Process: 197/2015-T

Date: November 10, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD arbitration decision 197/2015-T addresses the critical issue of IUC (Single Circulation Tax) liability when vehicles are subject to financial leasing contracts. The claimant, a leasing company, challenged IUC assessments totaling €4,870.61 for fiscal years 2009 and 2012, arguing that vehicles under financial leasing contracts were transferred to lessees, making them the actual owners and therefore the proper taxpayers. The company contended that Article 3 of the IUC Code's presumption that the registered owner is liable should be rebuttable, invoking the equivalence and polluter-pays principles. The Tax Authority countered that Article 3 clearly establishes a legal presumption: the person registered as owner in the motor vehicle registry is the taxable person, regardless of economic ownership or possession. The AT argued that vehicle registration creates a definitive presumption for tax purposes, ensuring administrative efficiency and legal certainty. This decision replaces an earlier February 2016 arbitral ruling after the Tax Authority successfully appealed to the Central Administrative Court South, which found the original tribunal failed to address a procedural statute of limitations exception. The case highlights fundamental tensions between formal legal presumptions based on registry data versus substantive economic reality in determining tax liability. It establishes important precedent for financial leasing companies, vehicle lessors, and tax practitioners regarding IUC subjective incidence, the probative value of motor vehicle registration, and the scope of legal challenges to circulation tax assessments based on ownership disputes.

Full Decision

TAX ARBITRATION DECISION

1 REPORT

1.1

A..., S.A., a Legal Entity with the number: ..., Claimant in the above-referenced tax proceeding, hereinafter denominated as the "Applicant," came, invoking the provisions of articles 2, no. 1, subparagraph a) and 10 of Decree-Law no. 10/2011 of January 20 (hereinafter RJAT) and article 99 of the Code of Tax Procedure and Process (CPPT) and numbers 1 and 2 subparagraph d) of article 95 of the General Tax Law (LGT), to request the establishment of a Singular Arbitral Tribunal in order to:

  • The annulment of the tax assessments relating to the Single Circulation Tax (hereinafter designated as IUC) for the fiscal years 2009 and 2012 (cf., document no. 1, attached to the Application for Arbitration and which is hereby reproduced in full for all legal purposes);

  • The reimbursement of the total amount of €4,870.61, plus the respective indemnity interest provided for in articles 43 of the LGT and article 61 of the CPPT.

1.2

Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011 of January 20, in the wording introduced by article 228 of Law no. 66-B/2012 of December 31, the Ethics Council designated Maria de Fátima Alves as the singular arbitrator, who communicated her acceptance of the assignment within the applicable timeframe:

  • On December 21, 2015, the parties were duly notified of this designation, having manifested no intention to refuse the arbitrator's designation, in accordance with the joint provisions of article 11 no. 1 subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code;

  • Therefore, the arbitral tribunal was established, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of Decree-Law no. 10/2011 of January 20, in the wording introduced by article 228 of Law 66-B/2012 of December 31;

  • Consequently, the issuance of the Arbitral Decision was scheduled for February 1, 2016.

1.3

The Applicant, in support of its request for arbitral decision, asserts, in summary, the following:

  • The vehicles to which the single circulation tax assessment relates were not, at the date of the tax event, the property of the Applicant, the latter not being the passive subject of the tax, a fact that precludes any subjective liability for its payment;

  • The Applicant bases its position on the fact that the aforementioned taxed motor vehicles are subject to Financial Leasing Contracts, cf., as described in evidentiary documents nos. 1 to 43 (annexes I to IV and annex V) attached to the Administrative Appeal, contained in the Administrative File, which are hereby reproduced in full for all legal purposes;

  • That the IUC is a circulation tax with the presupposition of the equivalence principle, provided for in no. 1 of the same Legal Instrument (IUC);

  • Whereby, the property of the aforementioned vehicles cannot be imputed to the Applicant, since when the "financial leasing contracts" occurred, the respective property was transferred to the current owner;

  • Since, upon the transfer of the vehicle, the same ceased to be in its possession, a fact that removes from it the status of "polluter/payer," and consequently, it cannot be the passive subject of the tax, in accordance with the letter and spirit of article 3 of the Code of the Single Circulation Tax;

  • It is a fact that article 3 of the IUC considers as owner of the motor vehicle the person in whose name it is registered;

  • However, the registration of vehicles in the competent Registry of Motor Vehicles is not a condition for the transfer of ownership, since such registration is solely intended to give publicity to the legal situation of the property, as results, namely, from the provisions of article no. 1 of Decree-Law no. 54/75 of February 12;

  • Thus, taxation relating to the IUC cannot be imposed solely on whoever appears in the registry as the owner of the vehicles; the effective owners must be considered, through a rebuttable presumption.

1.4

The Respondent, the Tax and Customs Authority (hereinafter designated as AT), proceeded to join the Administrative Tax File and submitted a Reply, in which it alleges the existence of an exception, within the scope of expiry of the request for arbitral decision, due to the fact that the Applicant "petitions solely that the tribunal deign to examine the legality of the official assessment acts attached as documents nos. 1 to 43," not invoking the rejection of the corresponding administrative appeals (a situation to be examined, hereinafter, at the appropriate point of this Arbitral Decision), and alleges, by way of challenge, that the tax acts at issue are not affected by any defect of violation of law, pronouncing itself in favor of the dismissal of the claim and the maintenance of the contested assessment acts, defending, briefly, as follows:

  • The passive subjects of the single circulation tax are the persons appearing in the registry as owners of the vehicles, in accordance with the provisions of no. 1 of article 3 of the IUC, which in the present case, "sub judice," are applicable to the Applicant;

  • Adding that when it is verified that the vehicle's registration is in the name of a determined person, that same person embodies the position of passive subject of the IUC tax obligation;

  • That notoriously wrong is the interpretation that the Applicant makes of the provisions of article 3 of the IUC, insofar as it incurs in a "biased interpretation of the letter of the law" and in the adoption "of an interpretation that does not heed the systematic element, aiming at the unity of the regime established throughout the IUC and, more broadly, throughout the entire tax-legal system," the Applicant further following an "interpretation that ignores the ratio of the regime established in the article in question and, likewise throughout the IUC";

  • Whereby, based on the reasons exposed above, the Respondent, not conforming with the Tax Arbitral Decision of February 1, 2016, filed an appeal to the 2nd Court of the 2nd Section of the Central Administrative Court South, which judged as procedent the "challenge to the arbitral decision" with predominance in the fact that the above-cited Decision did not rule on the exception of expiry invoked by the AT.

Thus, Recognizing and Accepting the Decision and the Arguments embodied in the Learned Judgment, this Arbitral Tribunal shall pronounce itself, according to legal terms, based on objective Good Faith, according to the spirit of article 8 of the new Civil Procedure Code (NCPC), ex vi, article 29 of the RJAT.

2 ISSUES TO BE DECIDED

2.1

Given the above exposition in the preceding numbered sections, with respect to the written submissions of the parties and the arguments presented, the main issues to be decided are as follows:

  • The preliminary question of the exception invoked by the AT;

  • The challenge made by the Applicant relating to the material assessment of the assessment acts, concerning the years 2009 to 2012, relating to the IUC on the vehicles better referenced in the record;

  • The erroneous interpretation and application of the rules concerning the subjective scope of the single circulation tax assessed and collected, which constitutes the central issue to be decided in the present proceeding;

  • The legal value of the registration of the motor vehicle.

3 FACTUAL GROUNDS

3.1

With respect to the matters of fact relevant to the decision to be rendered, this Tribunal establishes, in view of the elements in the record, the following facts as proven:

  • The Applicant presented evidentiary documents of the motor vehicles in question, cf. Documents nos. 1 to 43, embodied in the corresponding Administrative Appeals - annexes I to IV and V (contained in the Administrative File), which are hereby reproduced in full for all legal purposes;

  • Proving that the aforementioned vehicles were legally covered by Financial Leasing Contracts (Annex V);

  • Considering, therefore, that the holders of the ownership will be the lessees, as being the true possessors of the motor vehicles, "in the present case" (no. 2 of article 3 of the IUC).

3.1.1 FOUNDATION OF THE PROVEN FACTS
  • The facts established as proven are based on annexes I to IV and V, attached to the Administrative Appeals (contained in the Administrative File and Application for Arbitration), which are hereby reproduced in full for all legal purposes.
3.1.2 UNPROVEN FACTS
  • There are no facts established as unproven, given that all facts considered relevant to the assessment of the claim were proven.

4 LEGAL GROUNDS

4.1

The Tribunal is materially competent and is duly constituted, in accordance with articles 2 no. 1, subparagraph a), 5 no. 2, subparagraph a), 6 no. 1, 10 no. 1, subparagraph a) and no. 2 of the RJAT:

  • The parties possess legal personality and capacity and are legitimate, ex vi, articles 4 and 10, no. 2, of the RJAT and article no. 1 of Ordinance no. 112-A/2011 of March 22;

  • The proceeding is not affected by any nullities;

  • There being a preliminary question upon which the Tribunal must rule.

PRELIMINARY QUESTION

  1. The Tax and Customs Authority (AT), Respondent in the present proceeding, comes,

In the scope of its Reply, presented in accordance with the provisions and for the purposes set out in article 17 of the RJAT, to invoke a peremptory exception, in accordance with the provisions of article 576 no. 3 of the Code of Civil Procedure, ex vi, article 29 of the RJAT, which would result in the discharge of the AT from the claim, as it prevents the legal effect of the facts alleged by the Applicant;

  1. Its allegation is based on the fact that the Applicant formulates the object of the Request for Arbitral Decision "solely based on the declaration of illegality of the Official Assessment Acts of the Single Circulation Tax, for the fiscal years 2009 to 2012, attached as documents nos. 1 to 43";

  2. Being that "the object of the request for arbitral decision should be the rejection of the administrative appeals presented by the Applicant," verifying, thus, the untimeliness of the Request for Arbitral Decision.

  3. Now, this Arbitral Tribunal, in analyzing the Request for Arbitral Decision presented by the Applicant, in conjunction with annexes I to IV and V, had no doubt that it was indeed the request for rejection of the Administrative Appeals, and that documents nos. 1 to 43 gave rise to the Administrative Appeals in question, as is obvious;

  4. Because otherwise the Administrative Appeals would have no "Reason to Be," indeed, it was based on logical deduction that this Arbitral Tribunal did not rule (recognizing now that it should have ruled), as it was convinced that there had been a lapse in interpretation by the AT (with due respect);

  5. Because otherwise, let us consider: The Applicant, in points 1 to 3 of the Application for Arbitration, refers to the rejection of the Administrative Appeals;

  6. In point 4 of the Application for Arbitration it states: "Upon review of the various decisions rejecting the Administrative Appeals attached as annexes I to IV, it is verified that the Applicant was notified of the first rejection of the Administrative Appeal on January 2, 2014, with the remaining notifications occurring on later dates";

  7. Furthermore, point 5 of the Application for Arbitration adds: "whereby the deadline for filing the request for establishment of an arbitral tribunal ends on April 2, 2015";

  8. In any event, it must be considered that the claim and the cause of action constitute the object of the proceeding when there is no unintelligibility between them;

  9. And, as it is intelligible that the documents corresponding to nos. 1 to 43 were subject to complaint through the Administrative Appeals and that only through the rejection of the Administrative Appeals could the Request for Arbitral Decision be filed, this tribunal understood that the concrete fact alleged by the Applicant in the Application for Arbitration relates to the constitutive facts of the material situation that concretely form part of the rejection of the Administrative Appeals, in the present case.

In light of the contextual exposition above and based on no. 8 of the NCPC, ex vi, article 29 of the RJAT (as a rule of conduct requiring the parties to "conduct themselves honestly," transposing ethical values of the community into procedural law), this tribunal finds it appropriate to reject the exception of expiry alleged by the AT, relating to the untimeliness of the Request for Arbitral Decision.

4.2

The claim, which is the object of the present proceeding, is the declaration of annulment of the IUC assessment acts relating to the motor vehicles better identified in the record, annexes I to IV and V.

4.2.1

Condemnation of the AT to reimburse the amount of tax relating to such assessment in the sum of €4,870.61;

4.2.2

Condemnation of the AT to payment of indemnity interest on the same amount.

4.3

According to the AT's understanding, it is sufficient that the vehicle appear in the registry as the property of a determined person for that person to be the passive subject of the tax obligation.

4.4

The factual matter is settled, as appears in no. 3.1 above, and it now becomes necessary to determine the applicable law to the underlying facts, in accordance with the issues to be decided identified in no. 2.1 above, it being certain that the central issue at stake in the present record, with respect to which there are absolutely opposing understandings between the Applicant and the AT, consists in determining whether no. 1 of article 3 of the IUC establishes or not a rebuttable presumption.

4.5

Having analyzed everything and, taking into account, on one hand, the positions of the parties in confrontation, mentioned in points 1.3 and 1.4 above and, considering, on the other hand, that the central issue to be decided is whether no. 1 of article 3 of the IUC establishes or not a legal presumption of tax scope, it is necessary, in this context, to assess and render a decision.

5 ISSUE OF ERRONEOUS INTERPRETATION AND APPLICATION OF THE RULE CONCERNING THE SUBJECTIVE SCOPE OF THE IUC

5.1

Considering that it is undisputed in legal doctrine that in the interpretation of tax laws the general principles of interpretation apply fully, which shall be limited only by the exceptions and particularities dictated by the law itself that is the subject of interpretation. This is an understanding that has come to be accepted in the General Tax Laws of other countries and which also came to be established in article 11 of our General Tax Law, which has, moreover, been frequently underlined by jurisprudence.

It is consensually accepted that, in view of apprehending the meaning of the law, interpretation resorts, a priori, to reconstructing the legislative intent through the words of the law, which means seeking its literal sense, weighing it and assessing it in light of other criteria, with the so-called elements of a logical, rational or teleological nature and of a systematic order intervening:

  • Regarding the interpretation of tax law, one must consider the jurisprudence, namely, the Judgments of the Supreme Administrative Court of September 5, 2012, case no. 0314/12 and of February 6, 2013, case 01000/12, available at www.dgsi.pt, the importance of the provisions of article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

  • Article no. 1 of article 3 of the IUC provides that "The passive subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered";

  • The formulation used in the aforementioned article resorts to the expression "considering-se" (considered as), which raises the question of whether such an expression can be attributed a presumptive sense, equating it to the expression "presuming-se" (presumed), these being expressions frequently used with equivalent meanings;

  • As Jorge Lopes de Sousa teaches, in the Code of Tax Procedure and Process, Annotated and Commented, volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in the matter of tax scope, presumptions may be revealed by the expression "presume-se" (presumed) or by a similar expression, there being mentioned various examples of such presumptions, referring to that contained in article 40, no. 1 of the Income Tax Code (CIRS), in which the expression "presume-se" is used, and that contained in article 46 no. 2 of the same Code, in which use is made of the expression "considera-se" (considered as), as an expression with an effect similar to that and also embodying a presumption;

  • In the legal formulation set forth in no. 1 of article 3 of the IUC, in which a presumption is established, revealed by the expression "considera-se" (considered as), of similar meaning and equivalent value to the expression "presume-se" (presumed), in use since the creation of the tax in question;

  • The use of the expression "considera-se" (considered as) aimed at nothing more than the establishment of a more marked and clear approximation between the passive subject of the IUC and the effective owner of the vehicle, which is in keeping with the strengthening conferred on the ownership of the vehicle, which came to constitute the tax event, in accordance with article 6 of the IUC;

  • The relevance and interest of the presumption in question, which historically was revealed through the expression "presume-se" (presumed) and which now resorts to the expression "considera-se" (considered as), lies in the truth and justice that, by this means, is conferred on tax relations and which embody fundamental tax values, allowing the taxation of the real and effective owner and not the one who, due to circumstances of a diverse nature, is sometimes merely an apparent and false owner. If the case were not so considered, if the presentation of evidentiary elements aimed at demonstrating that the effective owner is, after all, a person different from the one appearing in the registry and who, initially, and in principle, was supposed to be the true owner, were not admitted and valued, those values would be objectively disregarded.

5.2

There is also to be considered the principle of equivalence, inscribed in article 1 of the IUC, which underlies the polluter-payer principle and concretizes the idea embedded therein that whoever pollutes must, therefore, pay. The aforementioned principle has constitutional basis, in that it represents a corollary of the provisions of subparagraph h) of no. 2 of article 66 of the Constitution, and also has its basis in Community law, whether at the level of primary law, article 130-R of the Treaty of Maastricht (Treaty of the European Union of February 7, 1992), where the aforementioned principle came to appear as a support of Community Policy in the environmental domain, which aims to hold responsible those who contribute to the damages that arise for the community, resulting from the use of motor vehicles, so that they are assumed by their owner-users as costs that only they must bear.

5.3

Given the facts described above, it is important to stress that the aforementioned elements of interpretation, whether those related to literal interpretation, supported by legally used words, or those pertaining to logical elements of interpretation, of a historical nature or of a rational order, all point in the direction that the expression "considera-se" (considered as) has a sense equivalent to the expression "presume-se" (presumed), and therefore should be understood that the provisions of no. 1 of article 3 of the IUC establish a legal presumption which, in light of article 73 of the LGT, where it is established that "Presumptions established in rules concerning tax scope always admit proof to the contrary," will necessarily be rebuttable, which means that the passive subjects are, in principle, the persons in whose names such vehicles are registered. These persons, identified in such conditions, shall therefore be those to whom the AT must necessarily address itself;

  • But it shall be, in principle, given that within the framework of mandatory prior hearing, in accordance with subparagraph a) of no. 1 of article 60 of the LGT, the tax relationship may be reconfigured, validating the passive subject initially identified or redirecting the proceeding toward the one who is, after all, the true and effective passive subject of the tax in question;

  • The taxpayer has the right to be heard, through prior hearing (José Manuel Santos Botelho, Américo Pires Esteves and José Cândido de Pinho, in the Code of Administrative Procedure, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 of article 100);

  • The prior hearing which, naturally, must be concretized at a moment immediately preceding the assessment procedure, corresponds to the proper venue and time to, with certainty and security, identify the passive subject of the IUC.

6 REGARDING THE LEGAL VALUE OF REGISTRATION

6.1

With respect to the legal value of registration, it is important to note what is established in no. 1 of article 1 of Decree-Law no. 54/75 of February 12 (amended various times, the last being by Law no. 39/2008 of August 11), when it establishes that "the registration of vehicles has essentially the purpose of giving publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce":

  • Article 7 of the Property Registry Code (CRP), applicable supplementarily to the registration of automobiles, by virtue of article 29 of the Vehicle Registry Code (CRA), provides 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";

  • Definitive registration is nothing more than a rebuttable presumption, thus admitting rebuttal, as follows from the law and jurisprudence has indicated, and can be seen, among others, in the Judgments of the Supreme Court of Justice nos. 03B4369 of February 19, 2004 and no. 07B4528 of January 29, 2008, available at: www.dgsi.pt;

  • Therefore, the function legally reserved to registration is, on one hand, to give publicity to the legal situation of the property, in the case at hand, of vehicles and, on the other hand, it allows us to presume that there exists a right over those vehicles and that it belongs to the holder, as such inscribed in the registry, does not have a constitutive nature of the right of ownership, but merely declarative, hence the registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer;

  • The acquirers of vehicles become owners of those same vehicles through the execution of the corresponding purchase and sale contracts, with or without registration, as well as, ex vi, through financial leasing contracts (no. 2 of article 3 of the IUC);

  • In this context, it is worth recalling that, in accordance with the provisions of no. 1 of article 408 of the CC, the transfer of real rights over things, so that, within the scope of the disputed case, the motor vehicle, is determined by the mere effect of the contract, and that, in accordance with the provisions of subparagraph a) of article 879 of the CC, among the essential effects of the contract of purchase and sale and of Financial Leasing, stands out the transmission of the thing;

  • Given the above exposition, it becomes clear that the legislative intent points in the direction that the provisions of no. 1 of article 3 of the IUC establish a presumption "juris tantum," consequently rebuttable, thereby permitting that the person who, in the registry, is inscribed as owner of the vehicle, may present evidentiary elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, to whom the ownership was transferred.

7 THE PRESUMPTION OF ARTICLE 3 OF THE IUC AND THE DATE ON WHICH THE IUC IS EXIGIBLE

7.1 THE PRESUMPTION OF ARTICLE 3 OF THE IUC

  • The AT considers that the presumption which exists in no. 1 of article 3 of the IUC is consequent upon an interpretation contra legem, resulting from a biased reading of the letter of the law and, therefore, violating the unity of the legal system, however, and with due respect, the understanding of the jurisprudence goes in the direction that one should consider the existence of a legally rebuttable presumption, whereby, consequently, it serves the values and interests questioned, whether at the level of material fiscal justice or at the level of the environmental objectives aimed at by the IUC;

  • With respect to the unity of the legal system, all of the above must be stressed, namely, regarding the ratio of article 1 of the IUC; regarding the norms and principles of the LGT; regarding the applicable and pertinent norms relating to the registration of motor vehicles, regarding the interpretation that best serves and achieves the aforementioned unity and ensures the connection of those same norms, considering the legal presumption that is established in article 3 of the IUC.

7.2 THE DATE ON WHICH THE IUC IS EXIGIBLE

  • The IUC is a tax of periodic taxation, the periodicity of which corresponds to the year that begins at the act of registration or on each of its anniversaries, in accordance with the provisions of nos. 1 and 2 of article 4 of the IUC;

  • It is exigible in accordance with no. 3 of article 6 of the aforementioned Code;

  • It being worth noting that, with respect to the assessment of the IUC charged to the Applicant on the vehicles, above referenced, in the years 2009 to 2012, it is not to be considered, because at the moment of the tax event the vehicles no longer belonged to it, since the aforementioned vehicles were in the possession of the lessees/users of the corresponding vehicles, cf. the evidentiary documents, already above cited and annexed to the administrative appeals (contained in the Administrative File and Application for Arbitration), which are hereby reproduced in full for all legal purposes.

7.2.1

Regarding the burden of proof, article 342 no. 1 of the CC stipulates: "it falls upon he who invokes a right to prove the facts constituting the alleged right";

7.2.2

Also, article 346 of the CC (counter-proof) determines that "to the proof produced by the party bearing the burden of proof, the other party may oppose counter-proof with respect to the same facts, intended to make them doubtful; if it succeeds, the question is decided against the party burdened with proof." (As Anselmo de Castro asserts, A., 1982, ED. Almedina Coimbra, "Civil Declaratory Procedure Law," III, p. 163, "when one of the parties bears the burden of proof, it is sufficient for the other party to oppose counter-proof, this being proof intended to make doubtful the facts alleged by the first party").

Thus, in the case at hand, what the Applicant must prove, in order to rebut the presumption that flows both from article 3 of the IUC and from the Vehicle Registry itself, is that it, the Applicant, was not the owner of the vehicle in question during the period to which the contested assessments relate. It proposes to prove, as appears from the record, that the ownership of the corresponding vehicles did not belong to it during the period to which the assessments relate, cf., documents annexed to the Administrative Appeals, contained in the Administrative File and Application for Arbitration, which are hereby reproduced in full for all legal purposes.

7.3 REBUTTAL OF THE PRESUMPTION

  • The Applicant, as referred to in 3.1, with respect to the proven facts, alleged, with the aim of setting aside the presumption, that it was not the owner of the corresponding vehicles when the tax event occurred, offering for that purpose the following document;

  • Evidentiary documents, nos. 1 to 43, attached to the record;

  • In this manner, the ownership of the aforementioned vehicle no longer belonged to it, and it could therefore not benefit from its use, from a date prior to that on which the IUC was exigible, thus embodying means of proof with sufficient force and appropriate to rebut the presumption based on the registry, in accordance with the provisions of nos. 1 and 2 of article 3 of the IUC, documents which enjoy the presumption of truthfulness provided for in no. 1 of article 75 of the LGT. It follows from this that at the date on which the IUC was exigible, the one who held the ownership of the motor vehicle was not the Applicant.

8 OTHER QUESTIONS RELATING TO THE LEGALITY OF THE ASSESSMENT ACTS

  • With respect to the existence of other questions relating to the legality of the assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of defects, as provided for in article 124 of the CPPT, that proceeding from a request for arbitral decision based on defects that prevent the renewal of the contested assessments, other defects become prejudiced, being useless to know them, it does not appear necessary to address the other issues raised.

9 REIMBURSEMENT OF THE TOTAL AMOUNT PAID

  • In accordance with the provisions of subparagraph b) of no. 1 of article 24 of the RJAT and, in conformity with what is established therein, the arbitral decision on the merits of the claim, as to which no appeal or challenge is available, binds the tax administration from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the procedence of the arbitral decision in favor of the passive subject and until the end of the period provided for the voluntary execution of the sentences of tax judicial tribunals, "Restore the situation that would exist if the tax act, object of the arbitral decision, had not been executed, adopting the necessary acts and operations for that purpose"

  • These are legal commands that are in complete consonance with the provisions of article 100 of the LGT, applicable to the case, ex vi, the provisions of subparagraph a) of no. 1 of article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial procedence of complaints or administrative appeals or judicial proceedings in favor of the passive subject, to the immediate and full reconstitution of the situation that would exist if the illegality had not been committed, with the payment of indemnity interest corresponding to the terms and conditions provided for by law".

  • The case in the present record raises the manifest application of the aforementioned norms, since, as a consequence of the illegality of the assessment acts referenced in this proceeding, there must, by force of these norms, be reimbursement of the amounts paid, whether for the tax paid or for the corresponding compensatory interest, as a means of achieving the reconstitution of the situation that would exist if the illegality had not been committed.

10 REGARDING THE RIGHT TO INDEMNITY INTEREST

  • The declaration of illegality and consequent annulment of the administrative act confers upon the recipient of the act the right to restoration of the situation in which it would have found itself prior to the execution of the annulled act.

  • Within the scope of the assessment of the tax, its annulment confers upon the passive subject the right to restitution of the tax paid and, as a rule, the right to indemnity interest, in accordance with no. 1 of article 43 of the LGT and article 61 of the CPPT.

  • Whereby, the Applicant has the right to indemnity interest on the amount of tax paid relating to the annulled assessments.

11 DECISION

Given the above exposition, this Arbitral Tribunal decides:

  • To judge as procedent the request for declaration of illegality of the IUC assessment concerning the years 2009 to 2012 (embodied in the cited Administrative Appeals) with respect to the motor vehicles identified and disputed in the present proceeding, consequently annulling the corresponding tax acts;

  • To judge as procedent the request for condemnation of the Tax Administration to reimburse the amount indebted paid, in the sum of €4,870.61, plus the respective indemnity interest legally due, condemning the Tax and Customs Authority to execute these payments.

VALUE OF THE PROCEEDING:

  • In conformity with the provisions of articles 306 no. 2 of the Code of Civil Procedure and 97-A no. 1 of the CPPT and article 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at €4,870.61.

COSTS:

  • In accordance with no. 4 of article 22 of the RJAT, the amount of costs is fixed at €612.00, in accordance with Table I, annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Notify the parties.

Lisbon, November 10, 2017

The Arbitrator

Maria de Fátima Alves

(The text of this decision was prepared by computer, in accordance with article 131, no. 5 of the Code of Civil Procedure, applicable by referral of article 29, no. 1 subparagraph e) of Decree-Law 10/2011 of January 20 (RJAT), its drafting governed by current spelling)

Arbitral Decision

1 REPORT

11.1

A..., S.A., a Legal Entity with the number: ..., Claimant in the above-referenced tax proceeding, hereinafter denominated as the "Applicant," came, invoking the provisions of articles 2, no. 1, subparagraph a) and 10 of Decree-Law no. 10/2011 of January 20 (hereinafter RJAT) and article 99 of the Code of Tax Procedure and Process (CPPT) and numbers 1 and 2 subparagraph d) of article 95 of the General Tax Law (LGT), to request the establishment of a Singular Arbitral Tribunal in order to:

  • The annulment of the tax assessments relating to the Single Circulation Tax (hereinafter designated as IUC) for the fiscal years 2009 and 2012 (cf., document no. 1, attached to the Application for Arbitration and which is hereby reproduced in full for all legal purposes);

  • The reimbursement of the total amount of €4,870.61, plus the respective indemnity interest provided for in articles 43 of the LGT and article 61 of the CPPT.

11.2

Pursuant to the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011 of January 20, in the wording introduced by article 228 of Law no. 66-B/2012 of December 31, the Ethics Council designated Maria de Fátima Alves as the singular arbitrator, who communicated her acceptance of the assignment within the applicable timeframe:

  • On December 21, 2015, the parties were duly notified of this designation, having manifested no intention to refuse the arbitrator's designation, in accordance with the joint provisions of article 11 no. 1 subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code;

  • Therefore, the arbitral tribunal was established, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of Decree-Law no. 10/2011 of January 20, in the wording introduced by article 228 of Law 66-B/2012 of December 31;

  • Consequently, the issuance of the Arbitral Decision was scheduled for February 1, 2016.

11.3

The Applicant, in support of its request for arbitral decision, asserts, in summary, the following:

  • The vehicles to which the single circulation tax assessment relates were not, at the date of the tax event, the property of the Applicant, the latter not being the passive subject of the tax, a fact that precludes any subjective liability for its payment;

  • The Applicant bases its position on the fact that the aforementioned taxed motor vehicles are subject to Financial Leasing Contracts, cf., as described in evidentiary documents nos. 1 to 43 (annexes I to IV and annex V) attached to the Administrative Appeal, contained in the Administrative File, which are hereby reproduced in full for all legal purposes;

  • That the IUC is a circulation tax with the presupposition of the equivalence principle, provided for in no. 1 of the same Legal Instrument (IUC);

  • Whereby, the property of the aforementioned vehicles cannot be imputed to the Applicant, since when the "financial leasing contracts" occurred, the respective property was transferred to the current owner;

  • With the transfer of the vehicle, the same ceased to be in its possession, a fact that removes from it the status of "polluter/payer," and consequently, it cannot be the passive subject of the tax, in accordance with the letter and spirit of article 3 of the Code of the Single Circulation Tax;

  • It is a fact that article 3 of the IUC considers as owner of the motor vehicle the person in whose name it is registered;

  • However, the registration of vehicles in the competent Registry of Motor Vehicles is not a condition for the transfer of ownership, since such registration is solely intended to give publicity to the legal situation of the property, as results, namely, from the provisions of article no. 1 of Decree-Law no. 54/75 of February 12;

  • Whereby, taxation relating to the IUC cannot be imposed solely on whoever appears in the registry as the owner of the vehicles; the effective owners must be considered, through a rebuttable presumption.

11.4

The Respondent, the Tax and Customs Authority (hereinafter designated as AT), proceeded to join the Administrative Tax File and submitted a Reply, from which it appears that the tax acts at issue are not affected by any defect of violation of law, pronouncing itself in favor of the dismissal of the claim and the maintenance of the contested assessment acts, defending, briefly, as follows:

  • The passive subjects of the single circulation tax are the persons appearing in the registry as owners of the vehicles, in accordance with the provisions of no. 1 of article 3 of the IUC, which in the present case, "sub judice," is verified with respect to the Applicant;

  • Verifying, for such purpose, that the vehicle's registration is in the name of a determined person so that that same person embodies the position of passive subject of the IUC tax obligation;

  • That notoriously wrong is the interpretation that the Applicant makes of the provisions of article 3 of the IUC, insofar as it incurs in a "biased interpretation of the letter of the law" and in the adoption "of an interpretation that does not heed the systematic element, aiming at the unity of the regime established throughout the IUC and, more broadly, throughout the entire tax-legal system," the Applicant further following an "interpretation that ignores the ratio of the regime established in the article in question and, likewise throughout the IUC".

2 ISSUES TO BE DECIDED

12.1

Given the above exposition in the preceding numbered sections, with respect to the written submissions of the parties and the arguments presented, the main issues to be decided are as follows:

  • The challenge made by the Applicant relating to the material assessment of the assessment acts, concerning the years 2009 to 2012, relating to the IUC on the vehicles better referenced in the record;

  • The erroneous interpretation and application of the rules concerning the subjective scope of the single circulation tax assessed and collected, which constitutes the central issue to be decided in the present proceeding;

  • The legal value of the registration of the motor vehicle.

3 FACTUAL GROUNDS

13.1

With respect to the matters of fact relevant to the decision to be rendered, this Tribunal establishes, in view of the elements in the record, the following facts as proven:

  • The Applicant presented evidentiary documents of the motor vehicles in question, cf. Documents nos. 1 to 43, embodied in the annexes I to IV and V (contained in the Administrative File), which are hereby reproduced in full for all legal purposes;

  • Proving that the aforementioned vehicles were legally covered by Financial Leasing Contracts (Annex V);

  • Considering, therefore, that the holders of the ownership will be the lessees, as being the true possessors of the motor vehicles, "in the present case" (no. 2 of article 3 of the IUC).

3.1.1 FOUNDATION OF THE PROVEN FACTS
  • The facts established as proven are based on annexes I to IV and V, attached to the Administrative Appeals (contained in the Administrative File and Application for Arbitration), which are hereby reproduced in full for all legal purposes.
3.1.2 UNPROVEN FACTS
  • There are no facts established as unproven, given that all facts considered relevant to the assessment of the claim were proven.

4 LEGAL GROUNDS

14.1

The Tribunal is materially competent and is duly constituted, in accordance with articles 2 no. 1, subparagraph a), 5 no. 2, subparagraph a), 6 no. 1, 10 no. 1, subparagraph a) and no. 2 of the RJAT:

  • The parties possess legal personality and capacity and are legitimate, ex vi, articles 4 and 10, no. 2, of the RJAT and article no. 1 of Ordinance no. 112-A/2011 of March 22;

  • The proceeding is not affected by any nullities;

  • There being no preliminary question upon which the Tribunal must rule.

14.2

The claim, which is the object of the present proceeding, is the declaration of annulment of the IUC assessment acts relating to the motor vehicles better identified in the record.

14.2.1

Condemnation of the AT to reimburse the amount of tax relating to such assessment in the sum of €4,870.61;

14.2.2

Condemnation of the AT to payment of indemnity interest on the same amount.

14.3

According to the AT's understanding, it is sufficient that the vehicle appear in the registry as the property of a determined person for that person to be the passive subject of the tax obligation.

14.4

The factual matter is settled, as appears in no. 3.1 above, and it now becomes necessary to determine the applicable law to the underlying facts, in accordance with the issues to be decided identified in no. 2.1 above, it being certain that the central issue at stake in the present record, with respect to which there are absolutely opposing understandings between the Applicant and the AT, consists in determining whether no. 1 of article 3 of the IUC establishes or not a rebuttable presumption.

14.5

Having analyzed everything and, taking into account, on one hand, the positions of the parties in confrontation, mentioned in points 1.3 and 1.4 above and, considering, on the other hand, that the central issue to be decided is whether no. 1 of article 3 of the IUC establishes or not a legal presumption of tax scope, it is necessary, in this context, to assess and render a decision.

5 ISSUE OF ERRONEOUS INTERPRETATION AND APPLICATION OF THE RULE CONCERNING THE SUBJECTIVE SCOPE OF THE IUC

15.1

Considering that it is undisputed in legal doctrine that in the interpretation of tax laws the general principles of interpretation apply fully, which shall be limited only by the exceptions and particularities dictated by the law itself that is the subject of interpretation. This is an understanding that has come to be accepted in the General Tax Laws of other countries and which also came to be established in article 11 of our General Tax Law, which has, moreover, been frequently underlined by jurisprudence.

It is consensually accepted that, in view of apprehending the meaning of the law, interpretation resorts, a priori, to reconstructing the legislative intent through the words of the law, which means seeking its literal sense, weighing it and assessing it in light of other criteria, with the so-called elements of a logical, rational or teleological nature and of a systematic order intervening:

  • Regarding the interpretation of tax law, one must consider the jurisprudence, namely, the Judgments of the Supreme Administrative Court of September 5, 2012, case no. 0314/12 and of February 6, 2013, case 01000/12, available at www.dgsi.pt, the importance of the provisions of article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

  • Article no. 1 of article 3 of the IUC provides that "The passive subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered";

  • The formulation used in the aforementioned article resorts to the expression "considering-se" (considered as), which raises the question of whether such an expression can be attributed a presumptive sense, equating it to the expression "presuming-se" (presumed), these being expressions frequently used with equivalent meanings;

  • As Jorge Lopes de Sousa teaches, in the Code of Tax Procedure and Process, Annotated and Commented, volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in the matter of tax scope, presumptions may be revealed by the expression "presume-se" (presumed) or by a similar expression, there being mentioned various examples of such presumptions, referring to that contained in article 40, no. 1 of the Income Tax Code (CIRS), in which the expression "presume-se" is used, and that contained in article 46 no. 2 of the same Code, in which use is made of the expression "considera-se" (considered as), as an expression with an effect similar to that and also embodying a presumption;

  • In the legal formulation set forth in no. 1 of article 3 of the IUC, in which a presumption is established, revealed by the expression "considera-se" (considered as), of similar meaning and equivalent value to the expression "presume-se" (presumed), in use since the creation of the tax in question;

  • The use of the expression "considera-se" (considered as) aimed at nothing more than the establishment of a more marked and clear approximation between the passive subject of the IUC and the effective owner of the vehicle, which is in keeping with the strengthening conferred on the ownership of the vehicle, which came to constitute the tax event, in accordance with article 6 of the IUC;

  • The relevance and interest of the presumption in question, which historically was revealed through the expression "presume-se" (presumed) and which now resorts to the expression "considera-se" (considered as), lies in the truth and justice that, by this means, is conferred on tax relations and which embody fundamental tax values, allowing the taxation of the real and effective owner and not the one who, due to circumstances of a diverse nature, is sometimes merely an apparent and false owner. If the case were not so considered, if the presentation of evidentiary elements aimed at demonstrating that the effective owner is, after all, a person different from the one appearing in the registry and who, initially, and in principle, was supposed to be the true owner, were not admitted and valued, those values would be objectively disregarded.

15.2

There is also to be considered the principle of equivalence, inscribed in article 1 of the IUC, which underlies the polluter-payer principle and concretizes the idea embedded therein that whoever pollutes must, therefore, pay. The aforementioned principle has constitutional basis, in that it represents a corollary of the provisions of subparagraph h) of no. 2 of article 66 of the Constitution, and also has its basis in Community law, whether at the level of primary law, article 130-R of the Treaty of Maastricht (Treaty of the European Union of February 7, 1992), where the aforementioned principle came to appear as a support of Community Policy in the environmental domain, which aims to hold responsible those who contribute to the damages that arise for the community, resulting from the use of motor vehicles, so that they are assumed by their owner-users as costs that only they must bear.

15.3

Given the facts described above, it is important to stress that the aforementioned elements of interpretation, whether those related to literal interpretation, supported by legally used words, or those pertaining to logical elements of interpretation, of a historical nature or of a rational order, all point in the direction that the expression "considera-se" (considered as) has a sense equivalent to the expression "presume-se" (presumed), and therefore should be understood that the provisions of no. 1 of article 3 of the IUC establish a legal presumption which, in light of article 73 of the LGT, where it is established that "Presumptions established in rules concerning tax scope always admit proof to the contrary," will necessarily be rebuttable, which means that the passive subjects are, in principle, the persons in whose names such vehicles are registered. These persons, identified in such conditions, shall therefore be those to whom the AT must necessarily address itself;

  • But it shall be, in principle, given that within the framework of mandatory prior hearing, in accordance with subparagraph a) of no. 1 of article 60 of the LGT, the tax relationship may be reconfigured, validating the passive subject initially identified or redirecting the proceeding toward the one who is, after all, the true and effective passive subject of the tax in question;

  • The taxpayer has the right to be heard, through prior hearing (José Manuel Santos Botelho, Américo Pires Esteves and José Cândido de Pinho, in the Code of Administrative Procedure, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 of article 100);

  • The prior hearing which, naturally, must be concretized at a moment immediately preceding the assessment procedure, corresponds to the proper venue and time to, with certainty and security, identify the passive subject of the IUC.

6 REGARDING THE LEGAL VALUE OF REGISTRATION

16.1

With respect to the legal value of registration, it is important to note what is established in no. 1 of article 1 of Decree-Law no. 54/75 of February 12 (amended various times, the last being by Law no. 39/2008 of August 11), when it establishes that "the registration of vehicles has essentially the purpose of giving publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce":

  • Article 7 of the Property Registry Code (CRP), applicable supplementarily to the registration of automobiles, by virtue of article 29 of the Vehicle Registry Code (CRA), provides 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";

  • Definitive registration is nothing more than a rebuttable presumption, thus admitting rebuttal, as follows from the law and jurisprudence has indicated, and can be seen, among others, in the Judgments of the Supreme Court of Justice nos. 03B4369 of February 19, 2004 and no. 07B4528 of January 29, 2008, available at: www.dgsi.pt;

  • Therefore, the function legally reserved to registration is, on one hand, to give publicity to the legal situation of the property, in the case at hand, of vehicles and, on the other hand, it allows us to presume that there exists a right over those vehicles and that it belongs to the holder, as such inscribed in the registry, does not have a constitutive nature of the right of ownership, but merely declarative, hence the registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer;

  • The acquirers of vehicles become owners of those same vehicles through the execution of the corresponding purchase and sale contracts, with or without registration, as well as, ex vi, through financial leasing contracts (no. 2 of article 3 of the IUC);

  • In this context, it is worth recalling that, in accordance with the provisions of no. 1 of article 408 of the CC, the transfer of real rights over things, so that, within the scope of the disputed case, the motor vehicle, is determined by the mere effect of the contract, and that, in accordance with the provisions of subparagraph a) of article 879 of the CC, among the essential effects of the contract of purchase and sale and of Financial Leasing, stands out the transmission of the thing;

  • Given the above exposition, it becomes clear that the legislative intent points in the direction that the provisions of no. 1 of article 3 of the IUC establish a presumption "juris tantum," consequently rebuttable, thereby permitting that the person who, in the registry, is inscribed as owner of the vehicle, may present evidentiary elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, to whom the ownership was transferred.

7 THE PRESUMPTION OF ARTICLE 3 OF THE IUC AND THE DATE ON WHICH THE IUC IS EXIGIBLE

17.1 THE PRESUMPTION OF ARTICLE 3 OF THE IUC

  • The AT considers that the presumption which exists in no. 1 of article 3 of the IUC is consequent upon an interpretation contra legem, resulting from a biased reading of the letter of the law and, therefore, violating the unity of the legal system, however, and with due respect, the understanding of the jurisprudence goes in the direction that one should consider the existence of a legally rebuttable presumption, whereby, consequently, it serves the values and interests questioned, whether at the level of material fiscal justice or at the level of the environmental objectives aimed at by the IUC;

  • With respect to the unity of the legal system, all of the above must be stressed, namely, regarding the ratio of article 1 of the IUC; regarding the norms and principles of the LGT; regarding the applicable and pertinent norms relating to the registration of motor vehicles, regarding the interpretation that best serves and achieves the aforementioned unity and ensures the connection of those same norms, considering the legal presumption that is established in article 3 of the IUC.

17.2 THE DATE ON WHICH THE IUC IS EXIGIBLE

  • The IUC is a tax of periodic taxation, the periodicity of which corresponds to the year that begins at the act of registration or on each of its anniversaries, in accordance with the provisions of nos. 1 and 2 of article 4 of the IUC;

  • It is exigible in accordance with no. 3 of article 6 of the aforementioned Code;

  • It being worth noting that, with respect to the assessment of the IUC charged to the Applicant on the vehicles, above referenced, in the years 2009 to 2012, it is not to be considered, because at the moment of the tax event the vehicles no longer belonged to it, since the aforementioned vehicles were in the possession of the lessees/users of the corresponding vehicles, cf. the evidentiary documents, already above cited and annexed to the administrative appeals (contained in the Administrative File and Application for Arbitration), which are hereby reproduced in full for all legal purposes.

17.2.1

Regarding the burden of proof, article 342 no. 1 of the CC stipulates: "it falls upon he who invokes a right to prove the facts constituting the alleged right";

17.2.2

Also, article 346 of the CC (counter-proof) determines that "to the proof produced by the party bearing the burden of proof, the other party may oppose counter-proof with respect to the same facts, intended to make them doubtful; if it succeeds, the question is decided against the party burdened with proof." (As Anselmo de Castro asserts, A., 1982, ED. Almedina Coimbra, "Civil Declaratory Procedure Law," III, p. 163, "when one of the parties bears the burden of proof, it is sufficient for the other party to oppose counter-proof, this being proof intended to make doubtful the facts alleged by the first party").

Thus, in the case at hand, what the Applicant must prove, in order to rebut the presumption that flows both from article 3 of the IUC and from the Vehicle Registry itself, is that it, the Applicant, was not the owner of the vehicle in question during the period to which the contested assessments relate. It proposes to prove, as appears from the record, that the ownership of the corresponding vehicles did not belong to it during the period to which the assessments relate, cf., documents annexed to the Administrative Appeals, contained in the Administrative File and Application for Arbitration, which are hereby reproduced in full for all legal purposes.

17.3 REBUTTAL OF THE PRESUMPTION

  • The Applicant, as referred to in 3.1, with respect to the proven facts, alleged, with the aim of setting aside the presumption, that it was not the owner of the corresponding vehicles when the tax event occurred, offering for that purpose the following document;

  • Evidentiary documents, nos. 1 to 43, attached to the record;

  • In this manner, the ownership of the aforementioned vehicle no longer belonged to it, and it could therefore not benefit from its use, from a date prior to that on which the IUC was exigible, thus embodying means of proof with sufficient force and appropriate to rebut the presumption based on the registry, in accordance with the provisions of nos. 1 and 2 of article 3 of the IUC, documents which enjoy the presumption of truthfulness provided for in no. 1 of article 75 of the LGT. It follows from this that at the date on which the IUC was exigible, the one who held the ownership of the motor vehicle was not the Applicant.

8 OTHER QUESTIONS RELATING TO THE LEGALITY OF THE ASSESSMENT ACTS

  • With respect to the existence of other questions relating to the legality of the assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of defects, as provided for in article 124 of the CPPT, that proceeding from a request for arbitral decision based on defects that prevent the renewal of the contested assessments, other defects become prejudiced, being useless to know them, it does not appear necessary to address the other issues raised.

9 REIMBURSEMENT OF THE TOTAL AMOUNT PAID

  • In accordance with the provisions of subparagraph b) of no. 1 of article 24 of the RJAT and, in conformity with what is established therein, the arbitral decision on the merits of the claim, as to which no appeal or challenge is available, binds the tax administration from the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the procedence of the arbitral decision in favor of the passive subject and until the end of the period provided for the voluntary execution of the sentences of tax judicial tribunals, "Restore the situation that would exist if the tax act, object of the arbitral decision, had not been executed, adopting the necessary acts and operations for that purpose"

  • These are legal commands that are in complete consonance with the provisions of article 100 of the LGT, applicable to the case, ex vi, the provisions of subparagraph a) of no. 1 of article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial procedence of complaints or administrative appeals or judicial proceedings in favor of the passive subject, to the immediate and full reconstitution of the situation that would exist if the illegality had not been committed, with the payment of indemnity interest corresponding to the terms and conditions provided for by law".

  • The case in the present record raises the manifest application of the aforementioned norms, since, as a consequence of the illegality of the assessment acts referenced in this proceeding, there must, by force of these norms, be reimbursement of the amounts paid, whether for the tax paid or for the corresponding compensatory interest, as a means of achieving the reconstitution of the situation that would exist if the illegality had not been committed.

10 REGARDING THE RIGHT TO INDEMNITY INTEREST

  • The declaration of illegality and consequent annulment of the administrative act confers upon the recipient of the act the right to restoration of the situation in which it would have found itself prior to the execution of the annulled act.

  • Within the scope of the assessment of the tax, its annulment confers upon the passive subject the right to restitution of the tax paid and, as a rule, the right to indemnity interest, in accordance with no. 1 of article 43 of the LGT and article 61 of the CPPT.

  • Whereby, the Applicant has the right to indemnity interest on the amount of tax paid relating to the annulled assessments.

11 DECISION

Given the above exposition, this Arbitral Tribunal decides:

  • To judge as procedent the request for declaration of illegality of the IUC assessment for the years 2009 to 2012, with respect to the motor vehicles identified and disputed in the present proceeding, consequently annulling the corresponding tax acts;

  • To judge as procedent the request for condemnation of the Tax Administration to reimburse the amount indebted paid, in the sum of €4,870.61, plus the respective indemnity interest legally due, condemning the Tax and Customs Authority to execute these payments.

VALUE OF THE PROCEEDING:

  • In conformity with the provisions of articles 306 no. 2 of the Code of Civil Procedure and 97-A no. 1 of the CPPT and article 3 no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at €4,870.61.

COSTS:

  • In accordance with no. 4 of article 22 of the RJAT, the amount of costs is fixed at €612.00, in accordance with Table I, annexed to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Notify the parties.

Lisbon, February 1, 2016

The Arbitrator

Maria de Fátima Alves

(The text of this decision was prepared by computer, in accordance with article 131, no. 5 of the Code of Civil Procedure, applicable by referral of article 29, no. 1 subparagraph e) of Decree-Law 10/2011 of January 20 (RJAT), its drafting governed by current spelling)

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle is under a financial leasing contract?
Under Article 3 of the IUC Code, the taxable person for IUC when a vehicle is under financial leasing is the person appearing in the motor vehicle registry as the owner, typically the leasing company. The Tax Authority maintains this is an absolute legal presumption for administrative efficiency. However, the claimant argued this presumption should be rebuttable based on the actual economic transfer of the vehicle to the lessee, who becomes the real polluter-payer. The legal dispute centers on whether registry-based presumptions override economic substance in determining tax liability for circulation taxes.
Can the registered owner challenge IUC assessments based on legal presumptions of vehicle ownership?
Yes, registered owners can challenge IUC assessments by arguing that the legal presumption in Article 3 of the IUC Code should be rebuttable. The claimant contended that vehicle registration serves only publicity purposes under Decree-Law 54/75 and is not a condition for ownership transfer. They argued that effective owners (lessees in financial leasing) should be taxed based on the polluter-pays and equivalence principles. However, the Tax Authority defends that the law establishes a clear, systematic presumption tied to registry data that cannot be easily rebutted to maintain legal certainty and administrative efficiency in tax collection.
What is the role of the equivalence principle in determining IUC liability for leased vehicles?
The equivalence principle plays a central role in the claimant's argument. Since IUC is an environmental circulation tax based on vehicle use and emissions (polluter-pays principle), the claimant argued that only the actual user/possessor should be liable, not the mere registered owner. Under financial leasing, possession and use transfer to the lessee, who is the actual polluter. However, the Tax Authority contends that Article 3's registry-based presumption already operationalizes the equivalence principle systematically, and the law deliberately chose registration as the determining factor for identifying taxpayers, balancing administrative efficiency with the underlying constitutional principles.
How does CAAD arbitration handle disputes over IUC liquidation acts for fiscal years 2009 and 2012?
CAAD arbitration handles IUC disputes for fiscal years 2009-2012 by examining both procedural and substantive issues. In this case, the Tax Authority raised a statute of limitations exception, arguing the claimant only challenged the assessment acts without properly contesting the rejection of administrative appeals. The original arbitral tribunal's failure to rule on this preliminary exception led to a successful appeal before the Central Administrative Court South, which remanded the case for proper consideration of the procedural issue before addressing the merits of whether Article 3's ownership presumption applies to financial leasing situations.
Are compensatory interest payments available when IUC tax assessments are annulled under Articles 43 LGT and 61 CPPT?
Yes, compensatory interest payments are available under Articles 43 LGT and 61 CPPT when IUC assessments are annulled. The claimant specifically requested reimbursement of €4,870.61 plus compensatory interest. These provisions establish the taxpayer's right to interest compensation when the State illegally collected taxes later determined to be undue. The interest rate and calculation method are defined by law to compensate taxpayers for the time value of money and the State's improper retention of funds. However, entitlement depends on successfully annulling the underlying tax assessments on substantive or procedural grounds.