IUC Tax on Vehicle Importers: Rebutting the Vehicle Registration Ownership Presumption (CAAD 208/2017-T)

ARBITRAL AWARD

I. REPORT

A… – BRANCH IN PORTUGAL ("Claimant", hereinafter), Corporate Person no. …, with registered office in …, …, …, hereby challenges the dismissal order dated 23.12.2016, issued by the Unit for Large Taxpayers (AT), which dismissed the Petitions for Official Review properly presented against 662 assessments of the Unique Circulation Tax (IUC) and compensatory interest (JC), relating to the years 2009 to 2012, inclusive, in the total amount of Euro 90,733.74.

It alleges the intention to obtain a declaration of illegality of the aforementioned order (doc 1, attached herewith), which was preceded by the draft decision for purposes of exercising the right of hearing (Doc 2, attached herewith).

It equally seeks a declaration of illegality of the acts of assessment of IUC and JC, which are the subject matter of the same Petition for Official Review, totaling Euro 90,733.74, which it paid and whose copies it attaches collectively as doc. 3 and whose contents are hereby given as fully reproduced for all legal purposes (cfr. also annex containing the list of assessments specifically challenged here).

It further alleged, fundamentally and in summary:

• that AT based itself exclusively on vehicle registration to effect the taxation of the Claimant;

• it presented a Petition for Official Review against those IUC and JC assessments, having attached thereto the documents better detailed therein (cfr. doc. 4, whose contents, for brevity, are hereby given as fully reproduced for all legal purposes).

• This Petition for Official Review was processed in the UCG under the administrative procedure of Official Review no. …2016… and related cases …, …, …, …, …, …, …, …, …, …, …, …and….

• AT based itself solely and exclusively on the presumption of Vehicle Registration.

The Claimant requests:

a) The annulment, on grounds of illegality, of the order dismissing the Petition for Official Review;

b) The annulment, on grounds of illegality, of the IUC and JC assessments challenged here, with the consequent reimbursement of the totality of IUC/JC unduly paid, Euro 90,733.74;

c) Recognition of the Claimant's right to compensatory interest, in accordance with legal terms;

d) Condemnation of the Respondent to payment of arbitral costs and other expenses, if any.

AT, notified to submit a Response, did so, alleging, in summary and in essence, that, pursuant to art. 24 of the RRA, the importer appears in the register as the first owner of the vehicle and, in that sense, is in accordance with the provisions of arts. 3 and 6 of the CIUC, the passive subject of the tax, and it is certain that there is no provision in the Law that the ownership recorded in the vehicle register is challengeable for purposes of identifying the passive subject of the tax; even if this were not the case, the invoices presented by the Claimant are not suited to prove the conclusion of synallagmatic contracts such as is the case of purchase and sale, as such documents do not reveal by themselves an essential and unequivocal declaration of will (i.e., acceptance) on the part of the alleged acquirers; furthermore, all invoices expressly state that ownership of the vehicle sold is reserved to the Claimant until full payment of the respective value, as verified in the upper left corner of the invoices, which reads: "The seller reserves for itself the ownership of the goods contained in this invoice until full payment of the respective price"; none of the documents attached to the arbitral request demonstrate full payment of the invoice amounts and the date on which such fact occurred, as the invoices themselves establish; the invoices containing no registration numbers, then obviously there is no computer system that, through the crossing of information contained therein with information from the IRN and IMT, could determine transfer of ownership; the IUC is assessed in accordance with registry information timely transmitted by the Institute of Registers and Notaries; the Claimant having not attended to updating the vehicle register, as it indeed could and was competent to do [article 5(1)(a) of Decree-Law 54/75, of 12 February, and article 118(4) of the Road Code], and having not ordered cancellation of the registration numbers of the vehicles in question, it is necessary to conclude that the Claimant did not proceed with the care required of it; therefore, it was not the Respondent who gave rise to the arbitral judgment request, but rather the Claimant itself; consequently, the Claimant should always be condemned to payment of arbitral costs arising from this arbitral judgment request, pursuant to article 527(1) of the CPC ex vi of article 29(1)(e) of the RJAT, in line, moreover, with a similar matter decided in the context of a case that, under no. 72/2013-T, was processed in this arbitration center, and this same reasoning is applicable with respect to the request for condemnation to payment of compensatory interest formulated by the Claimant; even if it is understood that the tax is not due to the Claimant because it is not the passive subject of the tax obligation, still and exactly as was decided by the aforementioned Arbitral Tribunal constituted in the context of case no. 26/2013-T, it is undeniable that the Respondent limited itself to complying with article 3(1) of the CIUC, which attributes such status to persons in whose names the vehicles are registered, whereby for this reason as well the recognition of the right to payment of compensatory interest must necessarily fail.

Constitution of the Arbitral Tribunal

The claimant did not proceed to the appointment of arbitrators, whereby, under the provisions of article 6, no. 2, letter a) of the RJAT, the undersigned were designated by the president of the Deontological Council of CAAD to compose this Collective Arbitral Tribunal, having accepted the assignment under the terms legally provided.

The parties were duly and regularly notified of this designation of arbitrators and did not manifest willingness to refuse it in accordance with the combined provisions of article 11, no. 1, letters a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

The Tribunal was constituted on 26-5-2017 [article 11(1)(c) of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31-12]

Meeting of the Tribunal with the parties (article 18 of the RJAT)

By order of 6-7-2017, the Tribunal, absent objection by the parties within 5 days [which did not occur], dispensed with the meeting provided for in article 18 of the RJAT, as well as the production of witness testimony and final arguments.

Procedural Clarification/Procedural Presuppositions

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

Given that it concerns the same tax (IUC) and considering the identity of the factual and legal grounds in all challenges to the assessments, the presuppositions provided for in articles 104 of the CPPT and 3 of the RJAT are verified, for the joinder of the requests.

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

The proceeding does not suffer from nullities and no issues were raised that might impede examination of the merits of the case.

II. GROUNDS FOR DECISION

Facts Proven

Absent essential disputed facts but only divergences of interpretation or legal characterization of the assessment acts, as tacitly and expressly was recognized by the Claimant and AT, the following factual framework is established:

a) The claimant is a commercial company that, in the course of its activity, imports, exclusively, all motor vehicles of the C… brand for the national market.

b) The vehicles are imported by the claimant from C… International, through prior request by the concessionaires, presented electronically directly to the factory.

c) The need for vehicle imports stems from orders placed directly by the concessionaires with the claimant, whereby there are no sales of vehicles to the claimant and from it to those parties, without the respective purchase order.

d) Upon arrival in Portugal, the vehicles are immediately invoiced by the claimant to the concessionaires and immediately delivered to their facilities, except for vehicles destined for Madeira and the Azores, which are deposited in a logistics company warehouse.

e) Once the vehicles are imported, the official representative associated – B… – requests in the name of the claimant the assignment of registration numbers to the vehicles.

f) The invoices for sale of the vehicles to the concessionaires do not contain the registration numbers, as they have not yet been requested, but only the vehicle identification numbers of the vehicles sold to the concessionaires.

g) After the sale to the concessionaires the claimant pays the due Vehicle Tax, requests the issuance of the registration number and invoices them for the tax borne, making the registration numbers of the vehicles appear on their respective invoices.

h) The self-assessments now challenged result from the fact that the claimant is, for the reasons above, the first registered owner of the vehicles as their importer.

i) The 662 IUC assessments, relating to the years 2009 to 2012, had as their object the vehicles detailed in the respective list attached to this judgment, which is hereby given as fully reproduced, initialed by the president of the collective with the agreement of the other co-arbitrators, and which constitutes "Annex I";

j) The claimant presented a petition for official review with respect to such self-assessments, whose proceeding ran under no. 02016… and related cases, which was dismissed by order of 23-12-2016;

k) The claimant was granted the right of hearing with respect to the draft order mentioned, but did not exercise it;

l) The claimant proceeded to payment of the aforementioned assessments in accordance with the itemization set forth in doc. 3, attached with the arbitral request;

m) On the dates referred to in "Annex I" to this decision, the Claimant was not the owner of the vehicles listed therein.

Facts Not Proven

There are no other facts that prove essential to the decision, either proven or not proven.

Motivation

The Tribunal has no duty to pronounce on all the matter alleged, having rather the duty to select only that which matters for the decision, taking into account the cause (or causes) of action that grounds the request formulated by the claimant (cfr. arts. 596(1) and 607(2)-(4) of the Civil Code, in the wording of Law 41/2013, of 26/6, and to record whether it considers it proven or not proven (cfr. art. 123(2) of the CPPT).

According to the principle of free appraisal of evidence, the Tribunal bases its decision, in relation to evidence produced, on its intimate conviction, formed from the examination and evaluation it makes of the means of proof brought to the proceeding and in accordance with its experience of life and knowledge of people (cfr. art. 607(5) of the CPC). Only when the probative force of certain means is pre-established in law (e.g., full probative force of authentic documents - cfr. art. 371 of the Civil Code) does not the principle of free appraisal of evidence dominate in the appraisal of the evidence produced.

The Tribunal's conviction was based, in this case, on critical analysis of the documents presented by the parties and the copy of the administrative instructional proceeding attached by AT, in conjunction with the position of the parties assumed in their respective pleadings.

Particular weight was given to the silent position of the Claimant, with the meaning of agreement or acceptance, regarding the production of witness testimony and of the Respondent on the same matter which, in the response to the arbitral judgment request, stated that "(…) in accordance with the terms outlined in the learned arbitral judgment request, the production of witness testimony appears unnecessary, in the case at hand, both because documentary elements are contained in the file that will provide proof of the facts, and because, with respect to the other articles, these constitute conclusive or legal matter (…) Thus, the dispensation of witness testimony production is requested, since the examination of witnesses would constitute a manifestly futile act (…)" [cfr articles 129 and 130 of the Response].

II. GROUNDS FOR DECISION (continued)

The Law

The contentious scheme provided for in the RJAT is one of mere legality, aiming solely at the declaration of illegality of acts of the types provided in letters a) and b) of no. 1 of its article 2.

Therefore, one must assess the legality of the challenged acts as they were practiced, with the grounds used in them, and other possible grounds that could support other acts with decision content totally or partially coinciding with the act practiced are not relevant. Thus, grounds invoked after the fact, after the end of the tax procedure in which the act whose declaration of illegality is requested was practiced, including those advanced in the judicial proceeding, are irrelevant.

On the other hand, it should once more be noted that Courts (which obviously include arbitral courts) do not have to appraise all arguments formulated by the parties (Cfr., inter alia, Judgment of the Plenary of the 2nd Section of the STA, of 7 Jun 95, rec 5239, in DR – Appendix of 31 March 97, pgs. 36-40 and Judgment STA – 2nd Sec – of 23 Apr 97, DR/AP of 9 Oct 97, p. 1094).

Issues to be Decided

In light of the positions assumed by the parties in the arguments presented in the petition for official review and in the pleadings and arguments, the following are, if we understand correctly, central determinative issues:

• What is the legal value of vehicle registration in the economy of the CIUC, namely for purposes of the subjective scope of this tax and, in particular, whether the norm of subjective scope contained in article 3 no. 1 of the CIUC establishes or does not establish a presumption;

• Whether the presentation of sale invoices constitutes a suitable means for proof of sale of a motor vehicle;

• Whether there is occasion for compensatory interest to be paid by AT in the event that, for purposes of taxation in the context of IUC, the ownership of the vehicle recorded in the vehicle register has the nature of a challengeable presumption (and is challenged); and

• Whether, even in the event of success of the request, AT should bear the costs.

Let us then examine the answers to these issues.

a. What is the legal value of vehicle registration in the economy of the CIUC, namely for purposes of the subjective scope of this tax and, in particular, whether the norm of subjective scope contained in article 3 no. 1 of the CIUC establishes or does not establish a presumption

It is stated in advance that the majority arbitral tax jurisprudence on this matter is essentially followed [Cfr, in particular, decisions handed down in cases of CAAD nos. 14/2013, 26/2013, 27/2013, 73/2013, 170/2013 and 154/2014 and, more recently, in cases nos. 539/2016-T, 580/2016-T, 623/2016-T, 109/2017-T and 145/2017-T, all published in www.caad.org.pt] and also, more recently, the arbitral award still unpublished handed down in case no. 185/2017, which was processed between the same parties.

Equally relevant and supporting the understanding of this Tribunal is the Judgment of the TCAS, handed down on 19-3-2015, in case no. 08300/14 (in www.dgsi.pt), which establishes the doctrine of challengeable nature, by force of article 73 of the LGT, of the legal presumption of ownership recorded in the vehicle register.

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

"Article 3

Subjective Scope

1 – The passive subjects of the tax are the owners of the vehicles, understanding as such the natural or legal persons, of public or private law, in whose names the same are registered.

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

Article 11, no. 1 of the LGT, for its part, establishes that "in determining the sense of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed."

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

There is thus need to consider what is the best interpretation of art. 3, no. 1 of the CIUC, in light, first of all, of the literal element, that is to say that in which it is sought to detect the legislative thinking that is objectified in the norm, to verify whether the same contemplates a presumption, or whether it determines, definitively, that the passive subject of the tax is the owner appearing in the register.

The question that arises is, in the case at hand, whether the expression "considering-themselves" used by the legislator in the CIUC, instead of the expression "presuming-themselves," which was what appeared in the statutes preceding the CIUC, will have removed the nature of "presumption" from the legal provision in question.

In our view and contrary to what AT contends, the answer must necessarily be negative, since from the analysis of our legal system it emerges clearly that the two expressions have been used by the legislator with equivalent sense, whether at the level of challengeable presumptions, or in the context of non-challengeable presumptions, whereby nothing empowers us to draw the conclusion intended by the Tax Authority based on a mere semantic reason.

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

• within the scope of civil law - no. 3 of art. 243 of the Civil Code, when it establishes that "it is always considered in bad faith the third party who acquired the right subsequent to the registration of the simulation action, when the same takes place";

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

• and also, still within the scope of tax law, when nos. 3 and 4 of art. 89-A of the LGT provide that the burden of proof rests with the taxpayer that the declared income corresponds to reality and that, such proof not being made, it is presumed ("it is considered" in the wording of the Law) that the income is that which results from the table contained in no. 4 of the said article.

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

It is necessary, subsequently, to submit the norm in question to the other elements of logical interpretation, namely, the historical element, the rational or teleological element, and the element of systematic order.

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

As BAPTISTA MACHADO states, "the legal provision presents itself to the jurist as a linguistic statement, as a set of words that constitute a text. To interpret obviously consists in drawing from that text a determined sense or content of thinking.

The text admits multiple senses (polysemy of text) and frequently contains ambiguous or obscure expressions. Even when apparently clear on first reading, its application to concrete life cases frequently gives rise to unsuspected and unpredictable interpretive difficulties. Moreover, although apparently clear in its verbal expression and bearing a single sense, there is still the possibility that the verbal expression has belied the legislative thinking – a phenomenon more frequent than may appear on first sight" (Cfr. Introduction to Law and Legitimizing Discourse, pp. 175/176).

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

To understand a law "is not only to mechanically grasp the apparent and immediate sense that results from verbal connection; it is to inquire with profundity the legislative thinking, to descend from the verbal surface to the intimate concept that the text encloses and to develop it in all its possible directions" (loc. cit., p. 128).

With the objective of unraveling the true sense and scope of legal texts, the interpreter employs interpretive factors that are essentially the grammatical element (the text, or the "letter of the law") and the logical element, which, in turn, subdivides into the rational (or teleological) element, the systematic element, and the historical element. (Cfr. BAPTISTA MACHADO, loc. cit., p. 181; J. OLIVEIRA ASCENSÃO, The Law – Introduction and General Theory 2nd Ed., Calouste Gulbenkian Foundation, Lisbon, p. 361).

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

The text of no. 1 of article 9 of the CC begins by saying that interpretation should not confine itself to the letter of the law, but reconstruct, from it, the "legislative thinking."

Regarding the expression "legislative thinking," BAPTISTA MACHADO tells us that article 9 of the CC "did not take a position in the controversy between the subjectivist doctrine and the objectivist doctrine. This is proven by the fact that it refers neither to the 'will of the legislator' nor to the 'will of the law,' but rather points as the scope of interpretive activity the discovery of 'legislative thinking' (art. 9, 1st). This expression, intentionally colorless, means exactly that the legislator did not wish to commit itself" (loc. cit., p. 188).

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

And regarding no. 3 of article 9 of the CC that author states: "(…) this no. 3 proposes to us, therefore, a model of ideal legislator that enshrined the most appropriate solutions (most correct, just or reasonable) and knows how to express itself correctly. This model clearly has objectivist characteristics, for one does not take as the point of reference the concrete legislator (so often incorrect, hasty, unfortunate) but an abstract legislator: wise, far-seeing, rational and just (…)" (loc. cit., p. 189/190).

Immediately following, this distinguished Professor draws attention to the fact that no. 1 of article 9 refers further to three elements of interpretation: "the unity of the legal system," "the circumstances under which the law was enacted," and "the specific conditions of the time in which it is applied" (loc. cit., p. 190).

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

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

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

It is also this author who tells us, regarding the literal or grammatical element (text or "letter of the law"), that this "is the starting point of interpretation. As such, it bears from the outset a negative function: that of eliminating those senses that have no support, or at least any correspondence or resonance in the words of the law.

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

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

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

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

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

Now through the analysis of the historical element, the conclusion is drawn that, from the entry into force of Decree-Law 59/72, of 30 December, the first to regulate the matter, until Decree-Law no. 116/94, of 3 May, the last preceding the CIUC [cfr Law no. 22-A/2007, with amendments of Law 67-A/2007 and 3-B/2010], the presumption was enshrined that the passive subjects of the IUC are the persons in whose names the vehicles were registered on the date of their assessment.

It is verified, therefore, that tax law has always had the objective of taxing (for the case that interests us) the true and effective owner and user of the vehicle, appearing it to be indifferent the use of one or another expression, which, as we have seen, have in our legal order a coinciding sense.

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

In fact, the current and new framework of vehicle taxation enshrines principles aimed at subjecting vehicle owners to bear the costs of damages from traffic and environmental damages caused by these, as is gleaned from the wording of art. 1 of the CIUC.

Now the consideration of these principles, in particular, the principle of equivalence, which merit constitutional protection and are enshrined in community law, and are also recognized in other branches of the legal order, determines that the aforementioned costs be borne by the real owners, the causers of the referred damages, which entirely excludes an interpretation aimed at preventing the presumed owners from providing proof that they are no longer so because ownership is in the legal sphere of another.

Thus, also, from the interpretation effected in light of elements of a rational and teleological nature, taking into account what the rationality of the system guarantees and the purposes aimed at by the new CIUC, it is clear that no. 1 of art. 3 of the CIUC enshrines a challengeable legal presumption.

In light of the foregoing, it is important to conclude that the ratio legis of the tax points in the direction that the actual owner-users of the vehicles be taxed, whereby the expression "considering-themselves" is used in the normative in question in a sense similar to "presuming-themselves," reason for which there is no doubt that a legal presumption is enshrined.

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

Thus being, enshrining art. 3, no. 1 of the CIUC a presumption juris tantum [and, therefore, challengeable], the person who is registered in the register as owner of the vehicle and who, for that reason was considered by the Tax Authority as the passive subject of the tax, may present elements of proof aimed at demonstrating that the holder of ownership, on the date of the taxable event, is another person, to whom ownership was transferred.

To these considerations should be added that, finding ourselves in the domain of assignment of the first registration number, it is important to take into account the legal mechanisms established for this purpose, regarding the vehicles identified in the proceeding and the corresponding initial registration of ownership.

In light of the provision in no. 4 of art. 117 of the Road Code, approved by Decree-Law no. 114/94, of 3 May, whose last amendment was introduced by Law no. 47/2017, of 7 July, the vehicle registration "[…] must be requested from the competent authority by the person, natural or legal, who proceeds to its admission, importation or placing into consumption in national territory." (emphasis added)

And no. 1 of art. 24 of the Regulation of Vehicle Registration, approved by Decree-Law no. 55/75, of 12 February, with the last wording introduced by Decree-Law no. 201/2015, of 17 September, provides that "The initial registration of ownership of vehicles imported, admitted, assembled, constructed or reconstructed in Portugal is based on the respective request and proof of compliance with tax obligations relating to the vehicle." (emphasis added)

On the other hand moreover, no. 1 of art. 118 of the said Road Code provides that "for each vehicle registered a document must be issued destined to certify the respective registration, from which must appear the characteristics that allow it to be identified," adding no. 2 of the same article that "the holder of the vehicle identification document is the person, natural or legal, in whose name the vehicle is registered and who, in the capacity of owner or to another legal title, may dispose of it […]." (emphasis added)

Now the document destined to certify the respective registration, as it results from what is established in no. 1 of art. 4 of Decree-Law no. 178-A/2005, of 28 October, which approved the Single Motor Vehicle Document and created the Registration Certificate, is issued "[…] when the first registration of vehicle imported, admitted, assembled, constructed or reconstructed in Portugal is effected," providing no. 2 of the said article that "the carrying out of any act relating to vehicle that implies alteration of the elements contained in the registration certificate determines the issuance of a new certificate, and delivery of the previous one is mandatory." (emphasis added)

It should be noted that the aforementioned first registration must be requested within 60 days, after the assignment of the registration number, in light of the provision in nos. 1 and 2 of art. 42 of the Regulation of Vehicle Registration, when it is there established that "1 - The mandatory registration must be requested within 60 days from the date of the fact. 2 - In the case of initial registration of ownership, the period referred to in the previous number is counted from the date of assignment of the registration number." (emphasis added)

Thus, from the conjunction of the mentioned norms, it is drawn that the first registration of the vehicle cannot but be effected in the name of the person who proceeds to its admission, importation or placing into consumption in national territory [in the case, the Claimant], who must provide proof of compliance with its tax obligations, particularly the Vehicle Tax.

It is in this context that the first registration of each of the vehicles in question cannot but be effected in the name of the Claimant, that is, the first registration of each of the vehicles identified in the file cannot, by any means, be circumvented by the Claimant (company of importation, commercialization and distribution of motor vehicles), insofar as its association with the DAV and payment of Vehicle Tax (ISV) and assumes, for the State, while creditor of the tax, an important function of certainty and fiscal security, in that in the absence of that registration request, within the legal period, the IUC will be assessed and demanded from the passive subject of the ISV, embodied in the respective importers, given that they and no others are the persons referenced in the DAV, as results from no. 1, letter a) of art. 18 of the CIUC, which means that only in the case that ownership of the vehicles has not been registered within the said 60-day period will the IUC be demanded from the Claimant.

Concluding on this point: the initial registration of the vehicle's ownership must, therefore, be effected within 60 days, counted from the assignment of the registration number, as results from the provision in nos. 1 and 2 of art. 42 of the Regulation of Vehicle Registration, and the tax must be assessed by the passive subject within the 30 days following the end of the period required for the registration request, in light of what is established in no. 1 of art. 17 of the CIUC.

b. Whether the presentation of sale invoices constitutes a suitable means for proof of sale of a motor vehicle

Purchase and sale contracts for automobiles have a consensual basis and without subjection to special formalities (Cfr articles 219 and 408(1) of the Civil Code).

The challenging of the legal presumption obeys the rule contained in art. 347 of the Civil Code, according to which full legal proof can only be contradicted by means of proof that shows that the fact of which it is the object is not true. What means that it is not sufficient for the opposing party to present mere counter-proof – which is intended to cast doubt on the facts (cfr. art. 346 of the Civil Code) that renders the presumed facts doubtful; on the contrary, it must show that the presumed fact is not true, in such form that no uncertainty remains that the facts resulting from the presumption are not real.

The invoices attached to the file, as proof of the sale of the vehicles, taking into account the business object of the Claimant, centered, in particular, on the exclusive importation, into Portugal, of motor vehicles of the C… brand and in the necessary sale of those vehicles to its customers, show themselves to be entirely appropriate to the aforementioned business reality, being absolutely plausible the sale of the vehicles that the invoices presented aim to prove, with no elements being identified that embody any simulated contract, rather permitting conclusion that we are before invoices that reflect the real and true sale of the vehicles to the persons named therein.

The invoices in question (copies), relating to the sales of the vehicles, insofar as they enjoy the presumption of truthfulness that is conferred upon them in no. 1 of art. 75 of the LGT, with it falling upon AT, in light of the provision in art. 75, no. 2 of the LGT, within the framework of founded and objective reasons that it might have, to demonstrate that the information inscribed in them does not correspond to reality, permit to conclude the real transfer of the title of the vehicles, constituting a sufficient means of proof to challenge the presumptions at issue in the file, that is, the presumption established in art. 7 of the Code of Land Registration and that enshrined in no. 1 of art. 3 of the CIUC, which means that, on the date when the tax was due, the ownership of the vehicles in question had been transferred from the Claimant to third parties, the Claimant not being the passive subject of the tax in question.

Thus, having the vehicles referenced in the file been alienated on dates prior to the dates relating to the due diligence of the IUC, it should be considered that the Claimant, with respect to such vehicles, was not, on the date to which the assessments in question relate, the passive subject of the tax in question, and it cannot, therefore, be left out of consideration that the legal presumption enshrined in no. 1 of art. 3 of the CIUC was challenged.

It should further be noted that both the invoice (as well as the debit note) are in fact accounting documents elaborated within the company and that are destined for the outside. The invoice should be viewed as the accounting document through which the seller sends to the buyer the general conditions of the transaction effected. For its part, the debit note consists of the document in which the issuer communicates to the recipient that the latter owes him a certain monetary amount. Both documents arise at the stage of liquidation (which frequently does not coincide with the actual payment) of the amount to be paid by the buyer. Thus, although not providing proof of actual payment of the price by the buyer, they constitute proof of that same transaction, that is, of the purchase and sale effected. Purchase and sale that may moreover be effected, with reservation of ownership for the seller until payment of the price, without such preventing that the obligation of IUC fall upon the buyer.

It is concluded thus by the admission of proof of the sale of a motor vehicle through the demonstration of the existence of issuance of a valid invoice and, consequently, that the Claimant was not really the owner of the vehicles to which the assessments in question relate, by having transferred, on the date when the respective IUC was due, the ownership of the vehicles, in accordance with civil law.

Those documentary elements constituted by copies of the respective sale invoices still without mention of the registration numbers enjoy – it is insisted – the presumption of truthfulness that is conferred upon them by the aforementioned art. 75, no. 1 of the LGT, and thus have suitability and sufficient force to challenge the presumption that supported the assessments effected based exclusively, as the Law provides, on vehicle registration.

Only that, as was seen, contrary to the understanding of AT, the registration of ownership in the name of the taxpayer does not prevent the latter from demonstrating that that situation does not correspond to the real situation on the date of registration of the vehicle or on the anniversary thereof (article 4(1) and (2) of the CIUC).

These effective operations of transmission or challenging of apparent ownership are, on the other hand, opposable to the Tax and Customs Authority, whereby, although the facts subject to registration only produce effects in relation to third parties when registered, in light of the provision in art. 5, no. 1 of the Code of Land Registration [applicable by reference in the Code of Vehicle Registration], the Tax Authority is not a third party for purposes of registration, since it is not in the situation provided in no. 2 of the said art. 5 of the Code of Land Registration, applicable by force of the Code of Vehicle Registration, that is, it has not acquired from a common author incompatible rights.

Thus it is that, in summary, vehicle registration, in the economy of the CIUC, represents mere challengeable presumption of the passive subjects of the tax.

In the case, the claimant succeeded, with complete success, in challenging that presumption and demonstrating that the reality of the registration was a mere appearance of that same reality, that is, the registered owner was not the real owner, the passive subject of the IUC.

In these circumstances, the mentioned and now challenged assessments must be annulled and, consequently, reimbursed to the Claimant, by the Tax and Customs Authority, the respective amounts thus unduly collected and evidenced in the mentioned and documented acts of assessment and payment.

c. Whether there is occasion for compensatory interest to be paid by AT in the event that, for purposes of taxation in the context of IUC, ownership of the vehicle recorded in the vehicle register has the nature of a challengeable presumption (and is challenged)

This is a matter of ascertaining whether, under article 24, no. 5 of the RJAT, the request for payment of compensatory interest in favor of the Claimant (Cfr. art. 43 of the LGT and 61 of the CPPT), should proceed.

In this respect, the decision handed down in case no. 26/2013-T, of 19/7/2013 and in case no. 185/2017-T (which dealt with situations similar to that now under consideration) is supported, that is, that "(…) the right to compensatory interest to which the aforementioned norm of the LGT refers presupposes that tax has been paid in amount greater than that due and that such derives from error, of fact or of law, imputable to AT services […] albeit it is recognized that tax is not due to the claimant, by not being the passive subject of the tax obligation, determining, in consequence, the respective reimbursement, it is not perceived that, in its origin, is found the error imputable to the services, that determines such right [to compensatory interest] in favor of the taxpayer. In fact, in promoting the official assessment of the IUC considering the claimant as the passive subject of this tax, AT limited itself to complying with the norm of no. 1 of art. 3 of the CIUC, which, as abundantly referred to above, imputes such status to the persons in whose names the vehicles are registered." (Cfr also in this same sense, v.g., the arbitral tax decisions handed down in CAAD cases nos. 170/2013-T, of 14/2/2014, 136/2014-T, of 14/7/2014, 230/2014-T, of 22/7/2014 and 140/2014-T, of 29/8/2014).

That is: the Tribunal considers that the grounds for annulment are not based on error imputable to the services, since the Respondent issued the assessments having in view the information it had available, and is not responsible, nor can be held responsible, for its respective updating or non-conformity. Thus, the presuppositions listed in article 43 of the LGT are not met.

d. Whether, if the request proceeds, AT should bear the costs

Payment of costs at the end of the proceeding, in general, is borne by the losing party, in proportion to its loss.

This will not be the case, however, if, despite losing, that party did not give rise to the action.

This was, for example, the case cited by AT of the decision handed down in case no. 72/2013-T, in which the cause of the proceeding was the omission of presentation of documents by the winning taxpayer.

The situation in these proceedings is quite different insofar as the challenging of the presumption contained in vehicle registration had already been demonstrated, without success, in the context of a gracious complaint.

Consequently, AT must bear all the costs.

III. DECISION

In harmony with the foregoing, the members of this Arbitral Tribunal agree in:

I) To declare the requests for declaration of the illegality of the dismissal of the petition for official review of the self-assessments of IUC and compensatory interest object of the proceedings and identified above, well-founded;

II) To revoke the act of dismissal of that petition for review and annul the said assessments;

III) To declare the request for reimbursement of the amounts paid corresponding to the said assessments, in the total amount of € 90,733.74, well-founded and to condemn the Tax and Customs Authority to reimburse them;

IV) To declare the request for payment of compensatory interest by the Tax and Customs Authority, ill-founded; and

V) To condemn the Tax and Customs Authority in the costs of this proceeding.

Value of the Proceeding

In accordance with the provisions of articles 306, no. 2 of the CPC, article 97-A, no. 1, letter a), 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 € 90,733.74.

Costs

Under article 22, no. 4 of the RJAT, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 2,754.00.

• Notify of this decision, which includes "Annex I" referred to above and which forms an integral part thereof for all legal purposes. It is initialed by the president of the collective and has the agreement of all the other arbitrators who compose it.

• Register and, in due course, file the proceeding.

Lisbon, 9 October 2017

The Collective Arbitral Tribunal

José Poças Falcão
(President)

Luís Menezes Leitão
(Member)

António Correia Valente
(Member)

[Attached dissenting opinion in part]

DISSENTING OPINION ATTACHED TO THE ARBITRAL AWARD

I dissent from the above Award, insofar as I understand, saving due respect for the contrary opinion, that the Claimant is entitled to be compensated for the damage caused to it by the undue payment of the amount of € 90,733.74, as title of Unique Circulation Tax and Compensatory Interest.

In fact, in light of the provision in no. 1 of art. 43 of the LGT, there is occasion for payment of compensatory interest, whenever, due to error imputable to AT services, results the payment of the tax debt in amount greater than legally due.

The requirements of the right to the aforementioned interest are embodied, more concretely, in the existence of an error in the assessment acts; in the imputation of that error to the services (and not to the taxpayer); in the determination of the error, in particular, in judicial challenge and that, from those circumstances, result the payment of the tax debt in amount greater than legally due.

In the case of these proceedings, it appears that the aforementioned requirements are met, both because AT proceeded to the illegal assessment of the IUC, based on the erroneous interpretation and application of the norms of subjective scope of the Unique Circulation Tax contained, in particular, in art. 3 of the CIUC, whether at the level of provision, or of enactment, and because the assessments in question were sustained by facts different from those that correspond to reality, when one considers as owner of the vehicles, one who (in the case the Claimant), on the date of the due diligence of the IUC, effectively, no longer was, and because from thereof resulted a payment of the tax debt in amount, manifestly, greater than legally due.

Thus, it appears to us that, in light of what is established in article 61 of the CPPT and that the requirements of the right to compensatory interest are met, as referred to, the Claimant is entitled to compensatory interest at the legal rate, calculated on the amount of € 90,733.74, which shall be counted, from the date of payment of the tax and the corresponding compensatory interest, until the full reimbursement of that same amount.

António Correia Valente