification and the consequent ineffectiveness of the notified act, do not affect the validity of the latter" (Tax Procedure and Process Code, annotated and commented, 5th Edition, Areas Publisher, 2006, Vol. I, p. 327, emphasis in the original).

[2] Indeed, in this author's opinion, it could not be otherwise.

Pursuant to Article 16, No. 1 of the IUC Code "The competence for the assessment of the Tax is of the General Directorate of Taxes," and pursuant to No. 2 of the same article "The assessment of the tax is made by the passive subject itself via the internet, under the conditions of registration and access to electronic declarations, being mandatory for legal entities."

Furthermore, pursuant to No. 3 "The assessment of the tax may be made by any finance service, in service to the public, whenever the passive subject requests it or when the following circumstances are verified (…)"

In turn, No. 2 of Article 18 determines that "(…) in the absence or delay of assessment attributable to the passive subject (…) the General Directorate of Taxes shall proceed to official assessment."

From the combination of these norms, it results that the passive subject can only proceed to self-assessment of the tax insofar as it does so within the legal period for such. Should such not occur, it can only be done by the Tax Authority, in accordance with Article 18, No. 2, of the IUC Code.

From Nos. 1 and 2 of Article 17 from which it follows that the tax must be assessed by the passive subject by the end of the month in which it becomes exigible.

In the case, since the assessments in question were made (long) beyond this period, the same could not, legally, have been made by the passive subject, but only by the General Directorate of Taxes.

[3] Available at the website "https://caad.org.pt"

[4] Furthermore, as sustained by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in annotation to Article 73, No. 3 of the General Tax Law ("LGT"), "presumptions in matters of tax incidence may be explicit, revealed by the use of the expression 'is presumed' or similar (…). However, presumptions may also be implicit in incidence norms, particularly objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations in which it is not unfeasible to ascertain the actual value" (See "General Tax Law Commented and Annotated", Encontros da Escrita, 4th Edition, 2012, p. 651).

[5] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, p. 251.

[6] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, p. 260.

As this author further notes on p. 227 of the same work, "Until the end of the twentieth century, special taxes on alcohol, tobacco, petroleum products or automobiles had no other objective than that of revenue raising, showing the unilateral contours typical of any tax.

From the 1980s and 1990s (…), however, these tax figures came to be instrumentalized to compensate for the costs that consumption of these brings to public health and the environment, so that special consumption taxes have come to gain the commutative nature that is typical of contributions."

[7] Manual of Tax Law, Almedina, 2011, p. 229.

[8] It should be noted, however, that the principle of freedom of form or consensuality prevails in Portuguese law (Article 219 of the Civil Code). Except when the law requires it, the validity of a contractual declaration does not depend on the observance of a special form. The "informal reality" to which the Claimant alludes is in fact the material reality that results from the norms of civil law.

[9] Jorge Bacelar Gouveia states that the principle of legal certainty requires "the publicity of the acts of public power, as well as the clarity and determinability of the sources of law," and that the principle of protection of trust requires "that the prevailing normative framework does not change in a way that frustrates the expectations generated in citizens about its continuity, with the prohibition of intolerable retroactivity of laws, as well as the necessity of its alteration in accordance with expectations that are constitutionally protected" (Manual of Constitutional Law, Almedina, 4th Ed., Vol. II, p. 821).

[10] According to the same author the configuration of this principle "is based on an internal material limitation to the public legal action of a discretionary character, containing the excessive effects that may appear in the edition of public power measures of an ablatory nature for their respective recipients" (op. cit. pp. 839-840).

[11] And not, clearly, the principle of efficiency of tax law, since, as written by Jónatas E.M. Machado and Paulo Nogueira da Costa, "From the principle of Efficiency it follows that the tax system should not have distortionary effects and should not interfere with the functioning of markets, except when, due to the existence of market failures, they do not function efficiently." (Course on Tax Law, Coimbra Publisher, 2009, p. 28.)