IUC Tax on Financial Leasing: Subjective Incidence and Legal Presumptions in CAAD Case 191/2015-T

ARBITRAL DECISION

CAAD: Tax Arbitration

Process No. 191/2015-T

Subject Matter: IUC

The Arbitrator Raquel Franco, appointed by the Deontological Council of the Center for Administrative Arbitration (CAAD) to form the single arbitral tribunal constituted on 08 June 2015, decides as follows:

I. REPORT

1. On 17.03.2015, the company "A… – …, S.A.", TIN … filed a request for the constitution of a single arbitral tribunal, in accordance with and for the purposes of the provisions of articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter "LFTÁ"), requesting the Tax and Customs Authority (AT).

2. The request for constitution of the Arbitral Tribunal was accepted by the Honorable President of CAAD and automatically notified to the AT on 27.03.2015.

3. In accordance with the provisions of paragraph a) of article 6, section 2, and paragraph b) of article 11, section 1, of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed as arbitrator of the single arbitral tribunal the undersigned, who communicated acceptance of the respective assignment within the applicable timeframe.

4. On 13.05.2015, the parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrator in accordance with the combined provisions of article 11, section 1, paragraphs a) and b) of the LFTÁ and articles 6 and 7 of the Code of Ethics.

5. Thus, in accordance with the provisions of paragraph c) of article 11, section 1, of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 08.06.2015.

6. On 01.09.2015, the meeting provided for in article 18 of the LFTÁ took place. The Claimant began by responding to questions posed to it by the tribunal regarding (i) timeliness of the request; (ii) missing documents; and (iii) any contradictions in the request. After the statement by the Claimant, and having heard the Respondent, the tribunal decided to grant a deadline to the Claimant to correct the request as to its timeliness and to submit missing documents; to grant a deadline to the Respondent to pronounce itself on the documents submitted by the Claimant. The tribunal also notified the parties to submit written arguments and informed that the arbitral decision would be rendered 30 days after submission of the written arguments by the Respondent.

7. In the present arbitration proceeding, the Claimant requests that the Arbitral Tribunal declare the illegality of the acts of official assessment of the single circulation tax (IUC) relating to the taxation periods from 2009 to 2012, whose total amount amounts to €13,818.44, and, consequently, determine the restitution of the total amount of €15,194.38, corresponding to tax and compensatory interest in the amount of €1,375.94, as well as the payment of indemnification interest in accordance with the provisions of article 43 of the General Tax Law.

7.A. The Claimant bases its request, in summary, as follows:

• The Claimant is a financial institution subject to supervision by the Bank of Portugal that carries on its activity in the field of automobile financing, namely through the granting of loans for the acquisition of vehicles or through financial lease contracts.

• The Claimant received various IUC assessment notices on vehicles related to the above-mentioned activity, regarding which it filed administrative appeals, the proceeding bearing number …2014….

• The administrative appeal filed by the Claimant was dismissed by the Tax and Customs Authority (AT) by means of a decision notified to the Claimant on 05.01.2015.

• The Claimant considers that it is not a liable person for IUC purposes with respect to the vehicles with the license plates in question in none of the years to which the official assessments which are the subject of the request for arbitration refer, specifically because:

(i) In 52 cases, the vehicle subject to taxation had already been disposed of by the Claimant on a date prior to the occurrence of the IUC taxable event;

(ii) In 55 cases, the vehicle was the subject of a lease contract that was in force on the date on which the taxable event occurred;

(iii) In 3 cases, the vehicles subject to taxation were not at the disposal of the Claimant on the date of the IUC due date, as they were ceded under financial lease contracts to the Claimant's customers;

(iv) In 4 cases, the vehicles subject to taxation were acquired by the Claimant on a date subsequent to the occurrence of the taxable event.

• With respect to the first group of situations, the Claimant considers that the fact that the vehicle in question was sold by it at a moment prior to the occurrence of the IUC constitutes a cause for exclusion of tax incidence that should have been observed by the AT, in that, in accordance with the provisions of article 6, section 3, of the IUC Code, the tax is considered due to the owner (or to other holders of the vehicle who are equivalent) on the first day of the taxation period of the vehicle, which, in accordance with article 4, section 2, of the same Code, takes place on the date on which the license plate is assigned. The fact that the ownership of the vehicles was not registered in the motor vehicle registry in favor of the new owner cannot be imputed to the Claimant, which did not have standing to request such registration. On the other hand, the Claimant considers that, although article 3, section 1, of the IUC Code provides that the liable persons for the tax are the owners of the vehicles, being considered as such the natural or legal persons, under public or private law, in whose name the same are registered, the expression "being considered" should be understood as a presumption of law subject to rebuttal by contrary evidence by the part transferring the vehicle. Thus, in light of article 3, section 1, of the IUC Code, the tax should fall upon the new owners of the vehicles.

• With respect to the second group of situations, the Claimant considers that, having entered into financial lease contracts that were in force on the date on which the taxable event occurred and the tax became due, the liable person for IUC is, exclusively, the financial lessee.

• With respect to the third group of situations, the Claimant considers that the IUC due must be attributed to the holders of the vehicles/lessees, since, with respect to the Claimant, the "economic premise selected as the object of the tax" does not apply.

• With respect to the last four situations indicated by the Claimant to the tribunal, it alleges that, on the date of tax accrual, it was not yet the owner of the vehicles in question, whereby the liable person should be, in each case, the prior owner or other equivalent holder existing on a date prior to the sale.

7.B. In its Response, the AT invoked, in summary, the following:

7.B.1 Preliminary Issues

• First, the AT argues that the Claimant, contrary to what it was obligated to do, provided no proof of the date on which it was notified of the dismissal of the administrative appeal, thus preventing review of the timeliness of the request for arbitration.

• Second, the AT questions the fact that the Claimant did not submit documents that could support the thesis it defended, namely the documents proving the alleged situations of "IUC during the contract validity," "IUC after the contract is in default," and "recovery IUC with due date prior to A… acquiring the vehicle." The Respondent considers that, in accordance with the provisions of article 423 of the Code of Civil Procedure, the documents should have been submitted with the petition in which the facts to which they relate were alleged, and that, after the filing of the request for arbitration, the opportunity to submit documentary evidence was precluded.

• Third, the Respondent invokes that the Claimant proved only a single tax payment (IUC for 2011 of the vehicle with license plate …-…-…) and, even as to that, the payment of compensatory interest in the amount of €5.43 is missing.

• As a fourth preliminary issue, the AT argues that the request is defective for the object of the request for arbitration containing in itself an irremediable contradiction in not permitting understanding which assessments the Claimant questions the legality of.

7.B.2 As to the merits of the request, the AT invokes the following arguments:

• The legislator expressly and intentionally established that such [as owners or in the situations provided for in section 2, the persons listed there] are to be considered the persons in whose name the same [vehicles] are registered, because this is the interpretation that preserves the unity of the legal-tax system.

• To understand that the legislator established here a presumption would unequivocally be to effect an interpretation against the law; it is, rather, a clear legislative policy option whose intention was that, for purposes of IUC, those who appear as such in the motor vehicle registry should be considered owners.

• If the Claimant's thesis regarding the fact that article 3 of the IUC Code establishes a rebuttable presumption were to be accepted, then the rebuttal of the presumption depends on compliance with the provisions of article 19 of the IUC Code; since the Claimant did not comply with the burden of proof incumbent upon it, and verifying the breach of the declarative obligation provided for in that legal provision, two consequences should be drawn: (i) the liability of the Claimant for the arbitration costs relating to the present request for arbitration given that such breach gave rise to the issuance of part of the assessments in question; (ii) the determination of its liability in terms of violations under article 117, combined with article 26, section 4, of the General Tax Violations Regime;

• The interpretation given by the Claimant results in an obstruction and increase of the competences assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State;

• The argument presented by the Claimant that the liable person for the tax is the effective owner, regardless of whether or not appearing in the motor vehicle registry in that capacity, is incorrect in light of a teleological interpretation of the regime established in the IUC Code insofar as the legislator intended to create a tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle registry.

• As to the documents submitted by the Claimant for proof of the first set of situations presented to the tribunal, the AT considers that these, as they are invoices, are not suitable to prove the celebration of a bilateral contract such as a purchase and sale, since they do not reveal by themselves an essential and unequivocal declaration of intent (i.e., the acceptance) by the supposed purchaser.

• As to the second set of situations, the Respondent notes that the Claimant submitted none of the lease contracts that it alleges were celebrated prior to the date of occurrence of the taxable facts;

• As to the third set of situations, the Respondent considers that the AT has nothing to do with the contractual relationships between the Claimant and its customers and that, once again, the Claimant does not prove what it alleges, namely, the existence of a lease contract; the breach thereof; the cancellation of the financial lease registration; compliance with the provisions of article 19 of the IUC Code.

• With respect to the last set of situations identified by the Claimant, the Respondent again invokes the absence of proof by the Claimant of what is alleged.

• Finally, the Respondent argues that, if the interpretation conveyed by the Claimant were to be accepted, then the same would be contrary to the Constitution, insofar as it results in the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

II. ON THE PRELIMINARY ISSUES RAISED BY THE RESPONDENT

The first preliminary issue that the AT raises is related to compliance with the legally fixed deadline for the request for constitution of the arbitral tribunal. Indeed, it does not appear clearly from the request for arbitration as it was initially formulated by the Claimant that compliance with the mentioned deadline is met, because the Claimant does not allege – nor prove – the date on which it was notified of the decision to dismiss the administrative appeal proceeding filed with reference to the assessments that are the subject of the present arbitration proceeding.

However, after being notified to do so at the meeting provided for in article 18 of the LFTÁ, the Claimant came to present proof of having been notified of the decision dismissing the administrative appeal on 05.01.2015, and amended the request for arbitration accordingly.

Now, the request for arbitration was filed on 17.03.2015, that is, within the 90-day period provided for in article 10, section 1, paragraph a) of the LFTÁ. Thus, as to this issue, the AT is not correct.

As to the issue of the failure to timely submit documentary support for what was alleged in the request for arbitration, the AT is, in fact, partly correct. Indeed, it is verified that the Claimant only through the petition filed on 08.09.2015 came to submit (i) assessment notices identified in the table annexed to the request for arbitration; (ii) contracts relating to the situations of IUC accrued during the validity of the contracts; (iii) invoices relating to the situations of IUC with due date after the sale of the vehicle – all these documents proving the facts alleged at the time of filing the request. On the other hand, in the arguments presented on 28.09.2015, the Claimant came to argue that any defect that might exist by virtue of the failure to submit, with the request for arbitration, the documents proving what was alleged, would have been cured by the respective submission through a petition filed on 07.09.2015. However, in the same arguments, it ends up admitting that, "by mistake, the assessment notices relating to the vehicles with license plates …-…-… (2009) and …-…-… (2009) were not submitted, a mistake that is hereby corrected through submission of the mentioned assessment notices" and that, "as to the invoices submitted to the proceeding relating to license plates …-…-… and …-…-…, it should be noted that these, likewise by mistake, did not correspond to the vehicle in question, reason for which the correct invoices are being submitted to the proceeding."

The AT is, therefore, correct when it questions the fact that the Claimant did not proceed to submit the documentary proof of the facts alleged at the procedurally appropriate moment for such purpose, that is, at the moment when it files the request for arbitration, without any justification or explanation being presented on this matter, at that moment or at a later moment. Indeed, it is not negligible the fact that the proofs are not presented at the moment when the facts to which they relate are alleged, because it is from the joint appraisal of allegation and proof that the exercise of the right to be heard by the opposing party should result.

However, it is also true that the opposing party – the AT – was given, in this proceeding, the opportunity to pronounce itself on all the documentation actually submitted by the Claimant after the request for arbitration, both through the petition filed on 14.09.2015 and through the arguments presented on 07.10.2015. By this means, the Respondent was allowed the full exercise of its right to be heard regarding the documentation presented, reason for which this tribunal does not consider it appropriate to derive other consequences from the procedural conduct of the Claimant.

With respect to preliminary issue 3, the same will be analyzed further in this decision, namely in the factual reasoning thereof.

As to preliminary issue 4, regarding the alleged irremediable contradiction of the request for arbitration, this tribunal considers that the AT is not correct. Indeed, it results from the table annexed to the request, from the request formulated, and from the value attributed to it that what is in question are the 114 assessments of IUC in the amount of €13,818.44.

Thus, verifying that none of the preliminary issues prevents consideration of the merits of the request, let us proceed to that.

III. PROCEDURAL REVIEW

1. The Tribunal is competent and is regularly constituted, in accordance with articles 2, section 1, paragraph a), 5, and 6, all of the LFTÁ.

2. The parties have legal personality and capacity, are legitimate, and are legally represented, in accordance with articles 4 and 10 of the LFTÁ and article 1 of Ordinance No. 112-A/2011, of 22 March.

3. The proceeding does not suffer from defects that would render it invalid.

4. It is sought to jointly review the legality of 114 assessments of IUC relating to the years 2009 to 2012. Thus, the prerequisites provided for in section 1 of article 3 of the LFTÁ and article 104 of the Code of Tax Procedure are met, and it is proper to allow the joinder by virtue of the identity of the tax and the circumstance that the analysis of the tax acts in question depends on the appraisal of the same factual circumstances and the application of the same rules of law.

IV. FACTUAL MATTERS

IV.1. Established Facts

Before entering into the review of the issues, it is necessary to present the factual matter relevant for their proper understanding and decision, which, having examined the documentary evidence and the administrative file (PA) attached to the record and having also taken into account the alleged facts, is established as follows:

1. The Claimant is a Credit Financial Institution subject to supervision by the Bank of Portugal, which is engaged in automobile financing, namely through the granting of loans for the acquisition of vehicles or the celebration of financial lease contracts;

2. The Claimant received 114 notices of assessment of IUC on vehicles related to the above-mentioned activity, all identified in the Table Annexed to the arbitration request, which is hereby considered fully reproduced;

3. The Claimant made payment of all notices of assessment of IUC that are the subject of the request for arbitration, as appears from the table contained in pp. 9 et seq. of the PA;

4. The Claimant filed an administrative appeal, which was handled under number …2014…, which was dismissed on 05.01.2015, as appears from the PA and the document submitted by the Claimant, which is hereby considered fully reproduced;

5. The ownership of these vehicles was, on the dates of the taxable events, registered in the motor vehicle registry in favor of the Claimant;

6. The Claimant issued the following documents denominated "second copies of invoices," relating to the vehicles and with the dates hereinafter indicated:

a. Vehicle with license plate …-…-…, invoice dated 24.02.2009;

b. Vehicle with license plate …-…-…, invoice dated 24.03.2010;

c. Vehicle with license plate …-…-…, invoice dated 30.11.2008;

d. Vehicle with license plate …-…-…, invoice dated 20.08.2005;

e. Vehicle with license plate …-…-…, invoice dated 24.02.2008;

f. Vehicle with license plate …-…-…, invoice dated 24.09.2010;

g. Vehicle with license plate …-…-…, invoice dated 24.04.2010;

h. Vehicle with license plate …-…-…, invoice dated 24.02.2008;

i. Vehicle with license plate …-…-…, invoice dated 30.11.2010;

j. Vehicle with license plate …-…-…, invoice dated 01.03.2009;

k. Vehicle with license plate …-…-…, invoice dated 24.11.2009;

l. Vehicle with license plate …-…-…, invoice dated 10.12.2008;

m. Vehicle with license plate …-…-…, invoice dated 30.11.2009;

n. Vehicle with license plate …-…-…, invoice dated 20.08.2005;

o. Vehicle with license plate …-…-…, invoice dated 24.04.2009;

p. Vehicle with license plate …-…-…, invoice dated 24.06.2009;

q. Vehicle with license plate …-…-…, invoice dated 24.07.2010;

r. Vehicle with license plate …-…-…, invoice dated 20.09.2006;

s. Vehicle with license plate …-…-…, invoice dated 29.07.2010;

t. Vehicle with license plate …-…-…, invoice dated 24.04.2011;

u. Vehicle with license plate …-…-…, invoice dated 24.08.2009;

v. Vehicle with license plate …-…-…, invoice dated 01.08.2010;

w. Vehicle with license plate …-…-…, invoice dated 12.10.2010;

x. Vehicle with license plate …-…-…, invoice dated 24.12.2009;

y. Vehicle with license plate …-…-…, invoice dated 24.07.2010;

z. Vehicle with license plate …-…-…, invoice dated 01.08.2009;

aa. Vehicle with license plate …-…-…, invoice dated 11.03.2009;

bb. Vehicle with license plate …-…-…, invoice dated 24.09.2008;

cc. Vehicle with license plate …-…-…, invoice dated 24.07.2011;

dd. Vehicle with license plate …-…-…, invoice dated 24.09.2010;

ee. Vehicle with license plate …-…-…, invoice dated 24.07.2009;

ff. Vehicle with license plate …-…-…, invoice dated 28.04.2005.

1. In all the cases indicated in the previous point, the taxable event that gave rise to the assessment in question occurred before the date of the invoice issued with respect to the same vehicle.

2. The following vehicles have the dates of registration that follow (cf. pp. 9 to 12 of the PA) and, with respect to the same, the following invoices were issued:

1. In the cases of vehicles with license plates …-…-…, …-…-…, …-…-…, …-…-… and …-…-…, the anniversary of the registration occurs before the date of issuance of the invoice.

2. In the cases of vehicles with license plates …-…-…, …-…-…, …-…-… and …-…-…, the anniversary of the registration occurs after the date of issuance of the invoice.

3. The Claimant celebrated financial lease contracts relating to the vehicles and for the periods hereinafter identified:

a. …-…-…, from 01.09.2009 to 01.09.2016;

b. …-…-…, from 24.07.2004 to 24.07.2009;

c. …-…-…, celebrated on 21.09.2009, for a period of 84 months;

d. …-…-…, from 01.01.2007 to 01.12.2010;

e. …-…-…, from 01.07.2007 to 01.07.2013;

f. …-…-…, from 24.07.2007 to 24.07.2014;

g. …-…-…, from 24.05.2005 to 24.05.2015;

h. …-…-…, celebrated on 30.04.2009, for a period of 120 months;

i. …-…-…, from 01.06.2009 to 01.06.2014;

j. …-…-…, from 01.01.2008 to 01.01.2012;

k. …-…-…, from 24.12.2010 to 24.12.2014;

l. …-…-…, celebrated on 27.01.2010, for a period of 48 months;

m. …-…-…, celebrated on 03.12.2010, for a period of 60 months;

n. …-…-…, from 05.12.2007 to 05.12.2014;

o. …-…-…, from 01.07.2011 to 01.07.2015;

p. …-…-…, from 01.07.2011 to 01.07.2015;

q. …-…-…, from 24.07.2007 to 24.05.2014;

r. …-…-…, from 24.11.2010 to 24.11.2015;

s. …-…-…, from 31.05.2011, for a period of 48 months;

t. …-…-…, from 24.06.2008 to 24.06.2015;

u. …-…-…, from 29.12.2009, for a period of 48 months;

v. …-…-…, from 24.05.2011 to 24.05.2015;

w. …-…-…, from 24.06.2007 to 24.05.2013;

x. …-…-…, from 28.12.2011, for a period of 24 months;

y. …-…-…, from 01.06.2007 to 01.06.2013;

z. …-…-…, from 24.05.2009 to 24.06.2011;

aa. …-…-…, from 01.05.2007 to 01.05.2012.

1. The following vehicles have the dates of registration that follow (cf. pp. 9 to 12 of the PA):

1. In all the cases indicated in point 11, the taxable event occurred during the term of validity of the financial lease contract.

2. The Claimant sent a letter, dated 09.02.2009, to the lessee of the financial lease contract relating to the vehicle with license plate …-…-… by means of which it informed him that the amount of €1,277.33 relating to the contract mentioned was overdue and unpaid, granting him an additional period of 8 days to proceed with payment and warning him that, after this period without payment occurring, they would consider the contract definitively breached.

IV.2. Unproved Facts

a. The cancellation of the financial lease registration with respect to the vehicle with license plate …-…-…;

b. That a financial lease contract relating to the vehicle with license plate …-…-… was celebrated;

c. That the vehicle with license plate …-…-… was acquired by the Claimant after the date of accrual of the tax assessed with reference to the same vehicle (relating to the years 2010, 2011, and 2012);

d. That the Claimant made the communication provided for in article 19 of the IUC Code with respect to any of the vehicles in question in the present proceeding.

e. That the vehicle with license plate …-…-… was ceded in financial lease on the date on which the taxable event occurred relating to the year 2011.

V. THEMA DECIDENDUM

The fundamental issue at stake in the present proceedings consists in determining whether the facts alleged by the Claimant constitute reasons for exclusion of subjective tax incidence and whether, consequently, it should be considered that the impugned acts are affected by error as to the elements of the taxable event, which would constitute a defect of violation of law that would warrant its annulment, with the due legal consequences.

VI. LEGAL REASONING

The Claimant bases its request on four distinct types of arguments, according to the factual situation it invokes:

1. Vehicles whose ownership was transferred prior to the taxable event;

2. Vehicles with lease contract in force on the date of the taxable event;

3. A vehicle whose lease contract was in breach at the moment the taxable event occurred;

4. A vehicle that was acquired by the Claimant after the moment the taxable events occurred.

5. As to the first group of situations:

The Claimant invokes that, with reference to the acts of assessment whose ownership was transferred prior to the taxable event, the requirements for subjective tax incidence provided for in article 3 of the IUC Code are not met, and therefore it is not liable for IUC purposes. It invokes that, on the dates of the taxable events, it was no longer the owner of the said vehicles (in the case those identified in the annexed table as the first 52 situations) and, consequently, the assessments should be annulled due to manifest lack of subjective responsibility for their payment.

It invokes the provision of article 3 of the IUC Code, which, in its view, establishes an implicit presumption of ownership of the vehicles in favor of whoever has them registered, a presumption that, by virtue of the application of the general rule provided for in article 73 of the General Tax Law, is rebuttable by contrary evidence. For the Respondent, article 3 of the IUC Code does not establish any implicit presumption, but a true irrebuttable legal fiction.

This issue has been extensively addressed by arbitral jurisprudence over recent years (cf. the decisions rendered in proceedings 286/2013-T, of 2 May 2014, 293/2013-T, of 9 June 2014, 46/2014-T of 5 September, 246 and 247/2014-T, of 10 October, among others), and has also been the subject of the judgment of the South Central Administrative Court rendered on 19-03-2015, proceeding No. 08300/14. Following this tribunal closely the line of arbitral jurisprudence delineated in the proceedings indicated above, only its most significant traits will be indicated here.

Thus, section 1 of article 3 of the IUC Code provides that:

"The liable persons for the tax are the owners of the vehicles, being considered as such the natural or legal persons, under public or private law, in whose name the same are registered."

The issue discussed with respect to this provision is the following: should it be understood that the legislator used the word "being considered" as it could have used the word "presuming" or, on the contrary, that the legislator intended to establish a legal fiction, barring the possibility of providing contrary evidence?

In accordance with the provision of article 349 of the Civil Code, "presumptions are the inferences that the law or the judge draws from a known fact to establish an unknown fact." On the other hand, section 2 of article 350 of the Civil Code clarifies that legal presumptions may be rebutted by contrary evidence, except in cases where the law prohibits it.

With respect to presumptions of tax incidence, article 73 of the General Tax Law provides that these always admit contrary evidence.

"Legal fictions" consist, differently, "in a legal process that considers a situation or fact as distinct from reality in order to attribute legal consequences to it."

Now, contrary to what the Respondent argues and as has already been recognized in the arbitral and judicial decisions referred to, the analysis of the literal element, as well as the historical and teleological elements present in the provision in question lead to the conclusion that the legislator did not intend to establish any legal fiction but only and solely a presumption, rebuttable by contrary evidence in accordance with and for the purposes of the provision of article 73 of the General Tax Law. As the provision of incidence provided for in section 1 of article 3 of the IUC Code is a provision of tax incidence, any other understanding would clearly be contrary to the principles governing the tax legal relationship.

As to the historical element, it is important to note that the IUC Code had its genesis in the creation, through Decree-Law 599/72, of 30 December, of the tax on vehicles, which already expressly provided that the tax was due by the owners of the vehicles, being presumed as such the persons in whose name the same are registered or enrolled. On the other hand, article 2 of the Regulation of Circulation and Trucking Taxes (approved by Decree-Law No. 116/94) provided that: "the liable persons for the circulation tax and the trucking tax are the owners of the vehicles, being presumed as such, subject to contrary proof, the natural or legal persons in whose name the same are registered."

It is true that, in the IUC Code, the legislator replaced the expression "being presumed" with the expression "being considered," which, in the perspective of the Respondent, translated the establishment of a legal fiction, irrebuttable. We do not, however, consider that to be the case. The change of verb does not constitute a substantive alteration in the provision of incidence, which, in our view, continues to establish a presumption rebuttable by contrary evidence – in conformity, moreover, with the provision of article 73 of the General Tax Law.

As stated by DIOGO LEITE CAMPOS, BENJAMIM SILVA RODRIGUES, and JORGE LOPES DE SOUSA, in the annotation to section 3 of article 73 of the General Tax Law, "presumptions in matters of tax incidence may be explicit, revealed by the use of the expression 'it is presumed' or similar (…). However, presumptions may also be implicit in provisions of incidence, in particular of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations in which it is not impracticable to determine the real value."

In summary, in matters of tax incidence, presumptions may be revealed by the expression "it is presumed" or by similar expression. By way of example, JORGE LOPES DE SOUSA notes that in article 40, section 1, of the Corporate Income Tax Code, the expression "it is presumed" is used, whereas in article 46, section 2 of the same Code, the expression "it is considered" is used, with no difference between one and the other expression, both meaning, after all, the same thing: a legal presumption.

As to the teleological element, it is important to note that the structuring principle of the automobile taxation reform is precisely that of the incidence of taxation on the true user of the vehicle, which is not compatible with a "blind" reading of the letter of the law, which could, after all, lead to taxing whoever is not the owner and, in that way, whoever is not the subject causing the "environmental and road cost" provoked by the vehicle, to which article 1 of the IUC Code alludes.

Thus, as to the subjective incidence of the tax, it is to be concluded that there are no changes with respect to the situation previously in effect under the Municipal Tax on Vehicles, Circulation Tax, and Trucking Tax, as is widely recognized by the doctrine, with a rebuttable presumption continuing to apply in this matter. This understanding is, moreover, the only one that appears adequate and consistent with the principle of material truth and justice, underlying tax legal relationships, with the objective of taxing the real and effective owner and not the one who, by circumstances of a different nature, becomes, sometimes, nothing more than an apparent and false owner, by being registered in the motor vehicle registry.

In this respect, considering the elements of interpretation of the law referred to, we are led to the conclusion that the expression "being considered" has exactly the same meaning as the expression "being presumed," and therefore should be understood as establishing that article 3, section 1, of the IUC Code establishes a true presumption of ownership and not any fiction, and therefore such presumption is rebuttable. For this reason, it must be permitted to the party registered in the motor vehicle registry the possibility of presenting sufficient probative elements to demonstrate that the effective owner is, in fact, a different person from the one appearing in the registry.

Finally, in the present analysis, it is necessary to consider the legal value of the motor vehicle registry. Thus, in accordance with the provision of section 1 of article 1 of Decree-Law 54/75, of 12 February, which established the Motor Vehicle Property Registry, "the registration of vehicles has essentially the purpose of publicizing the legal situation of motor vehicles and their trailers, with a view to the security of legal transactions." Article 7 of the Property Registry Code further adds that "definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it." The motor vehicle property registration is not, therefore, of a constitutive nature, but merely declarative, permitting only the registration to presume the existence of the right and its holding. Therefore, the presumption resulting from the registration may be rebutted by contrary evidence. And this is so precisely because, in accordance with the provision of article 408 of the Civil Code, except for the exceptions provided by law, the constitution or transfer of real rights over a determined thing is effected by mere effect of the contract, not being the validity thereof dependent on the registration. In sum, the motor vehicle registry, in the economy of the IUC Code, represents mere rebuttable presumption as to the liable persons for the tax. In the case of a contract for the sale of a motor vehicle, the law not providing any exception for the same, the contract has real effect, with the purchaser becoming its owner, regardless of the registry; in the same way, the party registered in the registry will cease to be the owner, although it may still appear, for some time or even a long time, in the registry as such.

It should also be noted that the transfers effected are opposable to the Respondent, despite the provision of section 1 of article 5 of the Property Registry Code, which provides: "the facts subject to registration produce effects against third parties only when registered." The notion of third parties for purposes of registration is established in section 4 of the same article 5: third parties, for purposes of registration, are those who have acquired from a common author rights incompatible with each other, which is manifestly not the case of the AT. Thus, the AT is not a third party for purposes of registration.

As a consequence of the above, the registered owner of an automobile can provide proof, for purposes of taxation under IUC, that it is no longer the effective owner of the vehicle in question, namely by having proceeded with its sale. And proof of the existence of a purchase and sale contract may be effected by any means, with the invoice being a suitable accounting document for this purpose, as for many others, in particular tax matters. Invoices evidence sales, transactions, or provision of services that are presumed true by virtue of the presumption of truthfulness established in article 75 of the General Tax Law. In this sense, it is not accepted that its probative force be questioned only for the purpose of proof of the transfer of vehicle ownership, under penalty of falling into the legal absurdity of, from the same document, recognizing that the transaction existed for purposes of income tax incidence, but did not exist for purposes of IUC. But, as this is a presumption, nothing prevents the demonstration of its falsity or inadequacy in light of the legal requirements established in article 36 of the VAT Code. This is, also in this case, a rebuttable presumption, with the burden of proof lying with the AT.

The Claimant alleges that, on the dates on which the taxable events occurred, it had already transferred ownership of the vehicles to third-party purchasers. For proof thereof, it submits second copies of invoices, in which are mentioned, among other elements, the license plate of the vehicle, the customer number, the identification of the recipient, the amount, a variable description – for example, "RESCISSION," "SALE NOT LEASED," "TOTAL LOSS BY INSURER," "RESIDUAL VALUE," "SALE OF PROPERTY IN CREDIT" – as well as the mention "Valid upon good collection."

The invoices presented by the Claimant benefit, as has been said, from the presumption of truthfulness contained in article 75 of the General Tax Law, provided that they comply with the legal requirements and demonstrate the correspondence to the factual reality that the Claimant intends to demonstrate in the proceedings: the transfer of ownership of the vehicles.

However, the AT questions the "actual validity of all the alleged second copies of invoices of sale of the vehicles, and for several reasons. Indeed, with respect to all invoices identified as second copies, it is absolutely relevant what was already decided in the arbitral decision of 30.07.2015, rendered in Proceeding No. 79/2015-T CAAD, of the same Claimant, as to the mention, appearing in all invoices, of the mention "valid upon good collection" (…). That is, and in a limiting and synthetic way: if all invoices are only valid upon the demonstration of their good collection, and if this proof was not made, then all invoices are invalid for the purpose intended." (…) The invoices submitted by the Claimant present in their description different mentions. Thus, in some invoices submitted one can read in the description field the mention "SALE NOT LEASED," "TOTAL LOSS BY INSURER," "RESIDUAL VALUE," "RESCISSION," and "SALE OF PROPERTY IN CREDIT." That is, faced with a supposed single type of contract (i.e., contract of purchase and sale of a motor vehicle) one would expect to ascertain the existence of a uniform description, which does not occur in the present case, given that various invoices submitted to the request for arbitration include different descriptions, whereby one is necessarily led to conclude as to the existence of several distinct realities."

Indeed, the documents submitted by the Claimant for proof of the transfer of ownership raise some doubts as to the actual occurrence of the transfer that they purport to evidence. First, the descriptions do not permit concluding, without more, as to the existence of underlying purchases and sales, given the diversity of situations described. Second, the indication of "valid upon good collection" removes from the invoice the capacity to, by itself, demonstrate the actual conclusion of the sale. Of course, the scenario could be different if the Claimant submitted to the record copies of the bills of sale relating to each of the vehicles in question, which certainly were issued and delivered to the respective purchasers for the conclusion of the transaction and subsequent modification of the property registry. However, it did not. And, thus, this tribunal cannot consider proved the transfers of vehicles that the Claimant intended to prove through the submission of invoices, but only the issuance of these. Therefore, as to the first 52 situations contained in the table annexed to the request for arbitration, as well as to the situation of the vehicle with license plate …-…-…, which appears in the table annexed to the request as a situation of "IUC in effect during the contract," but with respect to which an invoice was submitted rather than a financial lease contract, this tribunal does not consider proved the transfer of ownership that could lead to exclusion of subjective tax incidence due to insufficiency of the documentary proof presented.

1. As to the second group of situations:

As to the second group of impugned assessments, the Claimant invokes the existence of financial lease contracts in force on the dates on which the taxable events of the IUC Code occurred. The issue that arises is, therefore, the following: if, on the date of occurrence of the taxable event of the IUC, a financial lease contract in force has as its object the automobile on which taxation is imposed, for purposes of the provision of article 3, sections 1 and 2, of the IUC Code, is the liable person for IUC the lessee or the lessor entity, the owner of the vehicle, in whose name the registration of the right of ownership is made?

For these cases, the legislator established an explicit rule, in section 2 of article 3 of the IUC Code, according to which, during the validity of the lease contract, the lessees are the liable persons for the tax. This rule is, moreover, in consonance with the legal regime of financial leasing, established in Decree-Law No. 149/95, of 24 June, from which it results that, during the validity of a financial lease contract, although the lessor remains the owner of the property in question, only the lessee has exclusive enjoyment of the leased property, using it as if it were the true owner.

Indeed, the lessor, by legal and contractual mandate, not having the potential for utilization of the vehicle and the lessee having exclusive enjoyment of the automobile, it is coherent that the lessee be responsible for payment of the tax, since it is he who has the potential for utilization of the vehicle and who provokes the road and environmental costs inherent to it.

However, it is necessary to take into account the provision of article 19 of the IUC Code, which provides as follows:

"For purposes of the provision of article 3 of the present code, as well as section 1 of article 3 of the law of its approval, the entities that proceed to the financial leasing, operational leasing, or long-term rental of vehicles are obligated to provide to the Tax Authority the data relating to the tax identification of the users of the leased vehicles."

In accordance with the provision of this article, the entities that proceed, in particular, to the financial leasing of vehicles are obligated to provide to the AT the tax identity of the users of the leased vehicles for purposes of the provision of article 3 of the IUC Code. Thus, so that the lessor or financial company is not considered liable for IUC with respect to the vehicles held in the respective contracts, the IUC Code requires the communication provided for in article 19. In fact, the burden of knowing whether or not there is a financial lease contract in effect on the date of the taxable facts, when it begins and when it ends, rests with the Claimant and not with the AT. If the latter does not receive the information in a timely manner as to the existence and conditions of the contract, it can only be guided by the information it has, consulting the registral and/or IMTT databases. In the present case, the Claimant did not proceed with the communication provided for in article 19 of the IUC Code – therefore, the AT had no other alternative than to issue the tax assessments in its name.

However, the Claimant submitted, in the course of the present proceeding, the financial lease contracts celebrated with respect to several of the vehicles subject to the impugned assessments. Through these contracts it is possible to (i) ascertain that, indeed, financial lease contracts were celebrated with respect to the vehicles in question for the periods of time contained in the contracts and (ii) know who the respective lessees are, who will be the liable persons for the IUC Code. In these cases, existing financial lease contracts in force on the dates on which the taxable events occurred, it will be the respective lessees, and not the lessor, who are responsible for payment of the tax.

The question will further be asked: and what about the communication provided for in article 19 of the IUC Code? Does its non-compliance conflict with the conclusion contained in the previous paragraph as to the person responsible for payment of the tax? The answer is, in our view, in the negative. Indeed, the consequence that results from non-compliance with this auxiliary obligation is the one we are witnessing: the AT issues the assessment notices in the name of the owner of the vehicle, being unaware that a financial lease contract was celebrated. However, this does not prevent that same owner/lessor from providing proof of the celebration of the contract and the period for which it was celebrated and, thus, preventing payment of the tax. And the fact is that, in the present proceeding, the Claimant submitted documentary proof that proves the existence of financial lease contracts that were in force on the date on which the taxable facts occurred relating to the vehicles referred to in point 11 of the established facts.

On this matter, the AT comes to say that, as a function of non-compliance with article 19 of the IUC Code, "it was not the Respondent who gave rise to the filing of the request for arbitration, but the Claimant itself" and that, "consequently, the Claimant should be sentenced to pay the arbitration costs arising from the present request for arbitration." This tribunal understands that the AT is not correct. On one hand, the present request for arbitration does not concern only the assessments in which the question was the celebration of financial lease contracts whose term comprises the dates on which the taxable facts of the assessed tax occurred. Therefore, even if the AT were correct, that correctness would always be partial, not being able to apply to all cases to which the request for arbitration refers. On the other hand, the AT's logic does not take into account that there was a previous administrative proceeding to the present arbitration proceeding within the scope of which the AT could have annulled the assessments in question. It is important not to forget that the default of the Claimant is subject to liability in terms of violations under article 117, combined with article 26, section 4, both of the General Tax Violations Regime, punishable with a fine of €300.00 to €7,500.00 for each of the financial lease contracts. That is the form found by the legislator to penalize those who breach the duty to inform the AT.

1. and 4) As to the third and fourth group of situations raised by the Claimant in the request, namely (3) the situations in which, allegedly, the vehicle was not at the disposal of the Claimant despite its having terminated the financial lease contract that covered it, and (4) the situations in which the vehicles were, allegedly, acquired by the Claimant after the date of occurrence of the taxable event, the Claimant did not prove the alleged facts, whereby the review of law is prejudiced. It should be noted, however, that, as to the vehicle with license plate …-…-…, the celebration of a financial lease contract with a validity period of 01.05.2007 to 01.05.2012 was proved, a period that includes the impugned assessments with respect to this vehicle (corresponding to the years 2009, 2010, 2011, and 2012).

As to the request for indemnification interest formulated by the Claimant, it is understood that the same is not meritorious, for the following reasons:

(i) As to the first, third, and fourth groups of situations enumerated in the request for arbitration, because the Claimant is not correct, with the assessments being due;

(ii) As to the second group of situations enumerated in the request for arbitration, because the annulment is not based on error imputable to the services, since the Respondent issued the assessments taking into account the information it had, as a result of the information as to the celebration of the financial lease contracts not having been provided by the Claimant. Thus, the prerequisites enumerated in article 43 of the General Tax Law are not met.

VII. DECISION

In conformity with what is set forth above, it is decided:

(i) To dismiss the request for arbitration insofar as it concerns the first group of situations enumerated in the request for arbitration (corresponding to the first 52 assessments contained in the table annexed to the request for arbitration and also to the vehicle with license plate …-…-…), as well as to the assessments relating to vehicles with license plates …-…-… (relating to the year 2012), …-…-… (relating to the years 2010, 2011, and 2012), …-…-… (relating to the years 2010, 2011, and 2012), and …-…-… (relating to the year 2011).

(ii) To allow the request for arbitration insofar as it concerns the assessments relating to the following vehicles:

a. …-…-…;

b. …-…-…;

c. …-…-…;

d. …-…-…;

e. …-…-…;

f. …-…-…;

g. …-…-…;

h. …-…-…;

i. …-…-…;

j. …-…-…;

k. …-…-…;

l. …-…-…;

m. …-…-…;

n. …-…-…;

o. …-…-…;

p. …-…-…;

q. …-…-…;

r. …-…-…;

s. …-…-…;

t. …-…-…;

u. …-…-…;

v. …-…-…;

w. …-…-…;

x. …-…-…;

y. …-…-…;

z. …-…-…;

aa. …-…-….

(iii) To dismiss the request for indemnification interest.

Value: In accordance with the provisions of articles 97-A, section 1, paragraph a), of the Code of Tax Procedure and article 3, section 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at €15,194.38.

Costs: In accordance with the provisions of article 22, section 4, of the LFTÁ and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €918.00, to be paid by the Claimant and the Respondent in the proportion, respectively, of 53% and 47%, in accordance with articles 12, section 2, and 22, section 4, both of the LFTÁ, and article 4, section 4, of the said Regulation.

Registered and notified.

Lisbon, 26 October 2015

The Arbitrator,

Raquel Franco