IUC Subjective Incidence: Financial Credit Institution's Liability for Vehicle Circulation Tax Annulled (CAAD 200/2017-T)

ARBITRAL DECISION

I – Report

1. On 23.03.2017, the Claimant, A… – FINANCIAL CREDIT INSTITUTION, S.A., tax identification number …, with registered office at Rua …, …, Porto, petitioned the CAAD for the constitution of an arbitral tribunal, pursuant to Article 10 of Decree-Law No. 10/2011 of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as RJAT), against the Tax and Customs Authority, seeking the annulment of the tax acts embodied in the assessments of Unique Circulation Tax ("IUC") identified in the table below, relating to the years 2013 and 2014.

a) Assessments relating to 2013 and 2014, in the amount of EUR 43.15, which were expressly denied within the scope of the Gracious Complaint procedure No. …2016…:

b) Assessments relating to 2013 and 2014, in the amount of EUR 3,534.32, which were expressly denied within the scope of the Ex Officio Review procedure No. …2016….

[Large detailed table of registrations, years, amounts and assessments - 48 rows omitted for brevity but included in original structure]

The Claimant further petitions, alleging that it has paid the value of these assessments, for their reimbursement, plus compensatory interest.

1. The petition for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority. Pursuant to Article 6(1) of RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, the signatory was appointed arbitrator, who communicated to the Deontological Council and to the Centre for Administrative Arbitration the acceptance of the mandate within the regularly applicable time limit. The Arbitral Tribunal was constituted on 01-06-2017.

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

• The corporate object of the Claimant is reflected in the financing of credit purchases of consumer goods and equipment (financial leasing and credit), as well as in the activity of Long-Term Rental (ALD) of motor vehicles without driver, motorcycles, and boats.

• Within the scope of the activity it develops, the Claimant enters into long-term rental contracts and financial leasing contracts with its customers, at the end of which the vehicle is transferred to the lessee, whose object are motor vehicles and, likewise, loan contracts for the acquisition of motor vehicles in which a reservation of ownership clause is established in its favour.

• At the end of financial leasing contracts, as a rule, the lessee acquires the vehicle for a residual value.

• It occurs that, for the vehicles subject to the IUC assessments at issue here, the beneficiaries of the respective contracts did not register their status as lessees, purchasers with reservation of ownership or even as owners.

• This omission resulted in the Claimant, in all cases at issue here, being registered in the motor vehicle ownership register as owner or beneficiary of a reservation of ownership clause, which is why the respective Unique Circulation Taxes were assessed against it.

• The assessments object of the present proceeding, all fully paid by the Claimant, relate to tax whose taxable event occurred:

1. At a time when the now Claimant was merely a beneficiary of a reservation of ownership clause stipulated in a loan contract, with the assessments totalling EUR 63.49.

2. At a time when the Claimant had already proceeded to sell the vehicle, at the end of a financial leasing contract or long-term rental, with the assessments totalling EUR 2,162.72.

3. At a time when the total loss of the vehicles in question by loss covered by an insurance contract had occurred, with the assessments totalling EUR 251.94.

4. During the pendency of long-term rental contracts ("ALD"), with the assessments totalling EUR 72.43.

5. With respect to vehicles that were the object of financial leasing contracts and long-term rentals and whose lessees defaulted, with the proceedings in litigation and the said vehicles not yet recovered to date, with the assessments totalling EUR 937.83.

• Pursuant to Article 3(1) of the Decree-Law, the cumulation of requests relating to different tax acts is admissible when the grounding of the requests essentially depends on the assessment of the same factual circumstances and on the interpretation and application of the same principles or rules of law.

• In the case sub judice, the Claimant requests that the Arbitral Tribunal pronounce on the legality of the tax assessments above identified, being that in all of them there are facts that prevent the now Claimant from being the taxpayer of the tax in question and in all of them the interpretation and application of the same principles or rules of law is at issue.

• According to Article 3(1) of the IUC Code, in the wording in force on the date of the facts under analysis, "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".

• The same provision further establishes in its (2), in the wording in force on the date of the facts under analysis, that "Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract are treated as owners".

• On 2 August, Decree-Law No. 41/2016 of 1 August entered into force, which amended Articles 1 and 2 of Article 3 of the IUC Code.

• However, given that such amendment, according to the Decree-Law itself, was not of an interpretive nature, it shall only apply to facts occurring after its entry into force, by force of Articles 12 of the Civil Code and 12 of the General Tax Law.

• All the more so because, as will be demonstrated below, the said amendment, for not being in keeping with what has been the unanimous understanding of national jurisprudence and doctrine, has a clearly innovative character, and therefore cannot operate its effects retroactively, under penalty of unconstitutionality for violation of Article 103(3), Article 161(d) and Article 198(b)(1), all of the Constitution of the Portuguese Republic, which is hereby invoked.

• Thus, to the facts at issue in the present action, the wording of the law in force on the date of the facts applies, that is, the wording prior to the entry into force of Decree-Law No. 41/2016 of 1 August.

• Therefore, it should be understood that the taxpayer of the IUC is the owner of the vehicle only in those cases where the purchaser is not burdened with a reservation of ownership clause, where applicable, or there are no other holders of the purchase option right by force of a leasing contract.

• In fact, in such cases, the tax is owed by the person who holds the right of exclusive use of the vehicle, in accordance with the user-pays principle that guides the taxation of motor vehicle circulation.

• This is because, as demonstrated above and in line with what has been understood by CAAD in proceedings whose facts and law are the same as now discussed, the jurisprudential position has been unanimous in deciding that Article 3(1) harbours a mere presumption.

• Which, under Article 73 of the General Tax Law and the Motor Vehicle Register in Portugal as a merely declarative institution, must always admit contrary proof.

• Notwithstanding its full conviction as to the illegality of the assessments at issue here, the Claimant proceeded to make voluntary payment thereof, as evidenced by the stamp certifying payment affixed to the assessments attached.

• Thus, if such acts are to be annulled, as is necessary, the Tax Authority should proceed to reimburse the amount indebtedly paid for that purpose, which, arising from an error attributable to the services, should, pursuant to Articles 43 and 100 of the General Tax Law, be increased by the corresponding compensatory interest.

1. The Tax and Customs Authority, called upon to respond, contested the Claimant's claims, defending itself by exception and counterclaim alleging, in summary, the following:

BY EXCEPTION

On the illegal cumulation of requests

• Within the scope of the petition for arbitral pronouncement, the Claimant cumulates the requests at issue alleging that the grounding of these depends essentially on the assessment of the same factual circumstances and on the interpretation and application of the legal rules concerning the subjective incidence of IUC.

• Subject to better opinion, we cannot agree with the thesis sustained by the Claimant.

• As determined by Article 3(1) of Decree-Law No. 10/2011 of 20 January, which approved the Legal Regime for Tax Arbitration (RJAT), "the cumulation of requests, even if relating to different acts and the joinder of parties are admissible when the grounding of the requests essentially depends on the assessment of the same factual circumstances and on the interpretation and application of the same principles or rules of law."

• In the present case, the requirement of coincidence as to factual circumstances is not met.

• Although one may consider that the factual procedures may be transverse to all assessments, the fact is that we are faced with disparate factual situations embodied in: (i) different vehicles; (ii) with different transmission dates; (iii) different transmission grounds; (iv) different taxation grounds; and (v) different owners.

• Consequently, the cumulation made by the Claimant is illegal and should not be admitted by the Singular Arbitral Tribunal, which must notify the Claimant, pursuant to Article 47(5) of the Code of Administrative Tribunal Procedure (CPTA), under threat of dismissal of the case.

As a precaution and without prejudice,

BY COUNTERCLAIM

On the subjective incidence of IUC

• The first misconception underlying the interpretation defended by the Claimant concerns a biased reading of the letter of the law.

• The tax legislator, in establishing in Article 3(1) of CIUC who the taxpayers of IUC are, expressly and intentionally established that these are the owners, being considered as such the persons in whose name the same are registered, this not being a presumption but a clear legislative policy option, adopted by the legislator within its freedom of legislative discretion.

• The tax normative is replete with provisions analogous to that enshrined in the final part of Article 3(1), in which the tax legislator, within its freedom of legislative discretion, expressly and intentionally, establishes what should be considered legally, for purposes of incidence.

• Also the systematic element of the interpretation of the law demonstrates that the solution proposed by the Claimant is intolerable, establishing Article 6(1) of CIUC that "The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration or enrollment in national territory".

• The failure to update the registration, pursuant to Article 42 of the Motor Vehicle Registration Regulations, shall be imputable to the legal sphere of the taxpayer of IUC and not to the Portuguese State, as the active subject of this tax.

• From all that has been set forth above, it is clear that the tax acts at issue do not suffer from any defect of violation of law, insofar as in light of Article 3(1) and (2) of CIUC and Article 6 of the same code, it was the Claimant, in its capacity as owner, the taxpayer of IUC.

• Hence all the reasoning proposed by the Claimant is fraught with error, and it is not possible to defeat the legal presumption established.

• However, even if it were otherwise understood – which is only admitted for mere academic hypothesis – and accepting that it is admissible to defeat the presumption in light of the jurisprudence already established at this arbitration centre, it would still be necessary to assess the documents submitted by the Claimant and their probative value with a view to such defeating.

• An assessment which constitutes the analysis of a question, a question of fact.

Regarding the assessments relating to vehicles alienated at the date of the taxable event

• Within the scope of this chapter the Claimant alleges the illegality of the IUC assessments (for violation of Article 3(1) of CIUC) relating to the vehicles identified in the petition, insofar as they had already been sold to third parties on the date of the occurrence of the taxable event of the tax or had already been lost or had entered into a loan contract with reservation of ownership or had entered into a financial leasing contract that defaulted or had entered into a long-term rental contract.

• However, the Claimant is not right, and therefore the Documents submitted with the petition are impugned, as shall be demonstrated:

• First, the documents submitted to the petition concern contractual relationships established between the commercial companies B… – Financial Credit Institution, S.A. and C…, S.A. and their customers.

• Second, the Documents do not relate to financial leasing contracts, but rather:

a) In the case of the commercial company B… – Financial Credit Institution, S.A., to "financial leasing contracts";

b) In the case of the commercial company D…, S.A., to "vehicle rental contracts without driver.

• With respect to vehicles – object of rental the taxpayer is not the lessee, but rather the owner of the vehicle, pursuant to Article 3(1) of CIUC, since from the content of such contracts purchase option rights do not emerge.

• Third, the duplicate copies of the invoices embodying some of the documents submitted with the petition are not sufficient to undermine the (alleged) legal presumption established in Article 3 of CIUC.

• From this naturally follows the question of whether invoices shall constitute sufficient proof to defeat the alleged legal presumption established in Article 3 of CIUC, and it must be concluded that clearly they do not, and therefore the Documents are impugned for all legal purposes, embodied in duplicate copies of invoices submitted with the petition.

• The duplicate copies of invoices are not apt to prove the celebration of a synallagmatic contract such as purchase and sale, as such documents do not reveal by themselves an essential and unequivocal declaration of intent (i.e., acceptance) by the alleged purchasers.

• This means that the Claimant has made no proof of having effectively proceeded to alienate the vehicles subject to the incidence of the tax.

• With respect to the assessments relating to the object of financial leasing and long-term rental in the face of default/litigation there is no reason for the Claimant inasmuch as the documents do not relate to financial leasing contracts, but rather:

• In the case of the commercial company B… – Financial Credit Institution, S.A., to "rental contracts", as results from its heading;

• In the case of the commercial company C… –, S.A., to "vehicle rental contracts without driver", as results from its heading.

• From all that has been set forth above, it is clear that the tax acts at issue are valid and lawful, because in conformity with the legal regime in force on the date of the tax facts, and therefore no error attributable to the services occurred in this case.

• Accordingly, the legal requirements granting the right to compensatory interest are not met.

• But even if it were otherwise understood – which is not conceded – that the tax is not owed by the Claimant because it is not the taxpayer of the tax obligation, still, and as was decided by the aforementioned Arbitral Tribunal constituted within the scope of proceeding No. 26/2013-T, it is undeniable that the Respondent merely complied with Article 3(1) of CIUC, which imputes such quality to the persons in whose name the vehicles are registered, and therefore also for this reason the recognition of the right to payment of compensatory interest must necessarily fail.

1. The parties submitted written submissions, in which, in essence, they maintained their positions.

2. The tribunal is materially competent and is properly constituted pursuant to RJAT. The parties have standing and legal capacity, are legitimate and are legally represented. The proceeding does not suffer from defects that would invalidate it.

3. It is necessary to resolve the following issues:

1. Exception of illegal cumulation of requests

2. Illegality of the tax acts object of the proceeding.

3. Whether, in case of annulment of the assessments, the Claimant should be recognized the right to reimbursement of taxes paid.

4. Whether, further in case of annulment of the assessments, the Claimant should be recognized the right to compensatory interest on the value of the assessments paid.

II. Sanitation

1. Exception of illegal cumulation of requests

Article 3 of RJAT admits the cumulation of requests whenever the "(…) grounding of the requests essentially depends on the assessment of the same factual circumstances and on the interpretation and application of the same principles or rules of law".

In this respect, JORGE LOPES DE SOUSA notes that "It is not necessary, for the cumulation of requests and joinder of parties to be viable, that there be an absolute identity of factual situations, it being sufficient that the legal-tax question to be assessed is essentially identical and that the factual situation be similar in the points that are relevant to the decision" (Cf. Guide to Tax Arbitration, Almedina, 2013, p. 147).

Also in the decision of proceeding 3/2015-T which was heard at this Arbitration Centre one can read that:

"According to the understanding of the respondent, the cumulation of requests has a limited scope presupposing identity of factual circumstances. This is not, however, the spirit of the rule in question, which results, from the outset, from the expression "essentially" which that provision employs, from which it follows that what is required is that there be similarity of the factual points of the legal-tax question to be assessed."

According to the Supreme Administrative Court decision of 06-03-2013 – Proc. 0327/12, regarding the joinder of requests in judicial impugnation are: "requirements of rationality of means, of celerity of decision and even to avoid contradictory decisions, which all points also in the direction of the assessments at issue being analyzed in the same action, and Article 104 of CPPT should be interpreted in light of the pro actione principle, corollary of the right to effective judicial protection".

In the case at hand, the factual points to be assessed are similar and the legal-tax question to be solved is essentially the same, that is, to determine the scope of the application of Article 3 of CIUC.

It is therefore legal, in light of Article 3 of RJAT and the pro actione principle, the cumulation of requests made by the claimant, and the exception invoked by the respondent does not proceed.

II – Relevant Factual Matter

1. The tribunal considers the following facts as proven:

1- The corporate object of the Claimant is reflected in the Practice of operations permitted to banks, with the exception of receipt of deposits.

2- Within the scope of the activity it develops, the Claimant enters into rental contracts and financial leasing contracts with its customers, and likewise, loan contracts for the acquisition of motor vehicles.

3- On 7 December 2005, the Claimant incorporated, by merger, C…, S.A., such act being registered commercially on 30 December 2005.

4- Following commercial registration presented on 16.01.2013, the Claimant, whose business name was B… – Financial Credit Institution, S.A., came to be registered commercially with the business name A… - Financial Credit Institution, S.A.

5- The Respondent proceeded to pay the assessments object of the present proceeding.

6- On 26.10.2016 the Claimant filed a gracious complaint which ran under the number …2016… against the assessments above identified in item a) of the identification table of the tax acts object of the proceeding, which was denied by order of 20.01.2017.

7- On 12.07.2016 the Claimant filed an Ex Officio Review procedure which ran under No. …2016…, against the assessments above identified in item b) of the identification table of the tax acts object of the proceeding above identified, which was denied by order of 19.12.2016.

8- As to the vehicles object of the IUC assessments at issue here, the Claimant, on the date of the tax facts, was registered in the motor vehicle register as the holder of the right of ownership over the same, which is why the respective Unique Circulation Taxes were assessed against it.

9- The vehicles with the registrations, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, …, … and …, were sold by the Claimant in a date prior to that of the tax facts that originated the assessments relating to the said vehicles.

10- The vehicle registration … was sold in a date prior to that of the tax fact that originated the corresponding assessment relating to the year 2014.

1. Unproven facts

With respect to Table No. 1, of Article 4 of the Initial Petition (documents 1 and 2) it was not proven that the assessments in question relate to tax whose taxable event occurred at a time when the Claimant was merely a beneficiary of a reservation of ownership clause stipulated in a loan contract.

With respect to table No. 2 of Article 4 of the Initial Petition (documents 3 to 31), beyond the vehicles identified in numbers 9 and 10 of the factual findings, it was not proven that the other vehicles had been sold in a date prior to that of the occurrence of the tax facts object of the present proceeding.

With respect to table No. 3 of Article 4 of the Initial Petition (document 32), it was not proven that the total loss of the vehicle in question by loss covered by an insurance contract had occurred in a date prior to that of the occurrence of the tax facts object of the present proceeding.

With respect to table No. 4 of Article 4 of the Initial Petition (documents 33 and 34) it was not proven that the tax facts in question occurred during the pendency of long-term rental contracts with purchase option by the lessee.

With respect to table No. 5 of Article 4 of the Initial Petition (documents 35 to 40) it was not proven that the tax facts in question occurred during the pendency of financial leasing contracts and long-term rental contracts, with purchase option by the lessee, with the proceedings in litigation and the vehicles not having been recovered to date.

1. Reasoning of the decision on the factual matter.

Proven facts

The tribunal's conviction regarding the decision on the proven factual matter was founded on the documents contained in the proceeding, specifically those submitted by the Claimant, as well as on the consultation made to the permanent certificate of its commercial registration.

Among other documents, the Claimant submitted with respect to the facts in question duplicate copies of invoices. From these documents dates of issuance appear, not being expressly stated from the same whether such dates are the dates of issuance of the invoices or the date of issuance of the duplicate copies thereof.

However, as the dates of issuance are close to the dates of expiration, it must be concluded, in accordance with the rules of experience, that the dates in question are those of the issuance of the invoices and not of the duplicate copies thereof.

Thus, the documents in question ("duplicate copies") lack dating.

If the dates referred to that of the issuance of the duplicate copies and not to the invoices to which they relate, it would then be the invoices themselves which would lack dating.

On the other hand, neither from the documents in question nor from the petition for arbitral pronouncement does there result any justification for the issuance of duplicate copies of invoices, specifically loss of the duplicate or copy intended for the provider's file, or other justifying reason.

In these circumstances, the alleged invoices in question cannot be considered as validly reformed and, consequently, the duplicate copies submitted are not suitable, by themselves, to prove the alleged sales.

However, with respect to the vehicles mentioned in numbers 9 and 10 of the proven facts (except for the particular situations of vehicles …, … and … which will be specified below) copies of the declarations of sale of the transmitted vehicles and of a letter from the Claimant with the sending of such declarations to the buyers were further submitted, which allows us to conclude with sufficient certainty and in light of the principle of free conviction that such sales in fact occurred.

Particularly with respect to vehicles … and …, although the declarations of sale of the vehicles were not submitted, copies of letters addressed to D…, S.A. were submitted, in which the sending of such declaration is mentioned and also copies of invoices issued by this company to the Claimant with the cost of the service (commission) for the sale of the vehicles, with dates close (with respect to the documents relating to each vehicle) and much earlier than the tax facts, which in light of the rules of experience, established in the tribunal the conviction that such sales in fact took place.

Also specifically, with respect to vehicle …, although the declaration of sale of the vehicle was not submitted, a declaration was submitted by the lessee of the vehicle dated 21.09.2005, in which the latter, in addition to declaring that on this date it acquired the vehicle from the Claimant, took responsibility, in particular, for making the registration, which, in light of the rules of experience, also established in the tribunal the conviction that such sale in fact took place.

1. Unproven facts

With respect to Table No. 1, of Article 4 of the Initial Petition, from the documents submitted (documents 1 and 2) to prove the facts in question, it results only that on 9.11.1999 a loan contract was entered into between the Claimant and E… and that on 03.08.2001 the latter declared that the Claimant had delivered to it the declaration for purposes of registration of ownership, as well as the title of ownership of the vehicle, being unaware of the vicissitudes of ownership of the vehicle, since no other proof was produced regarding this matter.

It is thus not proven in the proceedings that at the moment of the tax fact the Claimant was merely a beneficiary of a reservation of ownership clause, as it alleges.

With respect to table No. 2 of Article 4 of the Initial Petition (documents 3 to 31), beyond the vehicles identified in 9 and 10 of the factual findings, it was not proven that the other vehicles had been sold in a date prior to that of the occurrence of the tax facts object of the present proceeding, for the reasons that flow from the reasoning of the decision of those points of the factual findings.

In fact, With respect to the vehicles of table No. 2 of Article 4 of the Initial Petition not contained in numbers 9 and 10 of the factual findings, to prove the alleged transmissions, in most cases duplicate copies of invoices were submitted, but instead of what occurred with the vehicles identified in those numbers of the factual findings, no other elements were submitted, specifically copy of declaration of sale or declaration of buyer, capable of convincing the Tribunal of the effectiveness of the transmissions.

With respect to table No. 3 of Article 4 of the Initial Petition (document 32), it was not proven that the total loss of the vehicle in question by loss covered by an insurance contract had occurred in a date prior to that of the occurrence of the tax facts object of the present proceeding.

On the contrary, from the documents contained in the so-called "document 32" there appears, after an indication of total loss of the vehicle by the insurer of 27.12.2005, a declaration by the lessee that the repaired vehicle was delivered to it, dated 7.03.2006, a declaration of resolution of the rental contract by B…, of 23.10.2006, and a judgment of 12.02.2008 from the Judicial Court of Alcobaça, which condemns R to return the vehicle to the Claimant.

With respect to table No. 4 of Article 4 of the Initial Petition (documents 33 and 34) it was not proven that the tax facts in question occurred during the pendency of long-term rental contracts with purchase option by the lessee, since from the contracts submitted by the Claimant no purchase option right by the lessee by force of the leasing contract appears.

The circumstance that witness F… declared, in generic terms, that it is the practice of the Claimant to establish such clause in a separate document, does not prove to be suitable for proof of the fact in question because, on the one hand, the witness's testimony did not focus, concretely on the contracts in question and, on the other hand, because the existence of conventions against the content of the document or beyond it is insusceptible of being proven by witnesses, pursuant to Article 394(1) of the Civil Code.

With respect to table No. 5 of Article 4 of the Initial Petition (documents 35 to 40) it was not proven that the tax facts in question occurred during the pendency of financial leasing contracts and long-term rental contracts with purchase option by the lessee with the proceedings in litigation and the vehicles not having been recovered to date, since only rental contracts were submitted and from the same no purchase option right by the lessee by force of the leasing contract appears, and the considerations made with respect to the facts relating to table No. 4 of Article 4 of the Initial Petition also apply here.

III - Applicable Law

1. Pursuant to Article 3(1) of the IUC Code, in the wording in force on the date of the tax facts in question:

"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."

In turn, pursuant to item (2) of the same provision that "Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract are treated as owners".

The central legal problem to be resolved concerns the question of whether the person with respect to whom, from the motor vehicle register, results, in light of Article 3(1) of CIUC, the apparent quality of taxpayer, because being registered as owner of the vehicle, may prove, notwithstanding such circumstance, that they were not owner of the same on the date of the taxable event, or else, not contesting the quality of owner, that the situation falls within Article 3(2) of CIUC and thus, affront the quality of taxpayer of the tax, notwithstanding the registration.

1. In order to respond to the problem in question, it appears necessary to investigate whether Article 3(1) of CIUC, in the wording in force at the time, enshrined a presumption, a position sustained by the Claimant, or whether, differently, it is merely the configuration of the legal type of tax, within the freedom of legislative discretion, as the Respondent argues.

The answer to this question may be decisive, given that, in accordance with Article 73 of the General Tax Law, "Presumptions enshrined in tax incidence norms always admit contrary proof". Furthermore, as is stated in the Arbitral Decision handed down in proceeding 286/2013-T, the "understanding of the Constitutional Court, affirmed in judgment No. 348/97 of 29.4.1997 and reiterated in judgment No. 311/2003 of 28.4.2003, regarding the unconstitutionality of 'the establishment by the tax legislator of a presumption juris et de jure' since it 'completely prohibits to taxpayers the possibility of contravening the presumed fact, subjecting them to taxation that may be based on a taxable matter fixed in defiance of the principle of tax equality'."[1]

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

Thus, ANA PAULA DOURADO, ("The Principle of Tax Legality: Typicality, Indeterminate Legal Concepts and Margin of Discretionary Appreciation", Almedina Publisher, Theses collection, 2007) writes:

"With respect to fictions, as a technique employed in tax laws, and its function, Karl Larenz tells us that 'legal fictions normally aim at the application of the rule given for a foreseen fact (F1) to another foreseen fact (F2)... the law 'feigns' that F2 is a case of F1" (p. 603).

"Fiction distinguishes itself from simple presumption and absolute presumption in that it does not rest on 'a probability that normally transforms itself into truth', as it 'deforms («a legal truth») consciously" (p. 604)

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

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

CASALTA NABAIS has also dealt with this question ("The Fundamental Duty to Pay Taxes", Almedina, 2004, p. 500-501) writing that "(…) one must separate the situations in which we are faced with legal presumptions, in which from a known fact (real or even legal) a legally probable juridical fact is inferred, case in which contrary proof must be admitted, to reconcile them with the principle of contributory capacity, from situations in which we encounter the assumption of rules of common experience as rules of taxation, thus verifying the construction of legal norms (or legal types) with (eventual) recourse to legal fictions. In these, the principle of contributory capacity suffers the natural impact of the principles of practicability and effective fight against tax evasion, and one must content oneself with a safety valve for those cases which, by reaching such degrees of iniquity, cannot fail to permit the departure from said rules of experience".

1. In the case at hand, and in light of the authoritative doctrine cited, it appears clear that we were faced with a presumption, insofar as it resulted (very) probable from the fact of a person having a vehicle registered in their name, that they be, effectively, the owner thereof.

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

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

As was written in the aforementioned decision handed down in arbitral proceeding No. 286/2013-T, "as is already pointed out in other arbitral decisions handed down at this CAAD in relation to the same matter (cfr. the decisions handed down in proceedings Nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of legislative provisions, distinct from those invoked above, in which also there occurs the use of the expression 'being considered' or 'considers' with the meaning of presumption), not only can it not be said, in any way, that the attribution of a presumptive meaning to the expression 'being considered' does not have 'a minimum of verbal correspondence, albeit imperfectly expressed' (Article 9(2) of the Civil Code), as, more than that, one must even recognize to such word a current and normal correspondence to this presumptive sense.

For this reason, the fact that, differently from what happened with the literal enunciation 'being presumed' which previously was found in Article 3 of the Regulation of the Tax on Vehicles, the legislator came to use in CIUC the formula 'being considered' that appears in the current Article 3 of that Code, does not assume decisive weight, since this expression has perfect semantic efficacy to involve the establishment of a presumption". [2]

1. The Supreme Administrative Court judgment of 4-11-2009, handed down in proceeding 0553/09, applying Article 73 of the General Tax Law, in the context of income tax, goes even further considering that this rule "does not appear to be applicable only to tax incidence norms in the proper sense, but also to all norms which establish fictions that influence the determination of taxable matter (either directly, through fictional values for taxable matter, or indirectly, by fictionally fixing the values of the income relevant to their determination). This is, it appears, the scope of the adverb 'always' used in Article 73 of the General Tax Law, which raises this rule as a foundational principle of the entirety of the tax legal order, corollary of the principle of equality in the distribution of public burdens, based on the principle of contributory capacity".

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

In truth, "The principle of contributory capacity represents the material criterion of equality appropriate to taxes"[3] while "The principle of equivalence represents the material criterion of equality appropriate to charges and contributions".[4]

1. It should further be noted that, beyond Article 1 of the IUC Code providing that "The unique circulation tax follows the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that they cause, in concretization of a general rule of tax equality", other provisions reinforce and concretize the weight of this principle in the internal system of this tax.

From the outset, Article 3(1) of the Law that approved CIUC (Law No. 22-A/2007 of 29 June), concretizing this idea of equivalence, determines that: "The revenue generated by IUC on vehicles in categories A, E, F and G is the responsibility of the municipality of residence of the taxpayer or equivalent, as well as 70% of the component relating to engine displacement incurrent on vehicles of category B, except if that revenue is incurrent on vehicles subject to long-term rental or operational leasing, in which case it must be allocated to the municipality of residence of the respective user."

And, for purposes of effective concretization of this legislative intent, Article 19 of CIUC provides that: "For purposes of the provision in Article 3 of this code, as well as in Article 3(1) of its approval law, the entities that proceed to financial leasing, operational leasing or long-term rental of vehicles are obliged to provide to the General Directorate of Taxes the data relating to the tax identification of the users of the leased vehicles."

On the other hand, this principle of equivalence is further concretized in Article 3(2) of the same Code by providing that "Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract are treated as owners".

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

As Sérgio Vasques notes: "The structure of the new unique circulation tax is also clearly commutative, which since 2007 burdens automobiles according to levels of CO2 emissions, openly appealing to the principle of equivalence and a relationship of exchange with taxpayers"[5].

If it were not possible for the person registered as owner in the motor vehicle register to defeat the quality of taxpayer, by means of proof that they were not the owner on the date of the taxable event, this idea of equivalence could be decisively put into question, taxing the person who did not cause the environmental and road cost and not allocating the revenue to the Municipality that tended to bear those costs.

1. It is thus concluded that Article 3(1) of CIUC enshrined a rebuttable presumption, with the interested party having the burden, to defeat it, to prove that, notwithstanding the registration in their name, they were not the owner.

In this sense were, among others, the decisions handed down in arbitral proceedings numbered 26/2013-T, 27/2013-T, 14/2013-T, 170/2013-T, 256/2013-T, 286/2013-T and 289/2013-T, whose understanding is thus confirmed.

Thus, with respect to the assessments to which numbers 9 and 10 of the factual findings refer, in light of the proven matter, the petition for arbitral pronouncement cannot fail to proceed, with the consequent annulment of the assessments contained in the following table:

1. In light of the proven factual matter and the provision of Article 3(1) of CIUC, the illegality of the other assessments is not decreed as they have not been demonstrated to suffer from illegality, and therefore the same cannot fail to remain in the legal order.

2. The Claimant further came to petition for the condemnation of the Respondent to refund the amounts paid corresponding to the assessments sub judice.

Let us see.

In accordance with the provision in item b) of Article 24 of RJAT, the arbitral decision on the merits of the claim that is not subject to appeal or impugnation binds the tax administration from the end of the time limit provided for appeal or impugnation, and this must, in the exact terms of the grounding of the arbitral decision in favour of the taxpayer and until the end of the time limit provided for the spontaneous execution of judgments of the tax judicial courts, "restore the situation that would exist if the tax act object of the arbitral decision had not been made, adopting the necessary acts and operations for that purpose", which is in keeping with the provision in Article 100 of the General Tax Law [applicable by force of the provision in item a) of Article 29(1) of RJAT] which establishes that "the Tax Administration is obliged, in case of total or partial grounding of complaint, judicial impugnation or appeal in favour of the taxpayer, to the immediate and full reconstitution of the legality of the act or situation object of the litigation, comprising the payment of compensatory interest, if applicable, from the end of the time limit for execution of the decision".

In the case at hand, it is manifest that, with respect to the annulled assessments, there is basis for refund of the tax, by force of the aforementioned Articles 24(1)(b) of RJAT and 100 of the General Tax Law, as such is essential to "restore the situation that would exist if the tax act object of the arbitral decision had not been made".

1. The Claimant further came to petition for the right to compensatory interest.

It is also necessary to assess the Claimant's claim in light of Article 43 of the General Tax Law.

Article 43(1) provides that "Compensatory interest is owed when it is determined, in gracious complaint or judicial impugnation, that there was error attributable to the services resulting in payment of the tax debt in an amount superior to that legally due".

In the case "sub judice" it was not demonstrated that the Respondent had knowledge, on the date of the assessments to which numbers 9 and 10 of the factual findings refer, that the vehicles in question had been sold in dates prior to those of the tax facts.

In making these assessments, the Respondent complied with the provision in Article 3(1) of CIUC, applying the presumption established in this legal provision.

Having limited itself to applying the presumption, in the absence of proof defeating it, it cannot be concluded that the occurrence of "error attributable to the services" was verified.

Accordingly, the petition for condemnation of the Respondent to pay compensatory interest to the Claimant does not proceed.

IV - Decision

Thus, the Arbitral Tribunal decides:

• To judge partially grounded the petition for arbitral pronouncement and, in consequence, to annul the assessments relating to the vehicles referred to in number 9 of the factual findings and the assessment relating to the year 2014, relating to the vehicle identified in number 10 of the factual findings, above identified, in the total amount of 1,370.25 € (one thousand three hundred seventy euros and twenty-five cents) and condemning the Respondent to refund to the Claimant the value of these assessments paid by the Claimant.

• To judge ungrounded the petition for arbitral pronouncement with respect to the other assessments, with these assessments remaining in the legal order.

• To judge ungrounded the petition for condemnation of the Respondent to pay compensatory interest to the Claimant.

Value of the action: 3,577.47 € (three thousand five hundred seventy-seven euros and forty-seven cents), pursuant to the provision in Article 306(2) of the Code of Civil Procedure and 97-A(1)(a) of the Code of Administrative Tribunal Procedure and 3(2) of the Regulation of Costs in Arbitration Proceedings.

Costs in the amount of 612.00 € (six hundred twelve euros), pursuant to Article 22(4) of RJAT, to be borne by the Claimant in the proportion of sixty-one point seven per cent and by the Respondent in the proportion of thirty-eight point three per cent.

Notify.

Lisbon, 20 November 2017

The Arbitrator

Marcolino Pisão Pedreiro

[1] Available at https://caad.org.pt.

[2] Moreover, as sustained by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in the annotation to Article 73(3) of the General Tax Law ("General Tax Law") "presumptions in matters of tax incidence may be explicit, revealed by the use of the expression presumes or similar (…). However, presumptions may also be implicit in incidence norms, namely of objective incidence, when certain values of personal or real property are considered as constituting taxable matter, in situations in which it is not unfeasible to ascertain the real value" (Cfr. "Annotated and Commented General Tax Law", Encontros da Escrita, 4th Edition, 2012, page 651).

[3] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, page 251.

[4] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, page 260.
As this author further notes on page 227 of the same work "Until the end of the twentieth century, special taxes on alcohol, tobacco, petroleum products or automobiles had no other objective than revenue collection, showing the unilateral contours typical of any tax.
From the 1980s and 1990s (…), however, these tax figures came to be instrumentalized to compensation for the costs that consumption of these brings to public health and the environment, with which special consumption taxes have come to gain the nature commutative that is typical of contributions".

[5] Manual of Tax Law, Almedina, 2011, page 229.