Summary
Full Decision
APPLICANT: A
RESPONDENT: Tax and Customs Authority
ARBITRAL DECISION
I – REPORT
A) The Parties and Constitution of the Arbitral Tribunal
A, Tax Identification Number ..., hereinafter referred to as the Applicant, with registered office at Place ..., ..., ... requested the constitution of an Arbitral Tribunal, pursuant to the provisions of paragraph a) of no. 1 of article 2º of the Legal Framework for Tax Arbitration, approved by Decree-Law no. 10/2011, of 20 January, hereinafter designated as "RJAT", to rule on the claim opposing it to the Tax and Customs Authority, hereinafter designated as "Respondent" or "AT", with a view to the annulment of the tax assessment acts for the Unique Circulation Tax relating to the year 2008, which it attached to the case file as document no. 4 attached to the initial request and which are deemed to be wholly reproduced herein.
The request for constitution of the Arbitral Tribunal presented on 4 September 2013 was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority on 6 September 2013.
The Applicant chose not to designate an arbitrator, therefore, pursuant to the provisions of no. 1 of article 6º of the RJAT, the undersigned was designated by the Deontological Council of the Administrative Arbitration Centre as sole arbitrator. The appointment was accepted and, on 22 October, the parties were notified of the arbitrator's designation, having manifested no intention to refuse the appointment.
Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11º of Decree-Law no. 10/2011, of 20 January, with the wording introduced by article 228º of Law no. 66-B/2012, of 31 December, the Singular Arbitral Tribunal was constituted on 6 November 2013.
On the same date, the AT was notified, pursuant to and for the purposes of the provisions of nos. 1 and 2 of article 17º of the RJAT, to present its reply within the legal time limit.
The AT presented its reply on 9 December 2013 and on 16 January 2014 the meeting referred to in article 18º of the RJAT was held, from which minutes were drawn up which are attached to the case file and are hereby deemed wholly reproduced for all legal purposes.
B) THE REQUEST FORMULATED BY THE APPLICANT:
The Applicant formulates the present request for arbitral ruling against the partial denial of the Administrative Review, presented against the tax assessment acts for IUC relating to the year 2008, as well as the respective assessments of compensatory interest, contained in document no. 4 attached to the arbitral request, in the amount of € 3,620.71, alleging in summary the following:
The Applicant now seeks for this Singular Arbitral Tribunal to declare the illegality and consequent annulment of the tax assessment acts for IUC relating to the year 2008, which it identifies in the request for arbitral ruling and proves by the documents that support the arbitral request.
It begins by alleging the statute of limitations of the tax assessments in question in the case file and attached to the proceedings as document no. 4, attached to the Initial Petition, which is deemed wholly reproduced herein.
To substantiate the request for arbitral ruling, regarding the alleged statute of limitations, the Applicant alleged, in summary, that IUC is a single-obligation tax, invoking various jurisprudence and doctrine in support of its thesis.
Starting from this premise, the Applicant concludes that the four-year period for the statute of limitations of the right to tax is counted from the date on which the taxable event occurred.
Starting from this premise, it alleges that it was notified of the said tax assessments beyond the statute of limitations period provided for in article 45º of the General Tax Code.
It further alleges, regarding the subjective scope of the tax, that it does not constitute a taxable person for IUC purposes.
That as of the date of the taxable events, the vehicles in question were no longer the property of the Applicant, having been disposed of at the end of the financial lease contracts, facts which are proven by the respective financial lease contracts and the invoices for sale attached to the case file as documents nos. 5 to 12.
It alleges that the respective purchasers did not effect the proper registration, which is why, in the database of the Motor Vehicle Registration Bureau, the Applicant appears as the owner and not the respective purchasers.
It further invokes that the fact that the registration is not updated does not prove that she may be considered as the owner and, consequently, as the taxable person for the IUC's in question, since, pursuant to article 408º of the Civil Code, the transfer "takes effect by mere operation of contract".
It adds that registration of the acquisition with the competent Motor Vehicle Registration Bureau is not a condition for the transmission of ownership, nor does it affect its validity, since, pursuant to article 7º of the Land Registration Code, applicable pursuant to article 29º of Decree-Law no. 54/75, of 12 February, registration only "(…) constitutes a presumption that the right exists and belongs to the person registered in the precise terms in which the registration defines it."
The Applicant further adds in its request for arbitral ruling that, although the transfer of ownership operates independently of registration, it may be questioned whether such unregistered transfer produces effects before the Tax Authority, the Applicant concluding in this regard that, in view of the legal definition of third party contained in no. 4 of article 5º of the Land Registration Code, the Tax and Customs Authority does not qualify as a third party, since nothing is acquired by it.
To this end, the Applicant invokes that article 3º of the CIUC cannot be interpreted in the sense of intending to tax only those appearing in the registration as owner and not the actual owner, since, on the one hand, registration is merely an appearance of reality, and on the other hand, such an interpretation would completely violate the spirit of the CIUC, motivated by an environmental concern, which manifests itself in the circumstance of taxing the users of the vehicles (whether owners or lessees), who, by force of their respective use, cause an environmental cost.
It concludes by requesting, in summary, that the present request for annulment of the tax acts covered by this proceeding be judged as well-founded and as a result the tax acts for the assessment of IUC be annulled.
It also claims the right to compensatory interest and consequent condemnation of the AT for its payment.
C – THE RESPONDENT'S REPLY
The Respondent, duly notified for that purpose, presented its reply in a timely manner in which it alleged, in summary, the following:
a. The Applicant's arguments are not well-founded, since, from the norms inherent in the Unique Circulation Tax Code, it follows that this is subsumed to a periodic tax, namely from the legal text contained in article 4º of the CIUC.
b. On the other hand, the provision of no. 1 of Article 6º of the CIUC, relating to the taxable event of the tax provides that "the taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration or registration in national territory."
c. The Respondent alleges that from the combination of these legal provisions results that the taxable event of the tax, arising from vehicle ownership, renews each year, with tax being due for each year and that it is the character of permanence and stability of a succession of facts united in a given time period that constitutes the touchstone in the distinction between single-obligation taxes and periodic taxes.
d. IUC qualifies, unquestionably, as a periodic tax, given the character of permanence and stability of the taxable event, regardless of its exigibility depending on the vehicle's registration.
e. It further alleges that, in a situation identical to IUC, the Municipal Property Tax establishes the same rules for the definition and scope of the tax, that is, the tax is due by whoever is the owner of the property on 31 December, therefore "IUC qualifies as a periodic tax and not a single-obligation tax as the Applicant argues, given the renewal of the taxable event, its character of permanence and stability."
f. Consequently, the Respondent concludes that the alleged statute of limitations of the right to tax assessment invoked by the Applicant should be rejected, since no. 4 of Article 45º of the General Tax Code establishes different counting of statute of limitations periods, depending on whether we are dealing with a single-obligation tax or a periodic tax.
g. Subsuming IUC to a periodic tax, given its character of permanence and stability, the statute of limitations period begins as of the end of the year in which the taxable event occurred.
h. It further notes that the statute of limitations period in no way conflicts with the period for the exigibility of the tax; in the case at hand, IUC's relating to the year 2008 are in question, whose statute of limitations period began as of the end of the year in which the taxable event occurred, that is, 01.01.2009, so the general statute of limitations period referred to in no. 1 of Article 45º of the General Tax Code on 01.01.2009, would only preclude on 31.12.2012.
i. With the IUC assessments having been issued on 28.11.2012 and having been notified to the Applicant, via postal service, on 24/12/2012, it appears that the general statute of limitations period of 4 years had not yet expired, and it is unquestionable that the assessments were made within the statute of limitations period since that period would only preclude on 01.01.2013.
j. It concludes by rejecting the arguments invoked by the Applicant, reinforcing with the invocation of the understanding already adopted by CAAD jurisprudence, according to which IUC is configured as a periodic tax.
k. Regarding the question of the subjective scope of IUC raised by the applicant, the Respondent alleges that the Applicant's arguments are also unfounded and that the position it defends results not only from a skewed reading of the letter of the law, but also from an interpretation that does not take into account the systematic element, violating the unity of the regime established throughout the CIUC and, furthermore, from an interpretation that ignores the ratio of the regime established in the article in question, and likewise in the entire CIUC.
l. It bases its argument on the provisions of nos. 1 and 2 of article 3º of the CIUC, which respectively provide that "The taxable persons of the tax are the owners of the vehicles, being considered as such natural or legal persons, whether public or private, in whose name they are registered" and that the taxable persons of the IUC are "the owners (or in the situations provided for in no. 2, the persons mentioned therein), being considered as such the persons in whose name they are registered."
m. The Respondent further alleges that the legislator did not use the expression "are presumed to be," as it could have done, indeed similarly to what occurs in other legal provisions, exemplifying some situations provided for in law; the Respondent contends that in cases where the fiscal legislator uses the expression "are considered," it is not establishing a presumption. Understanding that the legislator established here a presumption would unequivocally be making an interpretation contra legem.
n. It concludes, therefore, that in the case of the present arbitral ruling, the legislator expressly and intentionally established that the persons are considered as such in whose name they are registered, because this is the interpretation that preserves the unity of the legal-fiscal system.
o. Any other interpretation would be to ignore the teleological element of statutory interpretation: the ratio of the regime established in the article in question, and likewise in the entire CIUC.
p. It concludes by rejecting the arbitral request, since the tax acts in question do not suffer from any defect of violation of law, "in that in light of the provisions of article 3º, nos. 1 and 2 of the CIUC and article 6º of the same code, it was the Applicant, in the capacity of owner, the taxable person for the IUC, as attested by the Information regarding the history of ownership of the vehicles in question, issued by the Motor Vehicle Registration Bureau."
q. Consequently, it also concludes by rejecting the request for compensatory interest.
II. ISSUES TO BE DECIDED
Thus, it is necessary to appreciate and decide the issues to be determined.
Given the positions of the Parties assumed in the arguments presented, the central determining issues are:
1st) Qualification of IUC and Statute of Limitations for tax assessment;
2nd) The subjective scope of IUC, the effects of motor vehicle registration and the possible existence or non-existence of a rebuttable presumption in this matter;
3rd) The merits or lack thereof of the request and the right to payment of compensatory interest.
III - PROCEDURAL REQUIREMENTS
The Arbitral Tribunal is regularly constituted. It is materially competent, pursuant to article 2º, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January.
The Parties possess legal personality and capacity, are legitimate and are legally represented (Cf. 4º and 10º no. 2 of DL no. 10/2011 and article 1º of Ordinance no. 112/2011, of 22 March).
Given that the requirements established by the provisions of no. 1 of article 3º of the RJAT are met, the cumulation of requests for declaration of illegality of the tax acts that are the subject of this proceeding is admitted.
The proceeding does not suffer from defects that would invalidate it.
Taking into account the tax administrative proceeding, the documentary evidence attached to the case file, it is now necessary to present the factual matter relevant to the understanding of the decision, which is established as follows.
IV - STATEMENT OF FACTS
A) Proven Facts
As relevant factual matter, this tribunal considers the following facts to be established:
The Applicant is a general partnership whose principal activity consists, among others, of the trade of motor vehicles.
In the course of its activity, the Applicant offers its customers various financing solutions intended for the purchase of motor vehicles, namely the granting of financial lease contracts ("leasing") or Long-Term Rental ("ALD") contracts.
The Applicant was notified to proceed with payment of thirty-four IUC assessments, all relating to the year 2008, which are itemized in Document no. 2 attached to the case file – Administrative Review IUC 2008 – ..., and which is hereby deemed wholly reproduced.
The tax assessments were issued on 28.11.2012 and notified to the Applicant via postal service on 24.12.2012, with payment due by 09.01.2013, as is evident from the analysis of the Administrative File attached to the case file by the Respondent.
The Applicant presented an Administrative Review, which was partially granted by a ruling issued on 4 June 2013.
In this ruling, it decided on the annulment of twenty-six of the thirty-four IUC assessments claimed, on the grounds of statute of limitations of the assessment, also considering that the remaining eight IUC assessments were due, as indeed results from the decision of the administrative review, already mentioned above, attached to the case file as no. 2 attached to the arbitral request, which is hereby deemed wholly reproduced.
In the present case file are therefore in question the assessments that survived the administrative review, contained in document no. 4 attached to the arbitral request, which are deemed wholly reproduced, and whose sum totals the amount of €3,620.71.
As of the date of the taxable event, the motor vehicles referenced in the IUC assessment lists contained in the above-mentioned document no. 4 were still registered in the motor vehicle registry in the name of the Applicant.
From the vehicles in question, contained in the assessments being challenged, considering the content of documents nos. 5 to 12 attached hereto to the present arbitral request, it is demonstrated that:
i. - The vehicles with registration plates ...-...-..., ...-...-... and ...-...-... were disposed of in favor of the respective purchasers in 2006;
ii. - The vehicle with registration plate ...-...-..., was disposed of in favor of the respective purchaser in 2007;
iii. - The vehicles with registration plates ...-...-... and ...-...-... were disposed of in favor of the respective purchasers in 2008;
iv. - The vehicle with registration plate ...-...-... was disposed of in favor of the respective purchaser in 2009;
v. - The vehicle with registration plate ...-...-... was disposed of in favor of the respective purchaser in 2010.
To prove the facts described above in h) the Applicant attached to the case file the following documents:
i. Copies of the financial lease contracts;
ii. Copies of accounting extracts, relating to each of the lessees contained in the financial lease contracts in question;
iii. Copies of the invoices for sale of the vehicles to the former lessees.
The owners of the vehicles (former lessees) did not effect the proper registration, therefore in the databases of the Motor Vehicle Registration Bureau, the Applicant appears as the owner thereof.
In the administrative review proceeding that preceded the arbitral request, a prior hearing of the applicant was conducted and the proceeding was instructed with the documents contained in the respective administrative file.
As of the date of the tax assessment acts, the AT had all relevant information elements for knowledge of vehicle ownership, as results from the analysis of all elements attached by the Applicant and Respondent.
The unique circulation tax assessed was paid by the Applicant.
In the context of the administrative review, partially granted, twenty-six assessments were annulled and it was considered that the IUC relating to the vehicles itemized in g) was owed by the Applicant because they were registered in its name in the respective registry.
B) STATEMENT OF PROVEN FACTS
The facts described above were deemed proven on the basis of the documents that the Parties attached to this proceeding, the applicant attached to the request formulated and the AT in the Administrative File sent to the case file. In addition, the parties' adherence to the factual reality described above results from the case file itself.
C) FACTS NOT PROVEN
It is not considered proven that the tax assessments being challenged were notified to the applicant already in the course of 2013, since the documents attached to the case file do not prove such fact regarding the assessments that are the subject of the present arbitral request.
There are no other facts deemed as not proven, since all facts relevant to the appreciation of the request were deemed proven.
V – STATEMENT OF LAW
With the factual matter established, it is now necessary to proceed with the analysis of the legal issues above indicated as determining issues (see Point 9 of this decision), corresponding, in summary, to the issues of illegality raised by the Applicant in the present arbitral request.
1st Issue: Qualification of IUC and Statute of Limitations for tax assessment
The Applicant begins by alleging the illegality of the tax acts in question on the grounds of statute of limitations of the right to assess IUC. This allegation is based on the premise of classifying IUC as a single-obligation tax and on the allegation that notification of said assessments occurred already in the course of 2013.
Paragraph 4 of article 45º of the General Tax Code provides that the statute of limitations period for the right to assess is counted, for periodic taxes, as of the end of the year in which the taxable event occurred, and, for single-obligation taxes, as of the date on which the taxable event occurred.
From the provision in this regulation it follows that it is essential to first ascertain what classification is to be attributed to the Unique Circulation Tax (IUC), that is, to determine whether the said tax is characterized as a periodic tax or as a single-obligation tax.
On this issue, the positions defended by the parties are clearly opposed, with the Applicant arguing that IUC is a single-obligation tax and the Respondent arguing that it is, likewise, a periodic tax.
This issue is of fundamental importance to ascertain whether or not the first defect invoked by the Applicant is verified, that is, the statute of limitations of the right to assess the tax.
Given that there is no legal definition of what periodic taxes and single-obligation taxes are, it is important to take into account the concepts that, for this purpose, doctrine has been consolidating. In light of the doctrinal understanding, it seems settled that periodic taxes are characterized by their durable character, temporal continuity and renewal in successive taxation periods, while single-obligation taxes relate to the taxation of isolated acts or operations, resulting from the consumption of individual and isolated goods, without a character of regularity.
As for the category of "periodic tax," it is understood that this is characterized by the fact that the tax obligations based on such situations renew year after year, that is, period after period.
It appears that IUC can, from this point of view, be compared to the Municipal Property Tax, which is clearly characterized, by doctrine and jurisprudence, as a periodic tax.[1]
Thus, taxes are distinguished into periodic and single-obligation depending on whether the type of situations they tax are permanent and recurring in time, giving rise to successive independent tax obligations, or, conversely, if they concern isolated acts or facts, without a character of continuity.
In summary, to permanent situations, stable situations that periodically repeat themselves, correspond periodic taxes, that is, taxes that renew in successive taxation periods, usually annually.
Single-obligation taxes, on the other hand, tax isolated acts or facts and generally give rise to a single tax obligation, as is the case, for example, with Transfer Tax or customs taxes.
Furthermore, on this point, it should be noted that recent arbitral decisions issued by CAAD on this issue, with the qualification of IUC as a periodic tax being settled, consider that, "the common elements that stand out from the mentioned doctrinal references indicate to us that periodic taxes are characterized by lasting in time, giving rise to successive independent tax obligations that renew from year to year and which, as a rule, have regular periodicity, while single-obligation taxes consist of taxation without continuity, which, falling on isolated acts or facts, gives rise, as a rule, to a single tax obligation, which does not renew."[2]
It follows from the provisions of nos. 2 and 3 of article 4º of the CIUC that this is a tax whose taxation period corresponds to the year, which begins with the date of registration, giving rise to successive tax obligations that renew year after year, in each year of the vehicle's life, lasting in time. It is further added, in no. 3 of said article 4º, that the tax is due until cancellation of the registration, and in no. 1 of this same article, that it is of annual periodicity, so there is no doubt that we are dealing with a periodic tax.
Finally, it should be noted that the motor vehicle taxation system in force, approved by Law no. 22-A/2007 of 29 June, comprises two taxes and two distinct codes, namely: the Motor Vehicle Tax Code (ISV) and the Unique Circulation Tax Code (IUC), the former being a good example of a single-obligation tax and the latter, clearly, a good example of a periodic tax.
That said, and without need for further development, it must be concluded that the Applicant's arguments regarding the alleged classification of IUC as a single-obligation tax are not well-founded, and therefore the conclusion that statute of limitations of the right to assess has occurred must also be rejected.
Having qualified IUC as a periodic tax, it remains to add that, with respect to these, paragraph 4 of article 45º of the General Tax Code provides that the statute of limitations period, of four years, is counted as of the end of the year in which the taxable event occurred.
The taxable events underlying the eight assessments being challenged, despite relating to different vehicles with different months of registration, all occurred in the year 2008, with the statute of limitations period being counted as of the end of that same year, or more precisely, as of the first day of the subsequent year, that is, as of 1 January 2009. And, thus being the case, the right to assess the tax would only preclude as of 31.12.2013.
It is proven that the assessments in question in the present case file were issued on 28.11.2012 and notified to the Applicant on 24.12.2012 (unlike the remaining ones that were the subject of administrative review and annulled on grounds of statute of limitations, given that notification occurred already in 2013), it must be concluded that the alleged statute of limitations of the right to assess the tax did not occur.
Furthermore, from the analysis of all documents attached by the Applicant with the present arbitral request, such fact is not demonstrated, but rather that the assessments were issued on 28.11.2012, with payment due by 09.01.2013. Thus being the case, and taking into account the content of the administrative review presented by the Applicant and its decision, with precisely the assessments notified to the applicant after 31.12.2012 being annulled, it must be concluded that the fact alleged by the Applicant regarding the date of notification of the assessments already in 2013 has not been demonstrated, a fact whose burden of proof fell on her. In this regard, article 74º, no. 1 of the General Tax Code provides that "the burden of proof of the facts constituting the rights of the tax administration or of the taxpayers falls on whoever invokes them."
And, finally, the argument of the applicant, contained in articles 44º and 45º of the Arbitral Request, is not accepted, according to which "even assuming notification on the dates of the assessments (cf. Docs. no. 4), the right to assess tax is statute-barred (…) given that, from the verification of the statements of the assessments of compensatory interest, which are due after the end of the month of the anniversary of the registration, it thus appears clear that the Applicant was notified to proceed with payment of the said IUC assessments after the statute of limitations period (cf. Doc.s no. 4)"
Now, such an argument is not accepted as appropriate, since it is clear that the statute of limitations of the right to assess tax is ascertained exclusively by the moment in which notification of the act occurs, which must not be confused with the due date that may be fixed to the taxpayer to proceed with payment.
In these circumstances, the Applicant's arguments regarding the alleged defect of violation of law on grounds of statute of limitations of the right to assess the tax in question are not well-founded, and thus the request for declaration of illegality of the assessments is not well-founded on this ground.
2nd Issue: The subjective scope of IUC, the possible existence or non-existence of a rebuttable presumption and the effects of motor vehicle registration
The second issue to be decided consists of determining the meaning and scope of the norm of subjective scope contained in article 3º, no. 1, of the CIUC and the possible existence or non-existence of a rebuttable presumption connected with the issue of the legal effects of motor vehicle registration.
On this issue, the positions of the parties can be summarized as follows: for the Applicant, that norm establishes a rebuttable legal presumption, while for the Respondent, the interpretation upheld by the Applicant is notoriously wrong and "results from a skewed reading of the letter of the law," and from an interpretation that does not take into account the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire tax-legal system and further derives from an interpretation that ignores the ratio of the regime established in the article in question, and likewise throughout the CIUC" (nos. 49 to 51 of the AT's reply).
It is necessary to decide.
Article 3º of the CIUC is worded as follows:
"ARTICLE 3º
SUBJECTIVE SCOPE
1 – The taxable persons of the tax are the owners of the vehicles, being considered as such natural or legal persons, whether public or private, in whose name they are registered.
2 – Financial lessees, purchasers with retention of ownership, as well as other holders of purchase option rights by virtue of the lease contract are treated as equivalent to owners."
(Underlining ours)
Article 11º, no. 1 of the General Tax Code provides that "in determining the meaning 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 the doubts that arise in the application of legal norms presupposes the carrying out of an interpretative activity, which should be objective, balanced, and in accordance with the letter and spirit of the law. Any text, and law is no exception, contains multiple meanings and frequently contains ambiguous or obscure expressions. For this reason, although the letter of the law is "the guiding thread" of the interpreter, it must be interpreted having in mind the underlying objectives, "the ratio" or the motivation of the legislator in establishing the norm under analysis.[3]
To these elements is added another, of enormous importance, according to which the interpretation of the legal norm must respect the "unity of the legal system," its coherence and intrinsic logic.
Among us, article 9º of the Civil Code (CC) provides the rules and fundamental elements for the interpretation of legal norms.
With regard to the issues now under analysis, it is important to highlight the contribution of the arbitral decisions already issued in the proceedings, nos. 14/2013-T, 26/2013-T and 27/2013 – T, revealing a refined reflection on the fundamental issues under consideration.
The interpretation of tax law must, therefore, obey the provisions of article 9º of the CC, which begins by saying that interpretation should not be limited to the letter of the law, but should reconstitute from it the "legislative thinking." Thus, it has been recognized by the Jurisprudence of the Supreme Administrative Court, among others, in Rulings of 05/09/2012 and 06/02/2013, respectively, proceedings nos. 0314/12 and 01000/12, available at www.dgsi.pt.
To these general principles are added the principles contained in the General Tax Code, particularly in article 73º, which establishes that the presumptions contained in norms of tax scope always admit proof to the contrary.
It is, therefore, in this background framework, using the fundamental hermeneutical principles just mentioned, accepted by the Jurisprudence of our superior courts, that we should seek to find the adequate interpretation of the norms at issue.
Beginning with the literal content of article 3º, no. 1 of the CIUC, the controversy between the parties arises over the scope of the expression "being considered as such"…
The current version did not use the term "are presumed" which was contained in the extinct Motor Vehicle Tax Regulation. Thus, the question under discussion is whether the fact that the legislator opted for the term "being considered" excludes the possibility that we are dealing with a presumption.
Now, we can easily point out several examples, drawn from the tax-legal order, in which the legislator opted for the use of the verb "to consider," with a presumptive sense.
Moreover, as has already been stated above, given that this is a norm of tax scope, it would never be admissible to establish an irrebuttable presumption. As stated by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in annotation no. 3 to article 73º of the General Tax Code, "presumptions in matters of tax scope can be explicit, revealed by the use of the expression 'is presumed' or similar (…). However, presumptions can also be implicit in norms of scope, particularly of objective scope, when certain values of movable or immovable property are considered to constitute taxable matter, in situations where it is not impossible to ascertain the actual value." And there are many examples of norms in which the verb "to consider" is used to establish rebuttable presumptions, as is the case with the provision of no. 2 of article 21º of the Corporate Income Tax Code, in article 89-A of the General Tax Code or in article 40º, no. 1 of the Personal Income Tax Code, among others.
Now, taking into account that the legal system must form a coherent whole, the examples referred to above, as well as the doctrine and jurisprudence indicated, allow the conclusion that it is not only when the verb "to presume" is used that we are dealing with a presumption, but also the use of other terms or expressions, such as the term "being considered," can serve as a basis for presumptions.
Given this, it is important, for determining the meaning of the norm contained in article 3º of the CIUC, which, being the norm of subjective scope of the IUC, must be interpreted in accordance with the rules established therein for determining the taxable person. And, as was mentioned above, with the literal element being the first instrument of interpretation of the legal norm, in search of legislative thinking, it is important to confront it with the other elements of interpretation, particularly the rational or teleological element, the historical element and the systematic element.
Beginning with the historical element, it is important to note that since the origin of the circulation tax, with the entry into force of Decree-Law no. 599/72 of 30 December, a presumption was explicitly established, regarding the taxable persons of the tax as being those in whose name the vehicles were registered. That legislative version, however, used the literal expression "presumed to be as such," however, the use of the expression "being considered," as an expression with an effect similar to that and likewise embodying a presumption. This is what occurs in the wording contained in no. 1 of article 3º of the CIUC, in which a presumption was established, revealed through the use of the expression "being considered," of meaning similar to and of equivalent value to the expression "presumed," in use since the creation of the tax in question.
The use of the expression "being considered" seems, therefore, to be more in tune with the reinforcement given to vehicle ownership, which has become the taxable event of the tax, as provided in article 6º of the CIUC.
This understanding is the only one that appears adequate and consistent with the principle of material truth and justice, underlying tax relations, with the objective of taxing the real and actual owner and not one who, due to circumstances of a different nature, is sometimes merely an apparent and false owner for appearing in the motor vehicle registry. Because it is so, the person registered in the motor vehicle registry must be allowed the possibility of presenting evidentiary elements sufficient to demonstrate that the actual owner is, after all, a different person from the one appearing in the registry, and who initially, and in principle, was presumed to be the true owner. Otherwise, one would accept the supremacy of the formal truth of the registry over material truth, and would be admitting a gross violation of the fundamental fiscal principles enunciated and, furthermore, of the principle contained in article 73º of the General Tax Code according to which there are no irrebuttable presumptions in matters of tax scope. To which would be added the violation of the principles of legality, proportionality and justice, as well as the inquisitorial principle, established, respectively, in articles 55º and 58º of the General Tax Code.
Thus, as regards subjective scope, there are no changes regarding the situation previously in effect within the scope of the Municipal Property Tax, Circulation Tax and Heavy Vehicle Tax, as is widely recognized by doctrine, continuing to apply a rebuttable presumption in this matter.[4]
Moreover, it is possible to extract yet another argument from the provision of article 7º of the Land Registration Code (which constitutes the fundamental legal basis in matters of property registration), which provides that "the definitive registration constitutes a presumption that the right exists and belongs to the person registered, in the precise terms in which the registration defines it."
Thus, in light of the principle of uniformity and intrinsic coherence of the legal system, no grounds appear acceptable for the principle in force in property registration in general to suffer an inflection or even unjustified "violation" in the matter of motor vehicle registration.
As for the elements of interpretation of a rational or teleological nature, it is important to note that the statement of reasons of Legislative Proposal no. 118/X of 07/03/2007, underlying Law no. 22-A/2007 of 29/06, is quite expressive in clarifying that the reform of motor vehicle taxation is implemented through the shifting of part of the tax burden from the moment of acquisition of vehicles to the circulation phase and aims to "form a coherent whole" that, although intended for the collection of public revenue, intends that the same be collected "in the measure of environmental costs that each individual causes to the community," adding, with respect to the tax in question and the different types and categories of vehicles, that "as a structuring and unifying element (…) the principle of equivalence is established, thus making clear that the tax, as a whole, is subordinate to the idea that taxpayers should be burdened in the measure of the cost they cause to the environment and the road network, this being the reason for this tax figure," further noting, being "(…) this principle that determines the taxation of vehicles based on their respective ownership and until the moment of scrapping (…)."
Thus, the logic and rationality of the new motor vehicle taxation system presupposes and aims at a taxable person coinciding with the owner of the vehicle, on the assumption that this, and not another, is the real and effective subject causing environmental damage, as follows from the principle of equivalence inscribed in article 1º of the CIUC.
This principle of equivalence, which informs the current unique circulation tax, has underlying it the polluter-pays principle, and embodies the idea contained therein, that whoever pollutes must, for that reason, pay. It is, after all, about capturing the negative environmental externalities that result from the use of motor vehicles, which should be assumed by their owners and/or users, as costs that only they should bear.
Therefore, the presumption inscribed in article 3º of the CIUC corresponds to the interpretation most adjusted to the pursuit of the objectives intended by the legislator. If it were not so, one would be accepting the possibility of taxing legal or natural persons without responsibility for the production of any environmental damage, while the real causes of such damage would not be subject to the tax.
In summary, having examined all relevant elements of interpretation, all point in the direction that the expression "being considered" has a meaning equivalent to the expression "presumed."
Consequently, it is understood that the provision of no. 1 of article 3º of the CIUC establishes a legal presumption, which, in view of the provisions of article 73º of the General Tax Code, can only be understood as rebuttable. That is, the taxable persons of the tax are, presumptively, the persons in whose name the vehicles are registered. But, despite this principle, this presumption may be rebutted or overcome if, in the course of the assessment procedure in question, that person comes to demonstrate that he is not the true taxable person of the tax in question.
In the case of the present case file, the interpretation defended by the AT in this matter does not appear consistent with the principle of material truth or with the principle of unity of the tax-legal system.
Thus, in each specific case in the present case file, the proper analysis of the evidentiary elements attached by the Applicant should have led to the conclusion that the taxable persons for IUC were, in some cases the purchaser-lessees of the vehicles, as their true owners, and in others the lessees, and not the seller-lessor, as virtual owner of the vehicles in question.
It was proven in the case file that the vehicles with registration plates ...-...-..., ...-...-... and ...-...-... were disposed of in favor of the respective purchasers in 2006; the vehicle with registration plate ...-...-... was disposed of in favor of the respective purchaser in 2007; and the vehicles with registration plates ...-...-... and ...-...-... were disposed of in favor of the respective purchasers in 2008, therefore, the taxable persons of the tax with reference to the year 2008 were their respective owners (former purchaser-lessees).
As for the remaining vehicles, it was proven that: the vehicle with registration plate ...-...-... was disposed of in favor of the respective lessee-purchaser in 2009; and the vehicle with registration plate ...-...-... was disposed of in favor of the respective lessee-purchaser in 2010, therefore, with reference to the IUC due for the year 2008, the taxable persons are the lessees, in the capacity of users, as provided in no. 2 of article 3º of the CIUC.
From the analysis of the documents attached to the case file by the Applicant and Respondent, it is possible to conclude that the AT had at its disposal all information elements regarding the concrete situation of the vehicles contained in the tax assessments being challenged.
To which is added that the inquisitorial principle, established in article 58º of the General Tax Code, establishes that the tax administration must, in the proceeding, perform all necessary diligences to satisfy the public interest and to discover material truth, not being subordinate to the initiative of the requester.
From the analysis of the elements contained in the administrative review proceeding presented by the Applicant, it is possible to infer that within that proceeding, and following the prior hearing conducted, the relevant evidentiary elements for the correct making of the decision were at the disposal of the AT.
The decision, however, proceeded from a premise according to which the IUC is owed by the person registered in the motor vehicle registry, regardless of the subsequent demonstration that ownership belongs to a third party, and further, ignoring the principle contained in no. 2 of article 3º of the CIUC regarding lessees.
As is set out, this Arbitral Tribunal's understanding is different, that of which the provision of no. 1 of article 3º establishes a presumption, this being the interpretation that is most in tune with the principle of material truth that the law takes care to point out.
Given this, to conclude the statement of reasons of the present arbitral decision, it remains to ascertain the legal effects of motor vehicle registration in the matter of IUC scope.
With respect to the question of the legal value of registration, it is important to note, from the outset, that in general terms registration has a publicity function. According to no. 1 of article 1 of DL no. 54/75, of 12 February (CRA - in the latest version introduced by Law 38/2008 of 11 August), relating to the registration of motor vehicles, it provides that motor vehicle registration has essentially the purpose of giving publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce.
It is further important to bear in mind that article 7º of the Land Registration Code (CRP), applicable supplementarily to motor vehicle registration, by virtue of article 29º of the CRA, provides that "The definitive registration constitutes a presumption that the right exists and belongs to the person registered, in the precise terms in which the registration defines it."
Thus, it must be concluded that definitive registration constitutes nothing more than a presumption that the right exists and belongs to the person registered, in the exact terms of the registration, which is rebuttable, thus admitting proof to the contrary.
And, on this point, given the function legally reserved to registration of publicizing the legal situation of the property, it must be concluded, in the case of motor vehicles, that it only allows us to presume that the right to those vehicles exists and that it belongs to the person registered in the registry.
Registration does not, therefore, have a constitutive nature regarding the right of ownership, but rather a declaratory nature, hence registration does not constitute a condition for the validity of transmission of the vehicle from the seller to the buyer. Therefore, purchasers of vehicles become, thus, owners of those same vehicles through the entering into of the corresponding purchase and sale contracts, by mere effect of the contract, with or without registration.
This same results from the provision of no. 1 of article 408º of the Civil Code, according to which the transfer of real rights to things is determined by mere effect of the contract, being one of those effects the transfer of the thing or the holding of the right (cf. paragraph a), of article 879º of said Civil Code).
In the case of the present case file, the eight vehicles mentioned in the tax assessments being challenged were the subject of financial lease contracts with purchase options, all of which were sold to the corresponding lessees. As has already been mentioned above (point 38 of this present arbitral decision), two of the vehicles were disposed of by the Applicant in 2006; one in 2007; and two in 2008, that is, at dates prior to the date of the taxable events and the exigibility of the tax; the remaining ones in 2009 and 2010, thus at dates after the date on which the IUC was exigible.
It should be said, therefore, that if the said lessees, purchasers of the vehicles, as their "new" owners, do not proceed with its registration in their favor, it is presumed, for the purposes of no. 1 of article 3º of the CIUC, that the vehicle continues to be the property of the person who sold it and who remains in the registry as its owner, although it is certain that such presumption is rebuttable, either by virtue of what is established in no. 2 of article 350º of the Civil Code, or in light of the provisions of article 73º of the General Tax Code. Hence, from the moment that said presumption is overcome by proof to the contrary, the AT may not persist in considering as the taxable person for IUC the seller of the vehicle, who continues to appear in the registry as its owner.
Also, after everything that is set out above, it must be concluded that, in light of the legal effects of motor vehicle registration, the provision of no. 1 of article 3º of the CIUC cannot but constitute a rebuttable presumption.
But also on this point, it should be recalled that the provision of article 19º of the CIUC, precisely, for the purposes of the provision of article 3º of said CIUC (that is, for the purposes of subjective scope), comes to impose, particularly on entities that engage in financial leasing, the obligation to provide the AT with data relating to the tax identification of the users of leased vehicles. Therefore, the legislator was clear as to the legal value of registration, requiring knowledge of the real users of leased vehicles, which, incidentally, is in perfect harmony with the understanding that no. 1 of article 3º of the CIUC intends, only, to establish a legal presumption.
The AT's understanding, reflected in the case file, according to which the taxable persons of the IUC are, definitively and without admission of proof to the contrary, the persons in whose name motor vehicles are registered, without considering the evidentiary elements attached to the case file for the identification of the actual and true owners of the vehicles, is proceeding with the illegal assessment of the IUC based on the erroneous interpretation and application of the norms of subjective scope of the Unique Circulation Tax.
Such interpretation of the provision of article 3º of the CIUC is illegal and leads to the practice of illegal assessments of tax on motor vehicles. Such assessments appear illegal due to error regarding the factual and legal presuppositions, which requires the annulment of the corresponding tax acts.
Thus, the Respondent AT's arguments are not well-founded when it insists that the understanding defended by the Applicant, which views the establishment of a presumption in no. 1 of article 3º of the CIUC, is based on an interpretation contra legem, resulting from a skewed reading of the letter of the law and violating the unity of the legal system.
Finally, it should be noted that, as IUC is a tax of periodic taxation, whose periodicity corresponds to the year that begins on the date of registration or on each of its anniversaries, as set out above, it is exigible on the first day of the taxation period, that is, on the date of registration or on each of its anniversaries. Thus, in view of what has already been stated about the situation of the vehicles contained in the assessments now being challenged, it is concluded that on the date the tax was exigible for each of them, the Applicant does not qualify as a taxable person for the tax, because:
given the interpretation that must be made of no. 1 of article 3º of the CIUC, the Applicant proved that it was no longer the owner of the vehicles whose ownership had already been transferred by mere effect of contract to the lessees, on the date the IUC became exigible;
given the provision of no. 2 of article 3º of the CIUC, the Applicant also cannot be considered a taxable person with respect to the remaining vehicles, whose ownership was transferred to the purchasers at dates after the date on which the IUC was exigible, and the lessees should be held as taxable persons for the tax, as persons treated as equivalent to owners, pursuant to that provision.
As regards the rebuttal of the presumption, it is further added that the Applicant, as is stated in point 8 of this present arbitral decision, relating to the proven facts, alleged and proved the facts necessary and sufficient for overcoming the presumption, offering for that purpose sufficient documents, namely: copies of the financial lease contracts; copies of the accounting extracts relating to each of the customers; and copies of the invoices for sale of the vehicles to the former lessees.
The documents presented are means of proof with sufficient force to rebut the presumption based on registration, as established in no. 1 of article 3º of the CIUC, documents which, moreover, enjoy the presumption of veracity provided for in no. 1 of article 75º of the General Tax Code and which the AT did not question or challenge.
In consequence of all the above, it follows that the assessments are illegal and must be annulled, proceeding, consequently, with the refund to the Applicant of the amount unduly paid, plus compensatory interest.
3rd Issue: The merits or lack thereof of the request and the right to payment of compensatory interest.
Paragraph b) of no. 1 of article 24º of the RJAT provides that the arbitral decision on the merits of the claim, from which no appeal or impugnation is possible, binds the tax administration as of the end of the period provided for appeal or impugnation, and this must – in the exact terms of the success of the arbitral decision in favor of the taxable person and until the end of the period provided for the spontaneous execution of sentences of tax judicial courts – restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose.
This provision is in harmony with the provision of article 100º of the General Tax Code, applicable to the case by virtue of the provision of paragraph a) of no. 1 of article 29º of the RJAT, in which it is established that "The tax administration is obliged, in case of full or partial success of administrative reviews or appeals, or of judicial proceedings in favor of the taxable person, to immediately and fully restore the situation that would exist if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions established by law."
Thus, in the case of the present case file, the above-mentioned principles must be applied, and, in the sequence of the illegality of the assessment acts referenced in this proceeding, there must, by force of those norms, be a refund of the amounts paid, whether as payment of the tax paid, or of the corresponding compensatory interest, as a way to achieve the restoration of the situation that would exist if the illegality had not been committed.
Furthermore, regarding compensatory interest, given the provision of article 61º of the Code of Tax Procedure and Process and with the requirements of the right to compensatory interest met, that is, with the existence of an error attributable to the services from which results payment of the tax debt in an amount higher than legally due, as provided for in no. 1 of article 43º of the General Tax Code, the Applicant is entitled to compensatory interest at the legal rate, calculated on the amount of €3,620.71, which shall be calculated from the date on which payment was made until full refund of that same amount.
There do not appear to be other relevant issues raised by the parties regarding the legality of the disputed assessment acts, and, given the provision of article 124º of the Code of Tax Procedure and Process, with the arbitral request succeeding based on defects invoked by the parties, knowledge of other defects is precluded.
VII - DECISION
Based on the foregoing, this Arbitral Tribunal decides:
A) - To judge the request for declaration of the illegality of the IUC assessments relating to the year 2008, disputed in the present case file, well-founded, and consequently annul the corresponding tax acts;
B) - To judge the request for condemnation of the Tax Administration to refund the amount unduly paid, in the sum of €3,620.71, plus compensatory interest at the legal rate, calculated from the date of the payment made until full refund of the aforementioned amount, well-founded, condemning the Tax and Customs Authority to make these payments.
Value of the Proceeding: In accordance with the provisions of articles 306º, no. 2 of the Code of Civil Procedure (formerly 315º, no. 2) and 97º-A, no. 1 of the Code of Tax Procedure and Process and in article 3º, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at €3,620.71.
Costs: Pursuant to the provisions of no. 4 of article 22º 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 €612.00, at the charge of the Tax and Customs Authority.
Let it be registered and notified.
Lisbon, 28 February 2014
The Arbitrator,
(Maria do Rosário Anjos)
[1] On this point, see, among others, Lopes de Sousa, J. (2011) Code of Procedure and Process of Taxation, Vol. III, 6th Edition, Áreas Editora, Lisbon, p. 250, who regarding the Municipal Property Tax states "[…] there are no doubts […]" as to its classification as a periodic tax". In the same sense, see Sá Gomes, N. (1984) Lessons of Tax Law, in Notebooks of Science and Technique of Taxation, April-June 1984 - nos. 304/306, pp. 147/148
[2] Cf. Arbitral Decision no. 27/2013-T, pp. 11 et seq., available for consultation at www.caad.org.pt, arbitration jurisprudence, IUC topic. In the same sense, see arbitral decisions issued in proceedings nos. 14/2013-T and 26/2013 – T, all on the same subject matter.
[3] On this, cf. BAPTISTA MACHADO, Introduction to Legitimizing Discourse, p. 175 et seq.
[4] On this, cf. Afonso, A. Brigas and Fernandes, M. (2009) Motor Vehicle Tax and Unique Circulation Tax, Coimbra Editora, p. 187
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