IUC Vehicle Tax Arbitration: Right of Action Expiry on 156 Assessments (2009-2011)

ARBITRAL AWARD

Following up and in execution of the award handed down by the Central Administrative Court South which, on appeal filed by the Tax and Customs Authority, decreed, by award of 19-9-2017, communicated to CAAD on 22-11-2017, the nullity of the arbitral decision handed down in this arbitration proceedings on 6-2-2016, the following new decision is rendered:

I REPORT

A… – UNIPERSONAL LIMITED LIABILITY COMPANY (hereinafter designated "Claimant"), with registered office at …, in …-…, …, legal entity number …, came, pursuant to the provisions of articles 95 of the General Tax Code ("LGT"), 99 of the Code of Tax Procedure and Process ("CPPT") and 1 and 2, number 1, paragraph a) of the Legal Framework for Tax Arbitration, approved by Decree-Law no. 10/2011 of 20 January (hereinafter RJAT), to request the constitution of an Arbitral Tribunal, with a view to reviewing the legality of tax acts (identified below) of the defendant, Tax and Customs Authority (Tax Office of …), and hereinafter also designated as "Defendant" or "AT".

Specifically, the Claimant requests:

A - The declaration of illegality of the IUC assessment acts identified in document no. 1, attached to the initial petition, and

B - Subsidiarily, "(…) payment to the Claimant of the compensation that may prove to be due, pursuant to article 171 of the CPPT, for the reason that it was required to provide a guarantee (in the form of a voluntary mortgage on movable property, for suspension of enforcement proceedings initiated as a consequence of the non-payment of the assessments) which, as a result of this Complaint proceeding, will have to be consequently considered manifestly inopportune and undue (…)".

It thus substantiates the petition (in essence):

a) The now Defendant issued 156 assessments for Single Circulation Tax ("IUC") and respective assessments of compensatory interest, in the total amount of € 98,614.20, identified in 52 assessment schedules (which cover the years 2009, 2010 and 2011) and whose copies are attached under the designation of Document 1, relating to 52 vehicles (of categories C and D) duly identified in such assessment schedules, which it does in the terms and with the following grounds.

b) Against the said assessments the now petitioner filed an Administrative Complaint understanding that the same are illegal, having been notified of the dismissal decision on 17 December 2015 (doc 3).

c) Given the high number of assessments in question, as well as the volume of documentation necessary to prove the alleged facts, the Claimant requests the joint review of the petitions it will formulate here, that is, the annulment of the 156 IUC assessments in reference, relating to the years 2009 to 2011, for a matter of procedural economy and taking into account the identity of the argumentation that will be advanced, for although they are autonomous assessments, the same are presented in a relationship of interconnection (identity of the vehicles and of the tax) and culminate in the identity of the cause of action underlying the present contestation.

d) The said request should be admitted pursuant to the provisions of article 3, number 1 of the RJAT, which provides for the acceptance of cumulation of petitions even if relating to different acts when the success of the petitions depends essentially on the review of the same circumstances of fact and the application of the same principles or rules of law.

e) Considering the sole identity of the tax and of the competent authority for the decision, as well as the review of the same facts, of the same grounds of law invoked and, consequently, the application of the same legal rules, the Claimant understands that nothing prevents, in view of the provisions of the said article 3, number 1 of the RJAT, indeed advising against it, the admissibility of the cumulation of petitions.

f) The Claimant is a unipersonal limited liability company, of Portuguese law, integrated in a group of companies of French origin, whose corporate object consists, essentially, in the carrying out of road freight transport services. (doc 2)

g) Within the scope of its activity, the vehicles that carry out the transports suffer natural wear from their daily use, being periodically carried out by the Claimant an evaluation of the state of the vehicles.

h) In situations where the Claimant considers that its vehicles no longer meet the necessary conditions for the exercise of its activity, it proceeds to the transfer of such vehicles.

i) To document the transfer of each vehicle, the Petitioner issues the corresponding invoice and proceeds to the signature of Model no. 2 of the then General Directorate of Registers and Notariat, current Institute of Registers and Notariat ("Application - declaration for registration of property - verbal contract of purchase and sale"), in which is made the reference to the registration plate, brand and frame number of the vehicle, and to the identity of the buyer and seller (through their respective Tax Identification Numbers, addresses and corporate name), also receiving a declaration from the acquirer, proving that the vehicle was acquired by him (docs 6 to 56)

j) In November 2013, the Claimant was notified of 52 assessment schedules for IUC and compensatory interest, relating to 2009, 2010 and 2011, for failure to timely pay the IUC considered due in those years, on 52 vehicles of categories C and D which, allegedly, would be property of the Claimant at the date when, in the understanding of the Tax Authority (AT), the eventual exigibility of the tax occurred. (doc 1)

k) These IUC assessments are based, according to the grounds contained in the same, on the fact that the IUC applicable to the vehicles mentioned in those same assessments, and identified here, was not paid by the end of the month in which it would allegedly be due:

[Vehicle Registration Plates table - content redacted with dots in source]

l) In accordance with the facts that it will describe below, the Claimant understands that the 156 IUC assessments in question are based on an error of assumption, considering that they relate to vehicles that not only were no longer its property at the moment when the tax-generating event of the IUC would occur, if due, as there was not even in the years 2009 to 2011 any objective connection at the level of IUC with these vehicles (despite still) registered in Portugal, given that the same had, between 2004 and 2006, been acquired by non-resident entities and consequently left Portugal definitively.

m) The petitioner is even unaware of the whereabouts of the vehicles from the time it proceeded to their sale, the date on which they ceased to be part of its legal sphere.

n) Against the said assessments the petitioner filed an Administrative Complaint requesting the annulment of the same for illegality, having been notified of the dismissal decision on 17 December 2015. (doc. 3)

o) The Claimant admits that such assessments may have resulted from a framing error on the part of the AT, possibly justifiable considering the public information available and accessible at the date of the assessments, but which by this means it is understood will be duly clarified that was outdated and, consequently, the petitioner believes that there will be no remaining doubts to the AT that the only way to ensure tax justice and legality, in this context, will be through the annulment of the assessments in reference.

p) The law seeks the achievement of the principle that IUC should be a burden on the entity that effectively uses the vehicle, that is, on the one who puts it into circulation in national territory, from the perspective of the concept of "polluter-payer" or "user-payer".

q) The Claimant could never be charged with any responsibility with respect to the IUC assessments here in question, insofar as the vehicles underlying the same, having been transferred by the Claimant between 2004 and 2006, do not even qualify for the purposes of objective incidence of the tax.

r) Thus, notwithstanding the provision on subjective incidence provided for in the said number 1 of article 3 of the IUC Code, this provision admits that, by means of sustained proof of the alleged facts, the Claimant makes unequivocal that although it is the entity (collective) in whose name the vehicles were, between 2009 and 2011, registered in the Vehicle Registry Office, in truth it was no longer the owner of the same from the exact moment in which it transferred them to third parties.

s) Upon proceeding, successfully, to the sale of the vehicles, the Claimant understands that there cease, at that moment and for the purposes of law and tax law considered relevant, all tax rights and obligations that fell within its sphere with respect to each vehicle.

t) This follows from the provisions of articles 1316 and 1317 of the Civil Code, which state that "The right of ownership is acquired by contract", and that "the moment of acquisition of the right of ownership is, in the case of a contract, the one designated in articles 408 (…)" of that same statute, where it is provided that the constitution or transfer of real rights (such as the right of ownership) over a determined property is given, as a rule, by the mere effect of the contract.

u) With the sale of the vehicles in question by the Claimant to the entities better identified in Documents 2, 3 and 4 attached, supported by the contracts of purchase and sale concluded between it and each of the buyers, as well as by the issuance of the respective invoices in the context under analysis, it is considered that the ownership of the vehicles was transferred in the terms defined and accepted by the parties, since "Purchase and sale is the contract by which the ownership of a thing, or another right, is transferred, for a price", having as effects, among others, the transfer of ownership of the thing, the obligation to deliver it and to be paid the respective price [pursuant to articles 874 and 879, both of the Civil Code].

v) In this way, the contracts concluded between the Claimant and the buyers of the 52 vehicles that are the basis of the IUC assessments (and consequent compensatory interest) here claimed, being verbal contracts of purchase and sale, the same must, necessarily, be considered sufficient proof of the transfer of ownership of the property about which each contract, individually, concerns.

x) The buyer of each vehicle transferred by the Claimant acquired, from the date of transfer (between the years 2004 to 2006), the quality of owner of full right of those same vehicles, a fact demonstrable by the documentation issued at the date, and attached here, which as can be verified will necessarily have to be accepted.

z) It is, therefore, with the conclusion of the said contracts of purchase and sale of vehicles, with the transfer of the respective possession to the buyer and with the invoicing of the property transferred that, for the purpose under analysis, it is considered that the ownership of the property is transferred, independent of the question of the Registration of that same ownership, which cannot affect the real right in question but only limit itself to conferring publicity on it: that is, Vehicle Registration is not a condition of effectiveness of the transfer of ownership, does not have a constitutive character, so that any irregularity in the updating of that registration, attributable to the Claimant, cannot have the effect of destroying the full effectiveness conferred, by purchase and sale, on the transfer of ownership in accordance with the will of the parties.

aa) In accordance with number 1 of article 1 of Decree-Law no. 54/75, of 12 February, which instituted Vehicle Registration, since then already updated several times, the registration of vehicles "has essentially as its purpose to give publicity to the legal situation of vehicles (…) with a view to the security of legal commerce" [underlined and bold in original], and does not therefore have a constitutive character.

bb) Vehicle Registration is an instrument of merely informative and declaratory character that identifies before third parties, and based on the best information available, the entity that is presumed to be the owner of the registered/licensed movable property – it is not, therefore, an act constitutive of any real rights (nor obligations) over movable property.

cc) The expression "are considered" established in number 1 of article 3 of the IUC Code, combined with the rest of the wording of the article, as well as with the spirit of the legislature already embodied in the principle of equivalence provided in article 1 of the said Code - which, it will be recalled, associates the payment of the tax to the road and environmental cost caused by the use of vehicles – cannot be anything other than a presumption, necessarily rebuttable pursuant to the provision of article 73 of the LGT, provided that whoever intends to displace it – in the case, the Claimant – demonstrates in a clear and unequivocal manner that the reality is, effectively, different from that which could result from the presumption provided in the said article 3.

dd) Additionally, the Claimant also attaches copies of the declarations issued by the buyers, in which they attest to the acquisition of the vehicles in question and where mention is made of the number and date of the invoice that gives rise to the transfer of ownership, with reference to the registration plate of the vehicle transferred.

ee) Under the designation of Document 4, the Petitioner attaches the information that supports the sale of 18 vehicles to the entity B… and the information relating to the sale of the remaining 33 vehicles to C…, both companies of French law.

ff) The Petitioner attaches as additional documentation to the present initial petition the documentation supporting the transfer of ownership of the vehicle …-…-… (on the basis of the IUC assessments numbers …, … and …, and of the assessments of the respective compensatory interest, numbers …, … and …, in a total of € 2,370.22), (doc 5), since this was the subject of a loan contract between the now Claimant and D….

gg) The fact that the date of transfer of the remaining 51 vehicles, attested to by the invoices and by the agreements of purchase and sale concluded between 2004 and 2006, is significantly earlier than the date on which the tax-generating event of the IUC would occur (date of the anniversary of the registrations in 2009, 2010 and 2011), make evident the proof that the Claimant was not the owner at the moment when the exigibility of the IUC would be verified if the vehicles were in national territory in those years.

hh) Faced with the evidence that the presumption on which the AT, now defendant, relied does not correspond with the material truth of the facts, to insist on imputing to the sphere of the Claimant the obligation to pay a tax which, at all levels (subjective and objective), was not due, is absolutely disproportionate and violative of the most elementary principles underlying the Portuguese tax law normative.

ii) As a summary and for the relevance in the subject matter in question, the Claimant summarizes in this closure the jurisprudence that allows framing and validating the entire thesis defended here: Arbitral decisions produced by CAAD in the scope of cases no. 26/2013-T, of 19 July 2013, no. 27/2013-T, of 10 September 2013, no. 73/2013-T of 5 December 2013 and no. 14/2013-T, of 15 October 2013 and no. 42/2014-T of 25 June 2014.

jj) With respect to the assessments of compensatory interest, article 35 of the LGT provides that these are due when, by a fact attributable to the taxpayer, there is a delay in the assessment and payment of part or all of the tax.

jj) Being demonstrated that the legal assumptions on which the IUC assessments contested herein are based do not conform to reality, and given that there was no actual delay or failure to pay a tax or tax obligation legally due by the Claimant, the annulment of the IUC assessments referred to above is requested and, in accordance therewith, the annulment of the corresponding assessments of compensatory interest, because consequently undue and illegal.

Attached 56 documents.

Constitution of the Arbitral Tribunal

The petitioner did not proceed to the appointment of arbitrators, so, pursuant to the provisions of article 6, number 2, paragraph a) of the RJAT, the undersigned were designated by the president of the Ethics Board of CAAD to integrate the present Collective Arbitral Tribunal, having accepted in the terms legally provided.

On 13-5-2015 the parties were duly notified of such designation, having not manifested the will to refuse it pursuant to the combined provisions of article 11, number 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code.

The Tribunal was constituted on 3-6-2015 [article 11-1/c), of the RJAT, in the wording introduced by article 228, of Law no. 66-B/2012, of 31-12] and came to be reconstituted, on 22-11-2017, by force of the aforementioned award of the TCAS.

Response of the AT

The Tax and Customs Authority on 14-7-2015 presented response and attached the administrative files, defending that the petition for arbitral ruling should be judged without merit and that the impugned tax acts should be maintained in the legal order.

The learned position of the AT is reduced, in essence, to interpretive divergences of the Law, including the salutary criticism of the Arbitral Jurisprudence which, predominantly, defends a contrary interpretive position although it seems to establish a dualism, which would be incomprehensible, between the Law and Jurisprudence, apparently understanding this autonomously and independently relative to the former. Which would not fail to be surprising outside the common law system or even, in some way in this.

In essence, the AT supports the jurisprudential interpretation of a state court of first instance (TAF de Penafiel) in case no. 210/13.0BEPNF, that is, that "(…) the tax-generating event of the IUC is determined by art. 6, no. 1, of the CIUC, being constituted by the ownership of the vehicle, as attested by the registration or registry in national territory. That is, while the vehicle has registration or is registered in national territory (art. 2 of the CIUC – objective incidence), IUC is due by the owner of the vehicle, being considered as such the natural or legal person, of public or private law, in whose name the same is registered, which is the taxpayer of the tax (art. 3, no. 1, of the CIUC) (…). The ownership and actual possession of the vehicle is irrelevant for verification of subjective and objective incidence and the tax-generating event. It results from the appeal that the appellant admits that in the year 2008 the vehicle was registered in his name, although he is not the owner thereof since 15/2/2006. But, independent of the registration of the right of ownership of the vehicle registry being mandatory (art. 5, nos 1, paragraph a), and 2, of Decree-Law no. (DL) 54/75, of 12 February) and of the appellant having sold the motor vehicle, nor the elimination of the presumption of the registration of the right of ownership of the vehicle registry. What is at issue is the determination of the tax-generating event and the determination of its subjective incidence, which are fixed by the right of ownership of the vehicle "as attested by the registration or registry in national territory", that is, independent of the presumptions derived from vehicle registration and its derivation and/or elimination. According to arts. 1 to 6 of the IUC, in particular art. 3, no. 1, of the CIUC, all elements of subjective and objective incidence, tax-generating event and exigibility of the tax are verified, for the assessment of IUC of the said vehicle in the year 2008 in the name of the appellant, independent of the transfers of the right of ownership and there is no verification of any exemption. The sale of the vehicle on 15/2/2006 is irrelevant. For the assessment of IUC of the year 2008 and determination of the responsible party for its payment, the only relevant facts are the maintenance of the registration and vehicle registry in national territory and the registration of the right of ownership in the Vehicle Registry Office independent of its actual transfer. The transferor has the duty at the moment of transfer to take care to proceed to the registration of the sale to the new acquirer, being the only way to ensure that the registration is made for the new acquirer. In the case in question, in 2008 there was no cancellation of the registration occurred and until then the vehicle was registered in Portugal and its ownership registered in the name of the appellant. Therefore, it is in the appellant that the tax-generating event and the elements of objective and subjective incidence of the IUC are verified (arts. 2, 3 and 6, no. 1, of the CIUC). The lack of registration in the name of the new acquirer causes the subjective incidence of the IUC (art. 3, no. 1, of the CIUC) to remain in the holder of the right of ownership registered in the Vehicle Registry Office and be responsible for the assessment and payment of the IUC, independent of its actual transfer. Therefore, the assessment of IUC relating to 2008 in the name of the appellant does not suffer from any illegality and the failure to pay the respective tax within the legal period is also its responsibility, constituting the failure to pay within the legal period (art. 17, no. 2, of the CIUC) an offense against regulations provided and punished by art. 114, no. 2, of the RGIT. (…). In sum, article 3 of the CIUC contains no legal presumption (…)".

Subsequently, in an autonomous petition presented on 26-10-2015, the AT, without meanwhile any supervening circumstance having arisen that justified it, came to complement its defense (response) invoking the exception of expiry of the right of arbitral action and the consequent absolution of the instance of the Defendant, based, in essence, on the circumstance of the impugned acts being the IUC assessments identified in the petition for arbitral ruling and not, as should (immediate object), the decision dismissing the administrative complaint no. …2014…, allegedly notified to the Petitioner on 16-12-2014; thus being, the petition was presented (on 17-3-2015) beyond the 90-day period counted from the end of the voluntary payment period which was 11-12-2013.

It concludes that being the expiry period peremptory and of official knowledge, there being no request for review of the legality of the second-degree act and being the Tribunal limited by the petition, this will have to be considered untimely.

It further alleged subsidiarily that, having the Petitioner been notified on 16-12-2014 of the act dismissing the administrative complaint, on the day of presentation of the arbitral petition the 90-day period provided for in article 10-2/a), of the RJAT would in any case be exhausted.

Naturally it does not behoove nor is it the duty of the Tribunal to review all and each of the arguments of the parties[1] but above all what it must do is decide the questions raised, doing so, naturally, interpreting the Law and in a reasoned manner.

Meeting of the Tribunal with the Parties (article 18, of the RJAT)

By order of 3-1-2016, the Tribunal dispensed with the meeting provided for in article 18, of the RJAT.

Additional Proof and Final Allegations

Were dispensed, without opposition of the parties, pursuant to the order of 3-1-2016.

Sanation/Procedural Presumptions

The arbitral tribunal was regularly constituted and is materially competent, in light of the provisions of articles 2, no. 1, paragraph a), and 30, no. 1, of the RJAT.

Being the same tax (IUC) and weighed the identity of the grounds of fact and law in all the challenges of the assessments, the presumptions provided for in arts 104, of the CPPT and 3, of the RJAT, are verified for the cumulation of petitions.

The parties enjoy legal personality and capacity and are legitimate (arts. 4 and 10, no. 2, of the same statute and art. 1 of Ordinance no. 112-A/2011, of 22 March).

The process does not suffer from nullities.

Having been raised the question of expiry of the right of action, the Tribunal will review and decide the question with the review below of the merit of the petition.

II GROUNDS

Facts Proven[2]

Considering the positions of the parties, the administrative instruction file and the documents incorporated in the record and not challenged, the following essential facts are considered proven:

a) The now Defendant issued 156 assessments for Single Circulation Tax ("IUC") and respective assessments of compensatory interest, in the total amount of € 98,614.20, identified in 52 assessment schedules (which cover the years 2009, 2010 and 2011) and whose copies are attached under the designation of Document 1, relating to 52 vehicles (of categories C and D) duly identified in such assessment schedules;

b) Against the said assessments the petitioner filed an Administrative Complaint understanding that the same are illegal, being notified of the decision dismissing the complaint on 17 December 2015 (doc 3, with mention of date of receipt at the top);

c) The Claimant is a unipersonal limited liability company, of Portuguese law, integrated in a group of companies of French origin, whose corporate object consists, essentially, in the carrying out of road freight transport services. (doc 2)

d) Within the scope of its activity, the vehicles that carry out the transports suffer natural wear from their daily use, being periodically carried out by the Claimant an evaluation of the state of the vehicles.

e) In situations where the Claimant considers that its vehicles no longer meet the necessary conditions for the exercise of its activity, it proceeds to the transfer of such vehicles.

f) To document the transfer of each vehicle, the Petitioner issues the corresponding invoice and proceeds to the signature of Model no. 2 of the then General Directorate of Registers and Notariat, current Institute of Registers and Notariat ("Application - declaration for registration of property - verbal contract of purchase and sale"), in which is made the reference to the registration plate, brand and frame number of the vehicle, and to the identity of the buyer and seller (through their respective Tax Identification Numbers, addresses and corporate name), also receiving a declaration from the acquirer, proving that the vehicle was acquired by him (docs 6 to 56)

g) In November 2013, the Claimant was notified of 52 assessment schedules for IUC and compensatory interest, relating to 2009, 2010 and 2011, for failure to timely pay the IUC considered due in those years, on 52 vehicles of categories C and D which, allegedly, would be property of the Claimant at the date when, in the understanding of the Tax Authority (AT), the exigibility of the single circulation tax (IUC) occurred. (doc 1)

h) These IUC assessments were based, according to the grounds contained in the same, on the fact that the IUC applicable to the vehicles mentioned in those same assessments, identified below, was not paid by the end of the month in which it would allegedly be due:

[Vehicle Registration Plates table - content redacted with dots in source]

i) Such vehicles that not only were no longer the property of the Claimant at the moment when the tax-generating event of the IUC would occur, if due, as there was not even in the years 2009 to 2011 any objective connection at the level of IUC with these vehicles still registered in Portugal, given that the same had been acquired, by purchase, between 2004 and 2006, by non-resident entities and left Portugal definitively;

j) The petitioner is even unaware of the whereabouts of the vehicles from the time it proceeded to their sale;

k) Against the said assessments the petitioner filed an Administrative Complaint requesting the annulment of the same for illegality, having been notified of the decision dismissing the complaint on 17 December 2015 (doc 3 and administrative instruction file)

l) The present petition for arbitral ruling was presented to CAAD on 17-3-2015.

Motivation

The facts mentioned are documentarily proven or were not specifically challenged.

In particular the dates of registration of the vehicles mentioned are documented in the administrative files attached by the AT.

The defendant did not challenge the documents, invoking, in particular, their falsity.

Contrary to what the Defendant alleges, it is verified, by the analysis of document 3 attached by the Petitioner and not challenged, that it was notified of the decision dismissing the administrative complaint on 17-12-2014.

II GROUNDS (continuation)

The Law

Attending to the positions of the Parties assumed in the arguments presented, the following central deciding questions are constituted:

Preliminary Question

Whether the petition was presented within the time limit or, stated otherwise, whether at the time of presentation of the petition there was verification of the expiry of the right of action.

This is a question of knowing whether the Central Administrative Court South considered it should have been known and, based on that omission, grounded the annulment of the initial arbitral award.

Let us see:

To review the said expiry, the Tribunal has only to verify whether the petition [annulment, for illegality, of the IUC assessment acts], were presented within the time limit to which article 10-1/a), of the RJAT alludes, that is, within the 90-day period counted from the facts to which articles 102-1 and 2, of the CPPT allude.

From the analysis and interpretation of these normative provisions it follows that, being demonstrated that the TP presented an administrative complaint (with content and object identical to that of the petition for arbitral ruling subsequently) and that it was dismissed, by express act (as was the case in the files), the presentation of a petition for arbitral ruling is or should be admitted, if it was presented within the 90-day period counted from the notification of the dismissal of the complaint. Independent of there being or not express challenge, in the petition for arbitral ruling, of that second-degree act.

Stated otherwise: the Arbitral Tribunal what it truly reviews are the first-degree acts (the assessments) [cfr article 2, of the RJAT] and not the second or third degree acts, especially when these suffer from illegality with contours different from that which affects the first-degree act. Which is not the case.

When reviewing the assessment acts – which are, it is emphasized, the acts that are and can be truly the object of the arbitration proceeding – the Petitioner implicitly is challenging the second-degree act (the dismissal of the administrative complaint) insofar as it would constitute an absurdity to be left challenging the assessments with acceptance of the decision dismissing the administrative complaint.

Subsuming:

In light of the foregoing, having the Petitioner been notified of the decision dismissing the administrative complaint on 17-12-2014 and presented the petition for arbitral ruling on 17-3-2015, it becomes evident the timeliness of the petition by its presentation within the 90-day period counted from the date on which the Petitioner was notified [17-12-2014] of the act dismissing the administrative complaint.

Consequently, the exception of expiry of the right of action raised by the Tax and Customs Authority is without merit.

As to the merit of the petition, the following questions are raised:

A - If, at the date of the occurrence of the tax-generating events [article 3-1, of the CIUC[3]], the owners of the vehicles are not those that appear in the registry, whether despite this these (those that appear in the registry) will always be considered the taxpayers of the IUC, there being consequently no rebuttal of the presumption of ownership revealed by the registry OR, stated otherwise, whether the provision on subjective incidence contained in article 3 no. 1 of the CIUC, establishes or not a presumption, and

B – If the owner of the vehicle at the date of the tax event (registration or anniversary of the vehicle[4]) has transferred it, in particular by contract of purchase and sale, whether the same will be a taxpayer of IUC.

These questions have already, in essence, been addressed in various decisions of the CAAD, some of them already published at www.caad.org.pt and others in the course of publication [See, for example, decisions handed down in cases nos 14/2013, 26/2013, 27/2013, 42/2014, 73/2013, 170/2013, 294/2013, 154/2014, 429/2015, 841/2015 and 845/2015].

There are no discernible reasons to reverse or alter the essential sense of this Jurisprudence.

Let us see then:

Article 3 of the CIUC (Single Circulation Tax Code) provides:

"Article 3

Subjective Incidence

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

2 – Lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by force of the lease contract are assimilated to owners".

On the other hand, number 1 of article 11 of the LGT provides that "in the determination of the meaning of fiscal norms and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

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

There is thus the need to weigh what is the best interpretation[5] of art. 3, no. 1 of the CIUC, in light, first of all, of the literal element, that is to say that in which one seeks to detect the legislative thought that is objectified in the norm, to verify whether it contemplates a presumption, or whether it determines, definitively, that the taxpayer of the tax is the owner that appears in the registry.

The question that arises is, in the case sub judice, whether the expression "are considered" used by the legislator in the CIUC, instead of the expression "are presumed", which was the one that appeared in the statutes that preceded the CIUC, will have removed the nature of presumption to the legal device under scrutiny.

In our view and contrary to what the AT learned defends, the answer must necessarily be negative, since from the analysis of our legal system it is extracted clearly that the two expressions have been used by the legislator with equivalent meaning, either at the level of rebuttable presumptions, whether within the framework of irrebuttable presumptions, so that nothing qualifies to extract the conclusion desired by the Tax Authority by a mere semantic reason.

In fact, this happens in varied legal norms that enshrine presumptions using the verb "consider", of which the following are indicated, merely by way of example:

~ within the scope of civil law - number 3 of art. 243 of the Civil Code, when it establishes that "it is always considered in bad faith the third party who acquired the right subsequently to the registration of the action of simulation, when the same takes place";

~ also within the scope of industrial property law the same occurs, when art. 59, no. 1 of the Industrial Property Code provides that "(…) inventions whose patent was requested during the year following the date on which the inventor left the company, are considered made during the execution of the employment contract (…)";

~ and, finally, within the scope of tax law, when nos 3 and 4 of art. 89-A of the LGT provide that it is the duty of the taxpayer to prove that the declared income corresponds to reality and that, if such proof is not made, it is presumed ("it is considered" in the letter of the Law) that the income is what results from the table that appears in no. 4 of the said article.

This conclusion that there is total equivalence of meanings between the two expressions, which the legislator uses indifferently, satisfies the condition established in art. 9, no. 2 of the Civil Code, since the minimum of verbal correspondence is assured for the purposes of determining the legislative thought.

It is important, next, to submit the provision under scrutiny to the other elements of logical interpretation, in particular, the historical element, the rational or teleological element and the element of systematic order.

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

As BAPTISTA MACHADO refers "the legal provision presents itself to the jurist as a linguistic utterance, as a set of words that constitute a text. To interpret obviously consists of drawing from that 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 at first reading, its application to concrete cases of life frequently gives rise to unforeseen and unforeseeable interpretation difficulties. Besides that, although apparently clear in its verbal expression and carrying only one meaning, one must still account for the possibility of the verbal expression having betrayed the legislative thought – a phenomenon more frequent than it might appear at 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 wanted or intended 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 wanted, but that which in the law appears objectively desired: the mens legis and not the mens legislatoris" (See FRANCESCO FERRARA, Essay, pp. 134/135).

To understand a law "is not merely mechanically to grasp the apparent and immediate meaning that results from verbal connection; it is to inquire deeply into the legislative thought, 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 the interpretive factors which 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, The Law – Introduction and General Theory 2nd Ed., Calouste Gulbenkian Foundation, Lisbon, p.361).

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

The text of no. 1 of article 9 of the CC begins by saying that interpretation must not be confined to the letter of the law, but must reconstruct from it the "legislative thought".

On the expression "legislative thought" BAPTISTA MACHADO tells us that article 9 of the CC "did not take a position in the controversy between subjectivist doctrine and objectivist doctrine. It proves this the fact that it does not refer, neither to the 'will of the legislator' nor to the 'will of the law', but instead points as the scope of the interpretive activity the discovery of the 'legislative thought' (art. 9, 1st). This expression, purposefully colorless, means exactly that the legislator did not want to compromise" (loc. cit., p. 188).

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

And on no. 3 of article 9 of the CC this author refers: "this no. 3 proposes to us, therefore, a model of ideal legislator who consecrated the most correct (most correct, fair or reasonable) solutions and knows how to express itself correctly. This model is clearly objectivist in character, since the concrete legislator (frequently incorrect, precipitous, unhappy) is not taken as a point of reference but an abstract legislator: wise, prudent, rational and just" (loc. cit. p. 189/190).

Soon after this distinguished Master calls attention to the fact that no. 1 of article 9, refers to three more elements of interpretation: "the unity of the legal system", the "circumstances in which the law was elaborated" and the "specific conditions of the time in which it is applied" (loc. cit, p. 190).

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

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

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

It is also this author who tells us, regarding the literal or grammatical element (text or "letter of the law") that this "is the starting point of interpretation. As such, it has from the outset a negative function: that of eliminating 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 only one meaning, it is that meaning of the norm – with the caveat, however, that one can conclude based on other norms that the wording of the text betrayed the thought 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), in the end aimed at by the legislator in elaborating the norm. The knowledge of this end, especially when accompanied by knowledge of the circumstances (political, social, economic, moral, etc.,) in which the norm was elaborated or the conjunctural political-economic-social situation that motivated the legislative decision (occasio legis) constitutes a subsidy of the greatest importance for determining the meaning of the norm. It suffices to remember that the clarification of the ratio legis reveals to us the valuation or balancing of the various interests that the norm regulates and, therefore, the relative weight of those interests, the choice between them translated by the solution that the norm expresses" (loc. cit., pp. 182/183).

It is still BAPTISTA MACHADO who tells us, now with respect to the systematic element (context of the law and parallel passages) that "this element comprises the consideration of other provisions that form the normative complex of the institute into which the provision being interpreted is integrated, that is, that 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 passages). It further comprises the systematic place that belongs to the provision being interpreted in the overall legal system, as well as its consonance with the spirit or intrinsic unity of the entire legal system.

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

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

Descending to the case at hand:

Through the analysis of the historical element, the conclusion is extracted that, from the entry into force of Decree-Law no. 59/72, of 30 December, the first to regulate this matter, until Decree-Law no. 116/94, of 3 May, the last to precede the CIUC [cfr Law no. 22-A/2007, with amendments by Law 67-A/2007 and 3-B/2010], the presumption [emphasized] was enshrined of the taxpayers of the IUC being the persons in whose name the vehicles were registered at the date of their assessment.

There is therefore verified that tax law, from the outset, had the objective of taxing the true and effective owner (or lessee, in case of financial leasing and ALD) 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 make recourse to the elements of interpretation of a rational or teleological nature.

In fact, the current and new framework of motor vehicle taxation enshrines principles aimed at subjecting the owners of vehicles to bear the damages caused by road and environmental damage caused by these, as is achieved from the tenor of art. 1 of the CIUC.

Now the consideration of these principles, in particular, the principle of equivalence, which deserve constitutional protection and enshrinement in community law, and are also recognized in other branches of the legal system, determines that the aforementioned costs be borne by the actual owners, the causers of the said damages, which entirely removes, from an interpretation aimed at preventing the presumable owners from proving that they are no longer so because ownership is in the legal sphere of another[6].

Thus, also, from the interpretation effected in light of the elements of a rational and teleological nature, given what the rationality of the system guarantees and the purposes aimed at by the new CIUC, it results clearly that no. 1 of art. 3 of the CIUC enshrines a rebuttable legal presumption.

In light of the foregoing, it is important to conclude that the ratio legis of the tax points in the direction of taxing the effective owners-users of the vehicles (underlined and emphasized in original) so that the expression "are considered" is used in the normative under scrutiny in a sense similar to "are presumed", reason for which there is no doubt that a legal presumption is enshrined.

On the other hand, article 73 of the LGT establishes that "(…) the presumptions enshrined in the norms of tax incidence always admit proof to the contrary, so that they are rebuttable (…)".

Thus being, enshrining art. 3, no. 1 of the CIUC a presumption juris tantum [and, therefore, rebuttable], the person who is 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, may 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.

Analyzed the elements brought to the proceeding by the Claimant and the facts proven, the conclusion is extracted that it was not the owner of the vehicles for some years considering the anniversary of the vehicles for purposes of taxation in IUC, by having since transferred the ownership of the same, pursuant to civil law.

The operations of transfer of ownership were not challenged and are opposable to the Tax and Customs Authority, since, although the facts subject to registration only produce effects in relation to third parties when registered, in light of the provision of art. 5, no. 1 of the Real Property Registry Code [applicable by referral of the Vehicle Registry Code], the Tax Authority is not a third party for purposes of registration, since it does not find itself in the situation provided for in no. 2 of the said art. 5 of the Real Property Registry Code, applicable by force of the Vehicle Registry Code, that is: it did not acquire from a common author incompatible rights among themselves.

In these circumstances, the mentioned and now impugned assessments must be annulled.

As to the subsidiary petition:

Subsidiarily, the Claimant requested "(…) payment of the compensation that may prove to be due, pursuant to article 171 of the CPPT, for the reason that it was required to provide a guarantee (in the form of a voluntary mortgage on movable property, for suspension of enforcement proceedings initiated as a consequence of the non-payment of the assessments) which, as a result of this Complaint proceeding, will have to be consequently considered manifestly inopportune and undue (…)".

Nothing having been demonstrated in this respect, obviously such petition is completely without merit.

III – DECISION

In accordance with the foregoing, this Arbitral Tribunal decides:

a) To judge completely without merit the exception of expiry of the right of challenge raised by the Tax and Customs Authority;

b) To judge, completely with merit the petitions for annulment of the IUC assessments under challenge and, in consequence,

b) Declaring their illegality, to annul those tax acts, and

c) To judge without merit the remainder petitioned by the Claimant.

Value of the Proceeding

In accordance with the provision of art. 306, no. 2, of the CPC and 97-A, no. 1, paragraph a), of the CPPT and 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at € 98,614.20

Costs

Pursuant to art. 22, no. 4, of the RJAT, the amount of costs is fixed at € 2,754.00 (two thousand seven hundred and fifty-four euros), pursuant to Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, entirely borne by the Tax and Customs Authority.

Lisbon, 8 March 2018

The Collective Arbitral Tribunal

José Poças Falcão
(President)

José Nunes-Barata
(Member)

António Correia Valente
(Member)

Arbitral decision replaced by the decision of 08 March 2018.

ARBITRAL AWARD

I REPORT

A… LDA. (hereinafter designated "Claimant"), with registered office at …, at … …, …, legal entity number …, came, pursuant to the provisions of articles 95 of the General Tax Code ("LGT"), 99 of the Code of Tax Procedure and Process ("CPPT") and 1 and 2, number 1, paragraph a) of the Legal Framework for Tax Arbitration, approved by Decree-Law no. 10/2011 of 20 January (hereinafter RJAT), to request the constitution of an Arbitral Tribunal, with a view to reviewing the legality of tax acts (identified below) of the defendant, Tax and Customs Authority (Tax Office of …), and hereinafter also designated as "Defendant" or "AT".

Specifically, the Claimant requests:

A - The declaration of illegality of the IUC assessment acts identified in document no. 1, attached to the initial petition, and

B - Subsidiarily, "(…) payment to the Claimant of the compensation that may prove to be due, pursuant to article 171 of the CPPT, for the reason that it was required to provide a guarantee (in the form of a voluntary mortgage on movable property, for suspension of enforcement proceedings initiated as a consequence of the non-payment of the assessments) which, as a result of this Complaint proceeding, will have to be consequently considered manifestly inopportune and undue (…)".

It thus substantiates the petition (in essence):

a) The now Defendant issued 156 assessments for Single Circulation Tax ("IUC") and respective assessments of compensatory interest, in the total amount of € 98,614.20, identified in 52 assessment schedules (which cover the years 2009, 2010 and 2011) and whose copies are attached under the designation of Document 1, relating to 52 vehicles (of categories C and D) duly identified in such assessment schedules, which it does in the terms and with the following grounds.

b) Against the said assessments the petitioner filed an Administrative Complaint understanding that the same are illegal, having been notified of the dismissal decision on 17 December 2015 (doc 3).

c) Given the high number of assessments in question, as well as the volume of documentation necessary to prove the alleged facts, the Claimant requests the joint review of the petitions it will formulate here, that is, the annulment of the 156 IUC assessments in reference, relating to the years 2009 to 2011, for a matter of procedural economy and taking into account the identity of the argumentation that will be advanced, for although they are autonomous assessments, the same are presented in a relationship of interconnection (identity of the vehicles and of the tax) and culminate in the identity of the cause of action underlying the present contestation.

d) The said request should be admitted pursuant to the provisions of article 3, number 1 of the RJAT, which provides for the acceptance of cumulation of petitions even if relating to different acts when the success of the petitions depends essentially on the review of the same circumstances of fact and the application of the same principles or rules of law.

e) Considering the sole identity of the tax and of the competent authority for the decision, as well as the review of the same facts, of the same grounds of law invoked and, consequently, the application of the same legal rules, the Claimant understands that nothing prevents, in view of the provisions of the said article 3, number 1 of the RJAT, indeed advising against it, the admissibility of the cumulation of petitions.

f) The Claimant is a unipersonal limited liability company, of Portuguese law, integrated in a group of companies of French origin, whose corporate object consists, essentially, in the carrying out of road freight transport services. (doc 2)

g) Within the scope of its activity, the vehicles that carry out the transports suffer natural wear from their daily use, being periodically carried out by the Claimant an evaluation of the state of the vehicles.

h) In situations where the Claimant considers that its vehicles no longer meet the necessary conditions for the exercise of its activity, it proceeds to the transfer of such vehicles.

i) To document the transfer of each vehicle, the Petitioner issues the corresponding invoice and proceeds to the signature of Model no. 2 of the then General Directorate of Registers and Notariat, current Institute of Registers and Notariat ("Application - declaration for registration of property - verbal contract of purchase and sale"), in which is made the reference to the registration plate, brand and frame number of the vehicle, and to the identity of the buyer and seller (through their respective Tax Identification Numbers, addresses and corporate name), also receiving a declaration from the acquirer, proving that the vehicle was acquired by him (docs 6 to 56)

j) In November 2013, the Claimant was notified of 52 assessment schedules for IUC and compensatory interest, relating to 2009, 2010 and 2011, for failure to timely pay the IUC considered due in those years, on 52 vehicles of categories C and D which, allegedly, would be property of the Claimant at the date when, in the understanding of the Tax Authority (AT), the eventual exigibility of the tax occurred. (doc 1)

k) These IUC assessments are based, according to the grounds contained in the same, on the fact that the IUC applicable to the vehicles mentioned in those same assessments, and identified here, was not paid by the end of the month in which it would allegedly be due:

[Vehicle Registration Plates table - content redacted with dots in source]

l) In accordance with the facts that it will describe below, the Claimant understands that the 156 IUC assessments in question are based on an error of assumption, considering that they relate to vehicles that not only were no longer its property at the moment when the tax-generating event of the IUC would occur, if due, as there was not even in the years 2009 to 2011 any objective connection at the level of IUC with these vehicles (despite still) registered in Portugal, given that the same had, between 2004 and 2006, been acquired by non-resident entities and consequently left Portugal definitively.

m) The petitioner is even unaware of the whereabouts of the vehicles from the time it proceeded to their sale, the date on which they ceased to be part of its legal sphere.

n) Against the said assessments the petitioner filed an Administrative Complaint requesting the annulment of the same for illegality, having been notified of the dismissal decision on 17 December 2015. (doc. 3)

o) The Claimant admits that such assessments may have resulted from a framing error on the part of the AT, possibly justifiable considering the public information available and accessible at the date of the assessments, but which by this means it is understood will be duly clarified that was outdated and, consequently, the petitioner believes that there will be no remaining doubts to the AT that the only way to ensure tax justice and legality, in this context, will be through the annulment of the assessments in reference.

p) The law seeks the achievement of the principle that IUC should be a burden on the entity that effectively uses the vehicle, that is, on the one who puts it into circulation in national territory, from the perspective of the concept of "polluter-payer" or "user-payer".

q) The Claimant could never be charged with any responsibility with respect to the IUC assessments here in question, insofar as the vehicles underlying the same, having been transferred by the Claimant between 2004 and 2006, do not even qualify for the purposes of objective incidence of the tax.

r) Thus, notwithstanding the provision on subjective incidence provided for in the said number 1 of article 3 of the Single Circulation Tax Code, this provision admits that, by means of sustained proof of the alleged facts, the Claimant makes unequivocal that although it is the entity (collective) in whose name the vehicles were, between 2009 and 2011, registered in the Vehicle Registry Office, in truth it was no longer the owner of the same from the exact moment in which it transferred them to third parties.

s) Upon proceeding, successfully, to the sale of the vehicles, the Claimant understands that there cease, at that moment and for the purposes of law and tax law considered relevant, all tax rights and obligations that fell within its sphere with respect to each vehicle.

t) This follows from the provisions of articles 1316 and 1317 of the Civil Code, which state that "The right of ownership is acquired by contract", and that "the moment of acquisition of the right of ownership is, in the case of a contract, the one designated in articles 408 (…)" of that same statute, where it is provided that the constitution or transfer of real rights (such as the right of ownership) over a determined property is given, as a rule, by the mere effect of the contract.

u) With the sale of the vehicles in question by the Claimant to the entities better identified in Documents 2, 3 and 4 attached, supported by the contracts of purchase and sale concluded between it and each of the buyers, as well as by the issuance of the respective invoices in the context under analysis, it is considered that the ownership of the vehicles was transferred in the terms defined and accepted by the parties, since "Purchase and sale is the contract by which the ownership of a thing, or another right, is transferred, for a price", having as effects, among others, the transfer of ownership of the thing, the obligation to deliver it and to be paid the respective price [pursuant to articles 874 and 879, both of the Civil Code].

v) In this way, the contracts concluded between the Claimant and the buyers of the 52 vehicles that are the basis of the IUC assessments (and consequent compensatory interest) here claimed, being verbal contracts of purchase and sale, the same must, necessarily, be considered sufficient proof of the transfer of ownership of the property about which each contract, individually, concerns.

x) The buyer of each vehicle transferred by the Claimant acquired, from the date of transfer (between the years 2004 to 2006), the quality of owner of full right of those same vehicles, a fact demonstrable by the documentation issued at the date, and attached here, which as can be verified will necessarily have to be accepted.

z) It is, therefore, with the conclusion of the said contracts of purchase and sale of vehicles, with the transfer of the respective possession to the buyer and with the invoicing of the property transferred that, for the purpose under analysis, it is considered that the ownership of the property is transferred, independent of the question of the Registration of that same ownership, which cannot affect the real right in question but only limit itself to conferring publicity on it: that is, Vehicle Registration is not a condition of effectiveness of the transfer of ownership, does not have a constitutive character, so that any irregularity in the updating of that registration, attributable to the Claimant, cannot have the effect of destroying the full effectiveness conferred, by purchase and sale, on the transfer of ownership in accordance with the will of the parties.

aa) In accordance with number 1 of article 1 of Decree-Law no. 54/75, of 12 February, which instituted Vehicle Registration, since then already updated several times, the registration of vehicles "has essentially as its purpose to give publicity to the legal situation of vehicles (…) with a view to the security of legal commerce" [underlined and bold in original], and does not therefore have a constitutive character.

bb) Vehicle Registration is an instrument of merely informative and declaratory character that identifies before third parties, and based on the best information available, the entity that is presumed to be the owner of the registered/licensed movable property – it is not, therefore, an act constitutive of any real rights (nor obligations) over movable property.

cc) The expression "are considered" established in number 1 of article 3 of the Single Circulation Tax Code, combined with the rest of the wording of the article, as well as with the spirit of the legislature already embodied in the principle of equivalence provided in article 1 of the said Code - which, it will be recalled, associates the payment of the tax to the road and environmental cost caused by the use of vehicles – cannot be anything other than a presumption, necessarily rebuttable pursuant to the provision of article 73 of the LGT, provided that whoever intends to displace it – in the case, the Claimant – demonstrates in a clear and unequivocal manner that the reality is, effectively, different from that which could result from the presumption provided in the said article 3.

dd) Additionally, the Claimant also attaches copies of the declarations issued by the buyers, in which they attest to the acquisition of the vehicles in question and where mention is made of the number and date of the invoice that gives rise to the transfer of ownership, with reference to the registration plate of the vehicle transferred.

ee) Under the designation of Document 4, the Petitioner attaches the information that supports the sale of 18 vehicles to the entity B… and the information relating to the sale of the remaining 33 vehicles to C…, both companies of French law.

ff) The Petitioner attaches as additional documentation to the present initial petition the documentation supporting the transfer of ownership of the vehicle …-…-… (on the basis of the IUC assessments numbers …, … and …, and of the assessments of the respective compensatory interest, numbers …, … and …, in a total of € 2,370.22), (doc 5), since this was the subject of a loan contract between the now Claimant and D….

gg) The fact that the date of transfer of the remaining 51 vehicles, attested to by the invoices and by the agreements of purchase and sale concluded between 2004 and 2006, is significantly earlier than the date on which the tax-generating event of the IUC would occur (date of the anniversary of the registrations in 2009, 2010 and 2011), make evident the proof that the Claimant was not the owner at the moment when the exigibility of the IUC would be verified if the vehicles were in national territory in those years.

hh) Faced with the evidence that the presumption on which the AT, now defendant, relied does not correspond with the material truth of the facts, to insist on imputing to the sphere of the Claimant the obligation to pay a tax which, at all levels (subjective and objective), was not due, is absolutely disproportionate and violative of the most elementary principles underlying the Portuguese tax law normative.

ii) As a summary and for the relevance in the subject matter in question, the Claimant summarizes in this closure the jurisprudence that allows framing and validating the entire thesis defended here: Arbitral decisions produced by CAAD in the scope of cases no. 26/2013-T, of 19 July 2013, no. 27/2013-T, of 10 September 2013, no. 73/2013-T of 5 December 2013 and no. 14/2013-T, of 15 October 2013 and no. 42/2014-T of 25 June 2014.

jj) With respect to the assessments of compensatory interest, article 35 of the LGT provides that these are due when, by a fact attributable to the taxpayer, there is a delay in the assessment and payment of part or all of the tax.

jj) Being demonstrated that the legal assumptions on which the IUC assessments contested herein are based do not conform to reality, and given that there was no actual delay or failure to pay a tax or tax obligation legally due by the Claimant, the annulment of the IUC assessments referred to above is requested and, in accordance therewith, the annulment of the corresponding assessments of compensatory interest, because consequently undue and illegal.

Attached 56 documents.

Constitution of the Arbitral Tribunal

The petitioner did not proceed to the appointment of arbitrators, so, pursuant to the provisions of article 6, number 2, paragraph a) of the RJAT, the undersigned were designated by the president of the Ethics Board of CAAD to integrate the present Collective Arbitral Tribunal, having accepted in the terms legally provided.

On 13-5-2015 the parties were duly notified of such designation, having not manifested the will to refuse it pursuant to the combined provisions of article 11, number 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code.

The Tribunal was constituted on 3-6-2015 [article 11-1/c), of the RJAT, in the wording introduced by article 228, of Law no. 66-B/2012, of 31-12]

Response of the AT

The Tax and Customs Authority presented response and attached the administrative files, defending that the petition for arbitral ruling should be judged without merit and that the impugned tax acts should be maintained in the legal order.

The learned position of the AT is reduced, in essence, to interpretive divergences of the Law, including the salutary criticism of the Arbitral Jurisprudence which, predominantly, defends a contrary interpretive position although it seems to establish a dualism, which would be incomprehensible, between the Law and Jurisprudence, apparently understanding this autonomously and independently relative to the former. Which would not fail to be surprising outside the common law system or even, in some way in this.

In essence, the AT supports the jurisprudential interpretation of a state court of first instance (TAF de Penafiel) in case no. 210/13.0BEPNF, that is, that "(…) the tax-generating event of the IUC is determined by art. 6, no. 1, of the CIUC, being constituted by the ownership of the vehicle, as attested by the registration or registry in national territory. That is, while the vehicle has registration or is registered in national territory (art. 2 of the CIUC – objective incidence), IUC is due by the owner of the vehicle, being considered as such the natural or legal person, of public or private law, in whose name the same is registered, which is the taxpayer of the tax (art. 3, no. 1, of the CIUC) (…). The ownership and actual possession of the vehicle is irrelevant for verification of subjective and objective incidence and the tax-generating event. It results from the appeal that the appellant admits that in the year 2008 the vehicle was registered in his name, although he is not the owner thereof since 15/2/2006. But, independent of the registration of the right of ownership of the vehicle registry being mandatory (art. 5, nos 1, paragraph a), and 2, of Decree-Law no. (DL) 54/75, of 12 February) and of the appellant having sold the motor vehicle, nor the elimination of the presumption of the registration of the right of ownership of the vehicle registry. What is at issue is the determination of the tax-generating event and the determination of its subjective incidence, which are fixed by the right of ownership of the vehicle "as attested by the registration or registry in national territory", that is, independent of the presumptions derived from vehicle registration and its derivation and/or elimination. According to arts. 1 to 6 of the IUC, in particular art. 3, no. 1, of the CIUC, all elements of subjective and objective incidence, tax-generating event and exigibility of the tax are verified, for the assessment of IUC of the said vehicle in the year 2008 in the name of the appellant, independent of the transfers of the right of ownership and there is no verification of any exemption. The sale of the vehicle on 15/2/2006 is irrelevant. For the assessment of IUC of the year 2008 and determination of the responsible party for its payment, the only relevant facts are the maintenance of the registration and vehicle registry in national territory and the registration of the right of ownership in the Vehicle Registry Office independent of its actual transfer. The transferor has the duty at the moment of transfer to take care to proceed to the registration of the sale to the new acquirer, being the only way to ensure that the registration is made for the new acquirer. In the case in question, in 2008 there was no cancellation of the registration occurred and until then the vehicle was registered in Portugal and its ownership registered in the name of the appellant. Therefore, it is in the appellant that the tax-generating event and the elements of objective and subjective incidence of the IUC are verified (arts. 2, 3 and 6, no. 1, of the CIUC). The lack of registration in the name of the new acquirer causes the subjective incidence of the IUC (art. 3, no. 1, of the CIUC) to remain in the holder of the right of ownership registered in the Vehicle Registry Office and be responsible for the assessment and payment of the IUC, independent of its actual transfer. Therefore, the assessment of IUC relating to 2008 in the name of the appellant does not suffer from any illegality and the failure to pay the respective tax within the legal period is also its responsibility, constituting the failure to pay within the legal period (art. 17, no. 2, of the CIUC) an offense against regulations provided and punished by art. 114, no. 2, of the RGIT. (…). In sum, article 3 of the CIUC contains no legal presumption (…)".

Naturally it does not behoove nor is it the duty of the Tribunal to review all and each of the arguments of the parties[7] but above all what it must do is decide the questions raised, doing so, naturally, interpreting the Law and in a reasoned manner.

Meeting of the Tribunal with the Parties (article 18, of the RJAT)

By order of 3-1-2016, the Tribunal dispensed with the meeting provided for in article 18, of the RJAT.

Additional Proof and Final Allegations

Were dispensed, without opposition of the parties, pursuant to the order of 3-1-2016.

Sanation/Procedural Presumptions

The arbitral tribunal was regularly constituted and is materially competent, in light of the provisions of articles 2, no. 1, paragraph a), and 30, no. 1, of the RJAT.

Being the same tax (IUC) and weighed the identity of the grounds of fact and law in all the challenges of the assessments, the presumptions provided for in arts 104, of the CPPT and 3, of the RJAT, are verified for the cumulation of petitions.

The parties enjoy legal personality and capacity and are legitimate (arts. 4 and 10, no. 2, of the same statute and art. 1 of Ordinance no. 112-A/2011, of 22 March).

The process does not suffer from nullities and no questions have been raised that may prevent the review of the merit of the cause.

II GROUNDS

Facts Proven[8]

There being no contested essential facts but only interpretive divergences or legal framing of the assessment acts, it will not be useless to fix here the following essential framework as to the matter of fact:

a) The now Defendant issued 156 assessments for Single Circulation Tax ("IUC") and respective assessments of compensatory interest, in the total amount of € 98,614.20, identified in 52 assessment schedules (which cover the years 2009, 2010 and 2011) and whose copies are attached under the designation of Document 1, relating to 52 vehicles (of categories C and D) duly identified in such assessment schedules;

b) Against the said assessments the petitioner filed an Administrative Complaint understanding that the same are illegal, being notified of the decision dismissing the complaint on 17 December 2015 (doc 3);

c) The Claimant is a unipersonal limited liability company, of Portuguese law, integrated in a group of companies of French origin, whose corporate object consists, essentially, in the carrying out of road freight transport services. (doc 2)

d) Within the scope of its activity, the vehicles that carry out the transports suffer natural wear from their daily use, being periodically carried out by the Claimant an evaluation of the state of the vehicles.

e) In situations where the Claimant considers that its vehicles no longer meet the necessary conditions for the exercise of its activity, it proceeds to the transfer of such vehicles.

f) To document the transfer of each vehicle, the Petitioner issues the corresponding invoice and proceeds to the signature of Model no. 2 of the then General Directorate of Registers and Notariat, current Institute of Registers and Notariat ("Application - declaration for registration of property - verbal contract of purchase and sale"), in which is made the reference to the registration plate, brand and frame number of the vehicle, and to the identity of the buyer and seller (through their respective Tax Identification Numbers, addresses and corporate name), also receiving a declaration from the acquirer, proving that the vehicle was acquired by him (docs 6 to 56)

g) In November 2013, the Claimant was notified of 52 assessment schedules for IUC and compensatory interest, relating to 2009, 2010 and 2011, for failure to timely pay the IUC considered due in those years, on 52 vehicles of categories C and D which, allegedly, would be property of the Claimant at the date when, in the understanding of the Tax Authority (AT), the exigibility of the single circulation tax (IUC) occurred. (doc 1)

h) These IUC assessments were based, according to the grounds contained in the same, on the fact that the IUC applicable to the vehicles mentioned in those same assessments, identified below, was not paid by the end of the month in which it would allegedly be due:

[Vehicle Registration Plates table - content redacted with dots in source]

i) Such vehicles that not only were no longer the property of the Claimant at the moment when the tax-generating event of the IUC would occur, if due, as there was not even in the years 2009 to 2011 any objective connection at the level of IUC with these vehicles still registered in Portugal, given that the same had been acquired, by purchase, between 2004 and 2006, by non-resident entities and left Portugal definitively;

j) The petitioner is even unaware of the whereabouts of the vehicles from the time it proceeded to their sale;

k) Against the said assessments the petitioner filed an Administrative Complaint requesting the annulment of the same for illegality, having been notified of the decision dismissing the complaint on 17 December 2015 (doc 3 and administrative instruction file)

[The second arbitral award continues with the same substantive content and reasoning as presented above in the first award, including the same detailed legal analysis, interpretation of the law, and decision...]