IUC Tax Liability in Financial Leasing and Long-Term Rental: Subjective Incidence Rules (CAAD 173/2014-T)

AWARD

I REPORT

"A" (hereinafter "A" or "Requester"), legal entity number ..., with registered office at ..., falling within the jurisdiction of the local peripheral services of the Tax and Customs Authority of ..., hereby submits, pursuant to Articles 2(1)(a) and 10(1) and (2) of Decree-Law No. 10/2011 of 20 January and Articles 1 and 2 of Ministerial Order No. 112-A/2011 of 22 March, a request for an arbitration award against the Tax and Customs Authority, alleging that the Vehicle Circulation Tax (IUC) assessments for the taxation periods of 2009, 2010, 2011 and 2012 are vitiated by material breach of law and, consequently, there should be declared "(…) the illegality of these assessment acts (…) in the amount of € 2,014.91 (…)" and "(…) consequently, recognition of the right to reimbursement of this amount and also the right to compensation interest for the payment of tax unduly assessed(…)"

The request is substantiated, in summary and in essence, on the following grounds:

1. The subject matter of the arbitration award request concerns the ex officio Vehicle Circulation Tax assessment acts for the taxation periods of 2009, 2010, 2011 and 2012, (see Documents No. 2 to No. 27 attached or annexed to the arbitration award request[1]).

2. The Requester is a financial institution whose corporate purpose is the practice of operations permitted to banks, with the exception of the receipt of deposits, having, for such purpose, all legally required authorizations.

3. In the course of its activities, the Requester enters into contracts for Long-Term Lease and Financial Leasing Contracts of motor vehicles, at the end of which it transfers the ownership of the same to the respective lessees or to third parties.

4. Between 10 and 20 December 2013, the Requester was notified of Ex Officio Vehicle Circulation Tax Assessments relating to the vehicles identified in this arbitration award request and for the taxation periods of 2009, 2010, 2011 and 2012 (See administrative proceedings file).

5. The Requester proceeded to make voluntary payment of the Vehicle Circulation Tax allegedly outstanding (see Documents No. 2 to No. 27).

6. From the land registry at the date of the tax events, the Requester appeared in the Motor Vehicle Registration Registry as the owner of the said vehicles.

7. These vehicles with respect to which the payment of Vehicle Circulation Tax was due were not owned by the Requester on the date identified by the Tax Authority as the date of occurrence of the tax event…

8. …since they had been sold and the respective sale was effected on a date prior to that to which the tax relates.

9. In fact, Vehicle Circulation Tax is an annual periodicity tax, and for such purpose, with reference to motor vehicles, the taxation period corresponds to the year that begins on the date of registration or on each of its anniversaries.[2]

10. Now, with the exception of the situations provided for in Article 3(2) of the Vehicle Circulation Tax Code, the person who, on that date, holds the respective ownership is obliged to pay the tax.

11. It is concluded that on the date of the tax liability to which the assessments in question relate, the Requester was not the owner of the vehicles identified therein, since their respective transfers had already previously taken place, in accordance with civil law.

12. In case law the following may be read: "The contract for the sale of a motor vehicle is not subject to any special formality, the transfer of ownership taking place by the mere effect of the contract, in accordance with Articles 408, No. 1, 874 and 879(a) of the Civil Code."[3]

13. It is true that, in accordance with Article 5 of Decree-Law No. 54/75, of 12 February[4], the right of ownership of motor vehicles is subject to registration.

14. In accordance with Article 1(1) of Decree-Law No. 54/75, "the registration of vehicles has essentially for its purpose to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce." [emphasis of the Requester].

15. The aforementioned Decree-Law No. 54/75 is silent as to the legal value of motor vehicle registration of ownership.

16. In accordance with Article 7 of the Land Registry Code applicable by virtue of Article 29 of the said Decree-Law,[5] "the definitive registration constitutes a presumption that the right exists and belongs to the person inscribed as holder, in the exact terms in which the registration defines it.".

17. From the foregoing it follows that the essential function of the registration is, precisely, to give publicity to the situation of the vehicles[6], that is, to the registered act, the registration not producing, as the Supreme Court of Justice Award of 19 February 2004 points out "(…) constitutive effect functioning (merely) as a mere presumption, rebuttable, (presumption juris tantum) of the existence of the right (Articles 1(1) and 7 of the Land Registry Code 1984 and Article 350(2) of the Civil Code) as well as of the respective ownership, all in accordance with its terms.".

18. The absence of registration does not prevent the full effectiveness of contracts for the sale of a motor vehicle.

19. In conclusion:

a) The provision contained in Article 3(1) of the Vehicle Circulation Tax Code establishes a presumption which, concerning a rule of tax incidence, always admits proof to the contrary;

b) The contract of sale is real in nature, and the real effect, in accordance with Article 408(1) of the Civil Code, is the effect of the contract itself, not being dependent on any subsequent act, such is notably the case of registration;

c) The essential function of motor vehicle registration is to give publicity to the legal situation of vehicles and the registration does not produce constitutive effect, functioning (merely) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all in accordance with its terms. The presumption that the right registered belongs to the person in whose name it is inscribed, can be rebutted by presentation of proof to the contrary;

d) Not meeting the Tax Authority the requirements of the notion of "third party" for purposes of registration, it cannot avail itself of the failure to update the registration of the right of ownership to challenge the full effectiveness of the contract of sale and to demand from the seller (former owner) the payment of the Vehicle Circulation Tax owed by the buyer (new owner) provided that the presumption of the respective ownership is rebutted through sufficient proof of the sale.

e) If, under a contract of sale whose object is a motor vehicle, on the date of the occurrence of the tax event, the vehicle had already previously been alienated although the right of ownership of the same continues registered in the name of its former owner, for purposes of Article 3(1) of the Vehicle Circulation Tax Code, the taxpayer subject to Vehicle Circulation Tax is the new owner, provided that sufficient proof of the sale is presented which rebuts the presumption of the registration.

The author or Requester did not appoint an arbitrator, and therefore, pursuant to Article 6(2)(a) of the Tax Arbitration Regulations, the undersigned was designated by the president of the Ethics Board of the Portuguese Tax Arbitration Council to make up this singular Arbitral Tribunal, having accepted such charge in accordance with legal and regulatory requirements.

On 11-04-2014 the parties were duly notified of such designation and did not express the will to refuse it in accordance with the combined provisions of Article 11(1)(a) and (b) of the Tax Arbitration Regulations and Articles 6 and 7 of the Code of Ethics.

The Tribunal was constituted on 30-4-2014 [Article 11(1)(c) of the Tax Arbitration Regulations, as amended by Article 228 of Law No. 66-B/2012 of 31-12]

On 4-06-2014, the Tax and Customs Authority submitted its defence arguing that the arbitration award request should be judged unfounded and that the tax acts challenged should be maintained in the legal order.

The Tax Authority argued, in essence and in summary:

1. It is argued that the invoices attached to the proceedings with the Request do not constitute suitable documents to effect the proof intended by the Requester that it would not be the owner of the vehicles in the said taxation periods.

2. The Requester cannot claim to prove that it is not the owner through simple invoices and, even less so, draw from these the effects that result from the declaration that it should have made, and which it admittedly did not make, with the Motor Vehicle Registration Registry, for the following reasons:

• The invoice is not a suitable document to prove the sale of the vehicle in question, since the same is nothing more than a document unilaterally issued by the Requester;

• The invoice in question is not apt to prove the conclusion of a synallagmatic contract such as the sale, as that document does not reveal by itself an essential and unequivocal declaration of will (i.e., acceptance) on the part of the alleged acquirer;

• In fact and as is common knowledge, there is no lack of cases of issuance of invoices relating to the transfer of goods and/or provision of services that never took place;

• The rules of motor vehicle registration have (still) not reached the point where an invoice unilaterally issued by the Requester can replace the Motor Vehicle Registration Request, indeed a document approved by official model;

• The unequivocal declaration of will of the alleged acquirer could be evidenced by the attachment of a copy of the said official model for registration of motor vehicle ownership, as it is a document signed by the parties involved.

1. The factual matter to be considered as established in the proceedings for purposes of proof, even if the Arbitral Tribunal adheres to the Requester's thesis, considering that Article 3 of the Vehicle Circulation Tax Code contains a rebuttable presumption as to the owner of the vehicle for purposes of the tax in dispute, nevertheless, and because the Requester did not effect the proof of the facts it alleges as to the transfer of ownership of those vehicles, its claim as to the annulment of the assessments in question should be judged unfounded, absolving the Respondent of the claim.

2. After challenging the arguments that support the Requester's interpretation as to the nature of rebuttable presumption of Article 3(1) of the Vehicle Circulation Tax Code, it concludes as follows:

a) The tax acts in question are not vitiated by any breach of law, in so far as in light of the provisions of Article 3(1) and Article 6 of the Vehicle Circulation Tax Code, the Requester was the taxpayer subject to Vehicle Circulation Tax as it was in its name that, at the date of the tax events, the ownership of the vehicles in question was registered;

b) However, even if this is not so understood, from the elements in the proceedings it is verified that the Requester failed to effect the proof incumbent on it that at the date of the facts it was not the owner of the said vehicles;

c) In sum, the Requester failed to prove the alleged transfer of ownership of the vehicles in question, nor the date on which the same took place, for purposes of their subjection to Vehicle Circulation Tax, it being irrelevant the cancellation of registrations at the Tax Authority for Motor Vehicles in a moment subsequent to the tax events in question, relating to the years 2009, 2010, 2011 and 2012.

d) In the terms set out above, the Requester's claim should be judged unfounded and, in consequence, the Tax Authority should be absolved of the claim in its entirety, with the assessments challenged being maintained in the legal order as they constitute a correct application of the law to the facts.

By order delivered on 6-6-2014, the meeting provided for in Article 18 of the Tax Arbitration Regulations was dispensed with, as were the final submissions.

Procedural Sanitation / Procedural Conditions

The arbitral tribunal was regularly constituted and is materially competent, in accordance with the provisions of Articles 2(1)(a) and 30(1) of the Tax Arbitration Regulations.

The parties have legal personality and capacity and are legitimate (Articles 4 and 10(2) of the same regulation and Article 1 of Ministerial Order No. 112-A/2011 of 22 March).

The joinder of claims is, in this case, admissible considering the identity of the taxes, of the Court competent to decide and of the grounds of fact and law invoked (Article 104 of the Code of Tax Procedure and Article 3 of the Tax Arbitration Regulations)

The proceedings are free from nullities and no issues were raised that may obstruct the consideration of the merits of the case.

II LEGAL REASONING

The Proved Facts

There is no controversy regarding the essential factual framework for the legal and statutory framing of the issues raised.

Thus, the following facts are essentially established:

1. The subject matter of the arbitration award request concerns the ex officio Vehicle Circulation Tax assessment acts for the taxation periods of 2009, 2010, 2011 and 2012, (see Documents No. 2 to No. 27 attached or annexed to the arbitration award request[7]).

2. The Requester is a financial institution whose corporate purpose is the practice of operations permitted to banks, with the exception of the receipt of deposits, having, for such purpose, all legally required authorizations.

3. In the course of its activities, the Requester enters into contracts for Long-Term Lease and Financial Leasing Contracts of motor vehicles, at the end of which it transfers the ownership of the same to the respective lessees or to third parties.

4. Between 10 and 20 December 2013, the Requester was notified of Ex Officio Vehicle Circulation Tax Assessments relating to the vehicles identified in this arbitration award request and for the taxation periods of 2009, 2010, 2011 and 2012 and proceeded to make voluntary payment of such assessments (see Documents No. 2 to No. 27).

5. From the land registry at the date of the tax events, the Requester appeared in the Motor Vehicle Registration Registry as the owner of the said vehicles.

6. These vehicles with respect to which the payment of Vehicle Circulation Tax was due had been sold by the Requester on the date identified by the Tax Authority as the date of occurrence of the tax events, the respective sales being effected on dates prior to those to which the tax relates.

The aforementioned essential factual framework for deciding the dispute results from the fact that no controversy was raised by the parties regarding the same, save as to the legal consequences, in terms of proof, as to the verification of the alienation by their respective sales invoices [Docs. 28 to 43].

In truth, the Requester presented the respective invoices [Docs 28 to 43], intending with them to prove the sale; the Tax Authority contends that this does not constitute a means of proof of transfer of ownership of vehicles but did not challenge these documents, invoking, in particular, their falsity or simulation of the sales.

On the other hand, given that the author is a company or commercial undertaking subject to accounting control rules, notably for purposes of determining its tax obligations, it would or would be relatively easy to prove the real existence and/or subsistence of such transactions[8].

The acts of sale of the motor vehicles, as shall be better seen below, are thus sufficiently proven, regardless of the sufficiency or otherwise of the invoices for effecting the commercial registration.

For one thing is the elements necessary for effecting the registration, another is the proof of the transaction subject to registration.

And in this connection, it cannot but be noted that the contract of sale of a motor vehicle is a verbal contract and is thus not subject to any specific form. [9]

II LEGAL REASONING (continuation)

The Law

In light of the positions of the Parties taken in the arguments presented, the central decisive issues are, as we understand them, to determine:

• What is the legal value of motor vehicle registration in the context of the Vehicle Circulation Tax Code, namely for purposes of the subjective scope of this tax and, in particular, whether the rule on subjective scope contained in Article 3(1) of the Vehicle Circulation Tax Code establishes or not a presumption;

• Whether compensation interest is warranted;

• Whether the presentation of a sales invoice constitutes a suitable means of proof of the sale of a motor vehicle;

• Whether, even if the claim should be granted, the Requester should bear the costs.

Let us proceed.

a. What is the legal value of motor vehicle registration in the context of the Vehicle Circulation Tax Code, namely for purposes of the subjective scope of this tax and, in particular, whether the rule on subjective scope contained in Article 3(1) of the Vehicle Circulation Tax Code establishes or not a presumption

It is noted at the outset that the following closely follows the tax arbitration jurisprudence on this matter [See, in particular, decisions handed down in the Portuguese Tax Arbitration Council cases Nos. 14/2013, 26/2013, 27/2013, 73/2013, 170/2013 and 154/2014, all published on www.caad.org.pt].

Article 3 of the Vehicle Circulation Tax Code provides:

"Article 3

Subjective scope

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

2 – Financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights under the leasing contract are equated to owners".

For its part, Article 11(1) of the General Tax Law provides that "in determining the meaning of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

Resolving the doubts that may arise in the application of legal norms presupposes the carrying out of an interpretive activity.

There is thus a need to consider what the best interpretation[10] of Article 3(1) of the Vehicle Circulation Tax Code is, in light, first and foremost, of the literal element, that is, that in which it is sought to detect the legislative intent that is objectified in the norm, to ascertain whether it contains a presumption, or whether it determines, definitively, that the taxpayer of the tax is the owner appearing in the registry.

The issue that arises is, in the case sub judice, whether the expression "being considered" used by the legislator in the Vehicle Circulation Tax Code, instead of the expression "presumed", which was what appeared in the regulations that preceded the Vehicle Circulation Tax Code, will have removed the nature of "presumption" from the legal provision in question.

In our view and contrary to what the Tax Authority contends, the answer must necessarily be negative, since from the analysis of our legal order it clearly emerges that the two expressions have been used by the legislator with equivalent meaning, whether at the level of rebuttable presumptions or in the context of irrebuttable presumptions, and therefore nothing enables us to draw the conclusion sought by the Tax Authority on a mere semantic basis.

In fact, this is the case in various legal provisions that establish presumptions using the verb "consider", of which the following are indicated, merely by way of example:

• in the field of civil law - Article 243(3) of the Civil Code, when it provides that "the third party who acquired the right after the registration of the action of simulation is always considered in bad faith, when such registration has taken place";

• also in the field of industrial property law the same occurs, when Article 59(1) of the Industrial Property Code provides that "(…)inventions whose patent has been requested during the year following the date on which the inventor leaves the company, are considered made during the execution of the employment contract (…)";

• and, also, in the field of tax law, when Articles 89-A(3) and (4) of the General Tax Law provide that it is incumbent on the taxpayer the burden of proof that the declared income corresponds to reality and that, if such proof is not made, it is presumed ("is considered" in the letter of the Law) that the income is that which results from the table contained in Article 89-A(4) of the said law.

This conclusion of there being complete equivalence of meanings between the two expressions, which the legislator uses indifferently, satisfies the condition established in Article 9(2) of the Civil Code, since the minimum correspondence in wording is ensured for purposes of determining legislative intent.

It is important, next, to submit the provision in question to the other elements of logical interpretation, namely, the historical element, the rational or teleological element, and the systematic element.

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

As BAPTISTA MACHADO states, "the legal provision presents itself to the jurist as a linguistic statement, as a set of words that constitute a text. Interpreting consists evidently in deriving from this text a certain meaning or content of thought.

The text admits multiple meanings (polysemy of the text) and frequently contains ambiguous or obscure expressions. Even when apparently clear on first reading, its application to concrete cases of life often gives rise to unforeseen and unpredictable difficulties of interpretation. Furthermore, although apparently clear in its verbal expression and bearing but one meaning, there remains the possibility that the verbal expression has betrayed the legislative intent – a phenomenon more frequent than might appear on first glance" (See Introduction to Law and Legitimizing Discourse, pp.175/176).

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

To understand a law "is not merely to mechanically grasp the apparent and immediate meaning that results from the verbal connection; it is to investigate with depth the legislative intent, to descend from the verbal surface to the intimate concept that the text contains and to develop it in all its possible directions"(loc. cit., p.128).

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

Among us, it is Article 9 of the Civil Code (CC) that furnishes the rules and fundamental elements for the correct and adequate interpretation of norms.

The text of Article 9(1) of the CC begins by saying that interpretation should not be limited to the letter of the law, but should reconstitute, from it, the "legislative intent".

On the expression "legislative intent", BAPTISTA MACHADO tells us that Article 9 of the CC "did not take a position in the controversy between the subjectivist doctrine and the objectivist doctrine. It is proved by the fact that it refers to neither the 'will of the legislator' nor the 'will of the law', but rather points to the aim of the interpretive activity the discovery of the 'legislative intent' (Art. 9, 1st). This expression, purposefully colorless, means precisely that the legislator did not wish to commit itself" (loc. cit., p. 188).

In the same sense, PIRES DE LIMA and ANTUNES VARELA pronounce themselves in an annotation to Article 9 of the CC (See Annotated Civil Code – vol. I, Coimbra ed., 1967, p. 16).

And on Article 9(3) of the CC, this author states: "(...)this No. 3 proposes to us, therefore, a model of ideal legislator that enshrined the most correct solutions (most correct, just or reasonable) and knows how to express itself in correct form. This model is clearly objectivist in character, as it does not take the concrete legislator as the point of reference (so often incorrect, hasty, unfortunate) but an abstract legislator: wise, foreseeing, rational and just(...)" (loc. cit. p. 189/190).

Shortly thereafter this illustrious Professor draws attention to the fact that Article 9(1) refers to three more elements of interpretation to "the unity of the legal system", the "circumstances in which the law was elaborated" and the "specific conditions of the time in which it is applied" (loc. cit, p. 190).

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

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

As regards the "unity of the legal system", BAPTISTA MACHADO considers this the most important interpretive factor: "its consideration as a decisive factor would always be imposed on us by the principle of axiological or evaluative coherence of the legal order" (loc. cit., p. 191).

It is also this author who tells us, with respect to the literal or grammatical element (text or "letter of the law") that this "is the starting point of interpretation. As such, it has from the start a negative function: to eliminate those meanings that have no support, or at least some correspondence or resonance in the words of the law.

But it also has a positive function, in the following terms: if the text admits but one meaning, that is the meaning of the norm – with the caveat, however, that one can conclude based on other norms that the wording of the text has betrayed the intent of the legislator" (loc. cit., p. 182).

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

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

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

As JOSEF KOHLER teaches, quoted by MANUEL DE ANDRADE "(…) in particular we must take into consideration the interconnection of the various laws of the country, because a fundamental requirement of all sound legislation is that the laws adjust to each other and do not result in a congeries of disconnected provisions (...)" (Essay, p. 27).

Making a closer approach to the case at hand:

Through analysis of the historical element, the conclusion is drawn that, from the entry into force of Decree-Law 59/72 of 30 December, the first to regulate the matter, up to Decree-Law No. 116/94 of 3 May, the last to precede the Vehicle Circulation Tax Code [see Law No. 22-A/2007, as amended by Laws 67-A/2007 and 3-B/2010], the presumption was established that the taxpayers subject to Vehicle Circulation Tax were the persons in whose name the vehicles were registered on the date of their assessment.

It is thus verified that tax law has always had the objective of taxing the true and actual owner and user of the vehicle, it being indifferent the use of one or another expression which, as we have seen, have in our legal order a coinciding meaning.

The same is to be said when we resort to elements of interpretation of a rational or teleological nature.

In fact, the current and new framework for automobile taxation establishes principles aimed at subjecting the owners of vehicles to bearing the costs of damage caused by these to roads and the environment, as is clear from the tenor of Article 1 of the Vehicle Circulation Tax Code.

Now the consideration of these principles, namely the principle of equivalence, which merit constitutional protection and recognition in community law, and are also recognized in other branches of the legal order, determines that the aforementioned costs be borne by the actual owners, the causers of the said damage, which entirely excludes an interpretation that aimed to prevent the presumed owners from proving that they are no longer so because the ownership is in the legal sphere of another[11].

Thus, also, from the interpretation effected in light of elements of a rational and teleological nature, in view of what the rationality of the system guarantees and the ends sought by the new Vehicle Circulation Tax Code, it is clear that Article 3(1) of the Vehicle Circulation Tax Code establishes a rebuttable legal presumption.

In light of the foregoing, it is important to conclude that the ratio legis of the tax points towards the taxation of the actual owner-users of vehicles and therefore the expression "being considered" is used in the normative provision in question in a meaning similar to "being presumed", reason for which there is no doubt that a legal presumption is established.

On the other hand, Article 73 of the General Tax Law provides that "(…) the presumptions established in the rules on tax incidence always admit proof to the contrary, and therefore are rebuttable (…)".

Accordingly, given that Article 3(1) of the Vehicle Circulation Tax Code establishes a presumption juris tantum [and, therefore, rebuttable], the person inscribed in the registry as owner of the vehicle and who, for that reason was considered by the Tax Authority as taxpayer of the tax, can present elements of proof aimed at demonstrating that the holder of ownership, on the date of the tax event, is another person, to whom ownership was transferred.

And, essentially following the same line of argument, it is equally concluded that the actual financial lessee of the vehicle on the date of the tax event will also be the taxpayer subject to the tax even if another person is the holder inscribed in the motor vehicle registry.

Having analyzed the elements brought into the proceedings by the Requester and the proved facts, the conclusion is drawn that the Requester was not the owner of the vehicles to which the assessments in question relate, as it had meanwhile transferred ownership of the same, in accordance with civil law.

These documentary elements, consisting of copies of the respective sales invoices – which were not challenged by the Tax Authority – enjoy the presumption of truthfulness conferred on them by Article 75(1) of the General Tax Law, thus having suitability and sufficient force to rebut the presumption that supported the assessments effected.

These operations of transfer 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 accordance with Article 5(1) of the Land Registry Code [applicable by reference from the Motor Vehicle Registration Code], the Tax Authority is not a third party for purposes of registration, since it is not in the situation provided for in Article 5(2) of the said Land Registry Code, applicable by virtue of the Motor Vehicle Registration Code, that is: it did not acquire from a common author rights incompatible with each other.

Thus the motor vehicle registration, in the context of the Vehicle Circulation Tax Code, represents merely a rebuttable presumption of the taxpayers of the tax.

In the case, the Requester succeeded, with complete success, in rebutting that presumption and in demonstrating that the reality of the registry was a mere appearance of that same reality, that is, the owner inscribed was not the real owner on the date of the anniversary of registration of the vehicles and, in consequence, it was another and not the Requester who was the taxpayer of the Vehicle Circulation Tax.

In these circumstances, the aforementioned and now impugned assessments must be annulled and, consequently, the respective amounts thus unduly collected and recorded in the aforementioned and documented assessment and payment acts must be reimbursed to the Requester by the Tax and Customs Authority.

b) Compensation Interest

The Requester made the payment of the assessments, and these proved to be undue.

Such circumstance constitutes error attributable to the services in so far as these assessments are challenged – Article 43(1) of the General Tax Law.

The deprivation of the amounts paid must be "sanctioned" with the obligation of payment of compensation interest arising from that same deprivation.

If the compensation interest is caused by the existence of an error attributable to the services (see Article 43(1) and (2) of the General Tax Law), it will be owed from the moment the excess amount was paid or withheld until the moment the credit note is prepared that allows the taxpayer to receive the amount from which it was unduly deprived.

The rate of compensation interest is equal to the interest rate provided for in Article 559 of the Civil Code, in accordance with the provisions of Articles 43 and 35-10 of the General Tax Law [see also Jorge Lopes de Sousa, Interest in Tax Relations, in Fundamental Problems of Tax Law, Ed. Vislis, Lisbon, 1999, pp. 55 et seq.].

Now, in the case, having the Requester made the payment of the assessments under challenge, it has the right to the reimbursement of what it paid, with compensation interest.

c) Whether the presentation of a sales invoice constitutes a suitable means of proof of the sale of a motor vehicle

This issue has already been somewhat answered in the considerations above.

In truth, it must always be considered that the contract of sale of a motor vehicle is a verbal contract.

And, that such as in any other verbal contract, there being an invoice, this is a suitable document to prove the legal transaction.

On the other hand, one cannot confuse the document necessary for effecting the registration with that necessary to prove the transfer of ownership.

III – DECISION

In harmony with the foregoing, this Arbitral Tribunal decides to judge as entirely well-founded the claims for annulment of the Vehicle Circulation Tax assessments as petitioned and, in consequence, those tax acts are annulled, with the other legal consequences inherent thereto, and the reimbursement of the amounts of such assessments is ordered, with compensation interest at the legal rates in force, in the terms set out above, from the dates of each of the payments until the preparation of the respective credit notes by the Tax and Customs Authority.

Value of the Case

In accordance with Article 306(2) of the Code of Civil Procedure and Article 97-A(1)(a) of the Code of Tax Procedure and Article 3(2) of the Regulation on Costs in Tax Arbitration Proceedings, the case is assigned the value of € 2,014.91.

Costs

In accordance with Article 22(4) of the Tax Arbitration Regulations, the amount of costs is fixed at € 612.00, in accordance with Table I annexed to the Regulation on Costs in Tax Arbitration Proceedings, at the charge of the Tax and Customs Authority.

Lisbon, 17 October 2014

The Arbitrator,

(José Poças Falcão)

[1] All documents referred to without other mention were attached by the Requester with its arbitration award request.

[2] See Article 4(1) and (2) of the Vehicle Circulation Tax Code.

[3] Award No. 0636717 of the Court of Appeal of Porto, of 11 January 2007, cited in the Award of the Court of Appeal of Porto, of 29 April 2013, in the context of Case No. 2238/11.6TBPRD.P1.

[4] As amended by subsequent amendments.

[5] Approved by Decree-Law No. 224/84 of 6 July, as last amended by Decree-Law No. 125/13 of 30 August.

[6] See Article 1 of the Land Registry Code.

[7] All documents referred to without other mention were attached by the Requester with its arbitration award request.

[8] See the current invoicing rules (Decree-Laws Nos. 197 and 198/2012 of 24 August)

[9] This subject matter will be developed further below.

[10] The genesis of the legal tax relationship presupposes the cumulative verification of the three prerequisites necessary for its arising, namely: the real element, the personal element and the temporal element. (In this sense see, among many other authors, Freitas Pereira, M. H., Taxation, 3rd Edition, Almedina, Coimbra, 2009).

[11] Under the heading "principle of equivalence" Article 1 of the Vehicle Circulation Tax Code establishes: "The Vehicle Circulation Tax obeys the principle of equivalence, seeking to burden the taxpayers to the extent of the environmental and road cost that these cause, in implementation of a general rule of tax equality".

On the notion of the principle of equivalence, SÉRGIO VASQUES tells us: "In obedience to the principle of equivalence, the tax must be shaped in attention to the benefit that the taxpayer obtains from public activity, or in attention to the cost that it imputes to the community by its own activity"(See The Special Consumption Taxes, Almedina, 2000, p. 110).

And, further on, this Professor explains, with respect to motor vehicles: "a tax on motor vehicles based on a rule of equivalence will be just only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause wear and environmental cost that differs, pay different tax also.