Summary
Full Decision
ARBITRAL DECISION
CAAD: Tax Arbitration
Case no. 230/2014 – T
I REPORT
A…, S.A., legal entity no. …, with registered office at Rua …, Lisbon (hereinafter simply "A…" or "Claimant"), hereby, pursuant to article 2(1)(a) and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January (hereinafter "DL 10/2011"), requests an arbitral ruling on the legality of 27 (twenty-seven) assessments of Single Vehicle Tax (hereinafter IUC) identified in the Table below [which is attached and fully reproduced as ANNEX A and forms an integral part of this request], issued by the Tax and Customs Authority (hereinafter AT) relating to 11 (eleven) vehicles also identified in ANNEX A, and for the years 2010 to 2012, in the total amount of €969.15.
Specifically, the claimant requests:
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The Declaration of Illegality and consequent Annulment of the 27 assessments relating to IUC concerning the 11 vehicles identified by their respective registration numbers in the list attached as document no. 1;
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The Reimbursement of the amount of €969.15, concerning the tax improperly paid by the Claimant; and
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The Payment of Compensatory Interest, for the deprivation of the said amount of €969.15, pursuant to article 43 of the General Tax Law.
The claimant alleges, essentially to substantiate the request:
a) All these additional tax assessments are based on the same facts and, likewise, on the same legal grounds.
b) All presuppose the same tax-legal understanding: that, pending the respective finance lease contracts, the Claimant herein, lessor of the vehicles in question, is responsible for the payment of IUC, instead of the corresponding lessee.
c) And that, once the contract ends and ownership of the said vehicles is transferred to the lessees, this responsibility continues to belong to the Claimant if the transfer has not been registered.
d) The determination of the (il)legality of the aforesaid assessments requires the analysis of the same factual grounds and the interpretation and application of the same rules and principles of Law.
e) Considering this identity of tax facts, factual and legal grounds and, likewise, of the court competent to decide, and also taking into account the high number of vehicles and the volume of documentation necessary to prove the facts alleged below, the Claimant opted, pursuant to articles 3 of the RJAT and 104 of the Code of Tax Procedure and Process, to consolidate the additional assessments whose legality is contested in a single request for arbitral ruling.
f) Requesting this Arbitral Tribunal that, pursuant to the cited provisions and having regard to the principle of procedural economy, it issues, within the scope of this arbitral proceeding, a ruling of illegality concerning the 27 tax assessments here in question.
g) Similarly to what has already occurred, moreover, in arbitral proceedings no. 26/2013-T and 27/2013-T, whose decisions have already become final.
h) The IUC assessments claimed here were directed to "B…", holder of NIPC … (hereinafter, simply B...), previously designated "C".
i) It was a branch in Portugal which, as appears from its respective commercial certificate (which is attached and reproduced for all legal purposes as ANNEX B), was dissolved, and whose registration was consequently cancelled on 10.01.2007 (cf. ANNEX B).
j) The set of assets and liabilities held by this branch was, however, before its dissolution, incorporated into the Claimant herein (cf. supporting document which is undertaking to attach).
k) Which thus assumed the position of lessor in all finance lease contracts that were then in force in the legal sphere of B....
l) Namely, those contracts relating to the vehicles identified in ANNEX A, whose IUC is here at issue.
m) Thus, having in view that, with the said incorporation, the finance lease contracts identified in the mentioned ANNEX A) became part of the Claimant's portfolio of assets – which acquired all the rights and obligations inherent to the position of financier and Lessor, namely, but without limitation, the right to receive all amounts owed by the acquirers, accrued and accruing, and by the Lessees of the contracts to the respective Lessor, by way of lease payments, residual value and any other amounts which, by virtue of the contracts, must be paid to the Lessor – it is also to the Claimant that procedural legitimacy falls to contest any eventual liabilities of a tax nature that come to be imputed to (or that derive from) the said contracts.
n) As it was also the Claimant that, as stated below, paid the amount of IUC assessed (€969.15) in the additional assessments identified in ANNEX A.
o) The Claimant (and, before it, B..., whose portfolio of assets was assumed by the Claimant) is a credit institution with strong presence in the national market.
p) Among its areas of activity, particular importance is assumed by financing of the automobile sector; indeed, the Claimant is currently one of the largest Portuguese banks specializing in operating in that particular area of financing.
q) Thus, a substantial part of its activity is directed to the execution – among others – of finance lease contracts intended for the acquisition, by companies and individuals, of motor vehicles.
r) These contracts follow, generally, a common script, typical of this type of financing: the Claimant, after being contacted by the customer – who, at that stage, has already chosen the type of vehicle he wishes to acquire, its characteristics (make, model, accessories, etc.), and even its price – acquires the vehicle from the supplier indicated to him by the customer.
s) and subsequently proceeds to deliver it to the said customer – who thus assumes the quality of lessee.
t) During the period to be stipulated in the contract, this lessee maintains temporary enjoyment of the vehicle – which remains the property of the Claimant – by way of remuneration to be delivered to the Claimant in the form of lease payments; and may acquire the vehicle, at the end of the contract, by payment of a residual value.
u) Thus, a key point of this type of contract – which is assumed as its essential characteristic – lies in the fact that, in no circumstance whatsoever, does the enjoyment of the acquired automobile belong to the Claimant: the vehicle subject to the contract remains at all times, during the term of the contract, in the exclusive enjoyment of the customer/lessee.
v) The motor vehicles identified in the list attached as ANNEX A (whose registration number appears in column C) were given in finance lease, by the Claimant, to customers also identified therein in column L) – cf. the respective Finance Lease Contracts, which are attached as documents no. 12 to 22, as identified in column O) of ANNEX A.
x) On the date of the end of these Contracts, the lessees of the said motor vehicles decided to exercise their purchase option, which is legally and contractually assured to them, having thus become owners of the mentioned vehicles (as appears from the sales invoices attached as documents no. 23 to 33, identified in column S) of the table constituting ANNEX A, by reference to the registration number) and proceeded to payment of the respective residual value.
z) Recently, the Claimant was notified to proceed with the payment of the IUCs to which the additional assessments identified in the table attached as ANNEX A relate.
aa) Which it has done accordingly, as evidenced by the payment proofs attached as documents no. 1 to 11, better identified in column T) of the mentioned ANNEX A.
bb) Some of these assessments relate to years in which the vehicles in question were still under the term of finance lease contracts.
cc) Others relate to years in which the same vehicles had already been disposed of to their respective lessees, as the corresponding finance lease had ended.
dd) See, by way of example, the motor vehicle with registration number ..-..-.., identified in lines 1 and 2 of ANNEX A (one for each assessment: 2011 and 2012). This vehicle was subject to a finance lease contract executed on 23.01.2006 with the lessee D… LDA. (NIPC …), which was in force when, in 2011, the IUC for that year became due.
ee) Therefore, it necessarily fell to the respective lessee to pay it, as will be explained in greater detail below.
ff) However, on 30.01.2011, this vehicle was disposed of to the same entity, which thus became its owner.
gg) Reason by which, also in 2012, when the respective IUC became due (in the month of registration: i.e., January), it was also to the said entity (already as owner) that it fell to pay it, as will be able to be demonstrated below.
hh) Thus, in none of the years for which the IUC is being required, in relation to this motor vehicle in particular, was the responsibility for paying it that of the Claimant herein.
ii) It was, rather, in all those years, that of D...: in 2011, as lessee; in 2012, already as owner.
jj) And the same applies to the other motor vehicles identified in ANNEX A: responsibility for bearing the IUCs whose assessments are now being contested never belonged to the Claimant, but to the respective lessees (before the date of sale) and owners (after that sale – whose date is identified, for each case, in column R) of ANNEX A).
kk) It should be noted that, by having proceeded to payment under the exceptional regime established by Decree-Law 151-A/2013 (Exceptional Regime for Settlement of Tax and Social Security Debts), both in this specific case and in all those mentioned in ANNEX A, the Claimant paid only the amount due (and stated in the said assessments) as tax, having been dispensed from payment of the corresponding compensatory interest.
ll) Thus, in this respect, only the reimbursement of the amount paid as tax is requested, in the total amount of €969.15.
mm) The responsibility for proceeding with the payment of the IUC whose assessment is contested does not fall, nor ever fell – not even during the term of the finance lease contract – to the Claimant.
nn) In the first place, attention will be paid to the attribution to the lessee entity of the quality of taxpayer of the IUC due during the term of a lease, seeking to demonstrate that it should be considered a charge on whoever actually uses the vehicle.
oo) The fact that ownership of a certain vehicle has already been transferred to the lessee is not prejudiced by the fact that the latter has not carried out the corresponding registration with the Motor Vehicle Registry Office.
The claimant did not appoint an arbitrator, wherefore, pursuant to article 6(2)(a) of the RJAT, the undersigned was designated by the president of the CAAD Deontological Council to form part of this singular Arbitral Tribunal, having accepted under the legally foreseen terms.
On 14-01-2014 the parties were duly notified of this appointment, and did not manifest the will to refuse it under the combined terms of article 11(1)(a) and (b) of the RJAT and of articles 6 and 7 of the Deontological Code.
The Tribunal was constituted on 12-5-2014 [article 11(1)(c) of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31-12]
On 11-06-2014, the Tax and Customs Authority presented its reply defending that the request for arbitral ruling should be judged unfounded and that the impugned tax acts should remain in the legal order.
The AT defends, designated and very briefly:
a) that the taxpayer of the IUC is whoever is registered in the registry as owner or equivalent [financial lessees, acquirers with reservation of title and other holders of purchase option rights by force of the lease contract (art 3(1) and (2) of the CIUC);
b) Such registration entry does not constitute, for this purpose, a rebuttable presumption, but rather is a clear legislative policy choice: that owners (and equivalent) taxpayers of IUC are those registered as such in the Motor Vehicle Registry;
c) In any case, the presentation of sales invoices of the vehicles is not the appropriate means of proof for the demonstration of the sales contract or transfer of ownership of the vehicle, besides which the finance lease contracts that underlie the said invoices were not attached – nor could they be – and;
d) Article 3 must be read in conjunction with article 19, both of the CIUC;
e) IUC is assessed in accordance with the registry information duly transmitted by the IRN and, therefore, the performance of the AT cannot be considered as having given rise to the request for arbitral ruling; it was rather the claimant that gave rise to the request by the inactivity shown regarding the updating of the registry information.
On 27-6-2014, the meeting provided for in article 18 of the RJAT was held.
The production of witness testimony was dispensed with and, with the consent of the parties, they immediately produced oral arguments in which, essentially, they maintained the positions reflected in their respective pleadings.
Clarification/Procedural Requirements
The arbitral tribunal was regularly constituted and is materially competent, in light of the provisions of articles 2(1)(a) and 30(1) of the RJAT.
The parties have legal personality and capacity and are legitimate (articles 4 and 10(2) of the same instrument and article 1 of Ordinance no. 112-A/2011, of 22 March).
The case does not suffer from nullities and no questions have been raised that may prevent the appreciation of the merits of the case.
II GROUNDS
The Proven Facts
The following is the essential factual framework established to frame juridically and legally the questions raised:
a) The claimant is a credit institution whose previous name was "C…";
b) Among its authorized areas of activity particular relevance is assumed by financing of the automobile sector and, namely, the area of finance lease intended for the acquisition, by companies and individuals, of motor vehicles;
c) The IUC assessments subject to this request were directed to "B…", holder of NIPC 980.144.914 (hereinafter, simply B...), previously designated "C…".
d) It was a branch in Portugal which, as appears from its respective commercial certificate (which is attached and reproduced for all legal purposes as ANNEX B), was dissolved, and whose registration was consequently cancelled on 10.01.2007 (cf. ANNEX B).
e) The set of assets and liabilities held by this branch was, however, before its dissolution, incorporated into the Claimant herein.
f) Which thus assumed the position of lessor in all finance lease contracts that were then in force in the legal sphere of B....
g) Namely, those contracts relating to the vehicles identified in ANNEX A, whose IUC is here at issue.
h) Were, among others, given in finance lease by the claimant, the motor vehicles identified in the list attached to the request for arbitral ruling [Annex A and docs 12 to 22].
i) The lessees of the mentioned vehicles exercised the contractual purchase option, having acquired them from the claimant and proceeded to payment of the respective residual value;
j) The claimant was notified to proceed with the payment of the IUCs to which the documented assessments relate [Docs 12 to 22, attached with the request];
k) The claimant made these payments pursuant to Decree-Law 151-A/2013 (Exceptional Regime for Settlement of Tax and Social Security Debts];
l) The additional assessments mentioned in j), relate to years in which, in relation to the respective vehicles, these were either given in finance lease or had already been sold by virtue of the exercise of the purchase option at the end of the term of the finance lease contracts;
h) It was understood by the AT, to substantiate the said IUC assessments, that the Claimant was the taxpayer of the tax for being, at the date of the tax facts in question, the entity in whose name the vehicles were registered, or that the claimant had this responsibility for being financial lessor in relation to some of the vehicles.
Reasoning
The mentioned facts are documentally proven or have not been specifically contested.
Namely, the dates of registration of the mentioned vehicles are documented, namely in the instructing administrative proceeding.
Regarding the proof of the sales of the vehicles, the claimant presented the respective invoices [Docs attached with this request for arbitral ruling].
The respondent did not contest these documents, invoking, namely, their falsity or simulation of sales.
On the other hand, given that the claimant is a company or commercial entity subject to accounting control rules, namely for the determination of its tax obligations, it would be or would be relatively easy to prove the actual existence and/or subsistence of these transactions[1].
The sales acts of the motor vehicles are thus sufficiently proven, independently of the sufficiency or otherwise of the invoices for the realization of commercial registration.
For one thing is the necessary elements for the realization of registration, another is the proof of the transaction subject to registration.
And to this purpose, it must be noted that the motor vehicle purchase and sale contract is a verbal contract, not subject, therefore, to specific form.[2]
II GROUNDS (continued)
The Law
In view of the positions of the Parties assumed in the arguments presented, the central issues to be resolved are:
A - If, on the date of the occurrence of the tax-generating facts [article 3(1) of the CIUC[3]] the owners of the vehicles are not those that appear in the registry, will it nevertheless be these that are always considered the taxpayers of the IUC, the presumption of ownership revealed by the registry not being consequently rebuttable, OR, put another way, whether the rule of subjective incidence contained in article 3(1) of the CIUC establishes or does not establish a presumption;
B – In the case of finance lease on the date of the tax fact, what is the law (quid juris) regarding the responsibility, in IUC matters, of the lessor?
C – Finally, if, in the case of concluding for the establishment of a presumption of ownership, invoices are an appropriate means of proof of sale of vehicles with a view to rebutting that same presumption.[4]
These questions have already, essentially, been addressed in diverse decisions of the CAAD, some of which have already been published at www.caad.org.pt and others in the process of publication [See, for instance, decisions delivered in proceedings nos. 14/2013, 26/2013, 27/2013, 73/2013, 170/2013, 294/2013 and 52/2014[5]].
There are no reasons to reverse or alter the essential sense of this Jurisprudence.
Let us then see:
Article 3 of the CIUC (Code of Single Vehicle Tax) provides:
"ARTICLE 3
SUBJECTIVE INCIDENCE
1 – The taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered.
2 – Assimilated to owners are financial lessees, acquirers with reservation of title, as well as other holders of purchase option rights by force of the lease contract".
On the other hand, article 11(1) of the LGT establishes that "in the determination of the sense of tax norms and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".
Resolving the doubts that arise in the application of legal norms presupposes the carrying out of an interpretative activity.
It is thus necessary to consider what the best interpretation[6] of article 3(1) of the CIUC is, in light, first, of the literal element, that is that which aims to detect the legislative thought that is objectified in the norm, to verify if the same contains a presumption, or if it determines, definitively, that the taxpayer of the tax is the owner that appears in the registry.
A - IUC Taxpayer: "the owner that appears in the motor vehicle registry" or "the owner"?
The question that arises in the first place is, in the case sub judice, whether the expression "is considered" used by the legislator in the CIUC, instead of the expression "is presumed", which was the one that appeared in the instruments that preceded the CIUC, will have removed the nature of presumption from the legal provision in question.
In our view, and contrary to what the AT eruditely argues, the answer must necessarily be negative, since from the analysis of our legal order it is clear that the two expressions have been used by the legislator with equivalent sense, whether at the level of rebuttable presumptions or in the context of irrebuttable presumptions, so that nothing enables us to draw the conclusion intended by the Tax Authority on a merely semantic basis.
In fact, this happens in various legal norms that establish presumptions using the verb "consider", of which the following are indicated, merely by way of example:
~ in the scope of civil law - article 243(3) of the Civil Code, when it establishes that "the third party who acquires the right after the registration of the action of simulation is always considered in bad faith, when such takes place";
~ also in the scope of industrial property law the same occurs, when article 59(1) of the Code of Industrial Property provides that "(…) the 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, finally, in the scope of tax law, when articles 89-A(3) and (4) of the LGT provide that it falls to the taxpayer the burden of proof that the declared income corresponds to reality and that, if such proof is not made, it is presumed ("is considered" in the letter of the Law) that the income is that which results from the table that appears in article 4 of the said article.
This conclusion that there is total equivalence of meanings between the two expressions, which the legislator uses indifferently, satisfies the condition established in article 9(2) of the Civil Code, since the minimum verbal correspondence is assured for the purposes of determination of the legislative thought.
It is important, subsequently, to subject 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 interpretative activity, FRANCESCO FERRARA says that this "is the most difficult and delicate operation to which the jurist can dedicate himself, and calls for fine treatment, refined sense, happy intuition, much experience and perfect mastery not only of the positive material, but also of the spirit of a certain legislation. (…) The interpretation must be objective, balanced, without passion, sometimes bold, but not revolutionary, sharp, but always respectful of the law" (See Essay on the Theory of Interpretation of Laws, translation by MANUEL DE ANDRADE, (2nd ed.), Arménio Amado, Editor, Coimbra, 1963, p. 129).
As BAPTISTA MACHADO states, "the legal provision presents itself to the jurist as a linguistic enunciation, as a set of words that constitute a text. To interpret consists evidently in drawing from that text a determined sense or content of thought.
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 cases of life often brings unforeseen and unpredictable interpretation difficulties. Besides, although apparently clear in its verbal expression and bearing a single sense, it is still necessary to account for the possibility that the verbal expression may have betrayed the legislative thought – a phenomenon more frequent than would appear on first sight" (See Introduction to Law and Legitimating 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 wanted or intended 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 architects and drafters of the law, and may lead to unforeseen and unexpected consequences for the legislators. (…) The interpreter must seek not what the legislator wanted, but what appears objectively intended in the law: the mens legis and not the mens legislatoris" (See FRANCESCO FERRARA, Essay, pp. 134/135).
To understand a law "is not merely to grasp mechanically the apparent and immediate sense that results from verbal connection; it is to inquire deeply into the legislative thought, to descend from the verbal surface to the intimate concept that the text 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 avails himself of the interpretative factors which 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. (See BAPTISTA MACHADO, loc. cit., p. 181; J. OLIVEIRA ASCENSÃO, The Law – Introduction and General Theory, 2nd Ed., Calouste Gulbenkian Foundation, Lisbon, p. 361).
Among us, it is article 9 of the Civil Code (CC) that provides the rules and the fundamental elements for correct and adequate interpretation of norms.
The text of article 9(1) of the CC begins by saying that interpretation should not be confined to the letter of the law, but should reconstruct from it the "legislative thought".
On the expression "legislative thought" BAPTISTA MACHADO tells us that article 9 of the CC "did not take a position in the controversy between subjectivist doctrine and objectivist doctrine. This is proven by the fact that it makes reference neither to the 'will of the legislator' nor to the 'will of the law', but rather points to the discovery of the 'legislative thought' (article 9, 1) as the scope of interpretative activity. This expression, purposefully colorless, means exactly that the legislator did not wish to commit itself" (loc. cit., p. 188).
In the same sense PIRES DE LIMA and ANTUNES VARELA pronounce themselves in annotation to article 9 of the CC (See Annotated Civil Code – vol. I, Coimbra ed., 1967, p. 16).
And on article 9(3) of the CC that author states: "this article 3 thus proposes to us a model of ideal legislator who established the most correct solutions (more correct, just or reasonable) and knows how to express itself in correct form. This model clearly bears objectivist characteristics, for it does not take as a point of reference the concrete legislator (often incorrect, hasty, unhappy) but an abstract legislator: wise, foresighted, rational and just" (loc. cit., p. 189/190).
Shortly after, this distinguished Professor calls attention to the fact that article 9(1) refers to three further elements of interpretation: the "unity of the legal system", the "circumstances under which the law was made" and the "specific conditions of the time in which it is applied" (loc. cit., p. 190).
As to the "circumstances of the time in which the law was made", BAPTISTA MACHADO explains that this expression "represents that which is traditionally 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 says that this element of interpretation "decidedly has an updateness 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.
Concerning the "unity of the legal system" BAPTISTA MACHADO considers this the most important interpretative 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 has from the outset a negative function: that of eliminating those senses which have no support, or at least some correspondence or resonance in the words of the law.
But it equally has a positive function, in the following terms: if the text admits only one sense, it is that sense which is the sense of the norm – with the caveat, however, that one can conclude on the basis of other norms that the wording of the text betrayed the thought of the legislator" (loc. cit., p. 182).
Referring to the rational or teleological element, this author says that it consists "in the raison d'être of the law (ratio legis), in the end aimed at by the legislator in elaborating the norm. The knowledge of this end, particularly 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 the 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 between 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 the other provisions that form the normative complex of the institute in which the norm being interpreted is integrated, that is, that regulate the same subject matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or kindred institutes (parallel provisions). It also comprises the systematic place that belongs to the norm being interpreted in the overall legal order, as well as its consonance with the spirit or intrinsic unity of all the legal order.
This interpretative subsidy is based on the postulate of intrinsic coherence of the legal order, namely on the fact that the norms contained in a codification obey in principle a unitary thought" (loc. cit., p. 183).
As JOSEF KOHLER teaches, cited by MANUEL DE ANDRADE, "(…) In particular we must take into consideration the interconnection 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).
B – Finance Lease and IUC Taxpayer.
As was seen, the law provides that the taxpayers will be the owners of the vehicles [article 1(1) of the CIUC], assimilating to owner the financial lessee, the acquirer with reservation of title and other holders of purchase option rights.
Returning to the interpretation of the law and to what was left explained, recognizing, namely that IUC is an environmental and road tax [cf article 1 of the CIUC, in addition to other norms of this compendium from which the same conclusion stands out, as for instance, article 7 (reference to the level of carbon emissions) and articles 9 et seq. (dealing with rates, there is constant reference to the level of carbon emissions)].
It can therefore be concluded that the tax base, the taxpayer's ability to contribute, is based on the vehicle and, consequently, on who uses it.
And if that is so, it makes no sense to tax the financial lessor – formal owner of the vehicle or a "quasi-owner" [7] but not its economic owner – and to leave out of this taxation whoever truly acts as owner, using the vehicle as his own property, that is, the financial lessee. It is this party that uses or enjoys the vehicle and all the benefits (and inconveniences…) that it provides.
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 this matter, up to Decree-Law no. 116/94, of 3 May, the last to precede the CIUC [cf Law no. 22-A/2007, as amended by Laws 67-A/2007 and 3-B/2010], the presumption [highlighted] was established that the IUC taxpayers are the persons in whose name the vehicles are registered at the date of their assessment.
It is thus verified that tax law has, from the outset, had the objective of taxing the true and effective owner and user (financial lessee, for example) of the vehicle, it being a matter of indifference whether one or another expression is used which, as we have seen, have in our legal order a coincident sense.
The same applies when we avail ourselves of elements of interpretation of a rational or teleological nature.
Indeed, the current and new framework of automobile taxation establishes principles which aim, as was seen, to subject the owners of vehicles to bearing the costs of damage caused by these to roads and the environment, as is ascertained from the content of article 1 of the CIUC.
Now the consideration of these principles, namely the principle of equivalence, which merit constitutional protection and establishment in community law, and are also recognized in other branches of the legal order, determines that the said costs be borne by the "real owners" and users of the vehicles, the causers of the said damage, which completely precludes an interpretation which aimed to prevent the presumed owners from providing proof that they no longer are by virtue of ownership being in the legal sphere of another[8].
Thus, also from the interpretation effected in light of elements of a rational and teleological nature, given what the rationality of the system guarantees and the ends aimed at by the new CIUC, it is clear that article 3(1) of the CIUC establishes a rebuttable legal presumption.
In view of the foregoing, it is important to conclude that the ratio legis of the tax points in the direction that the effective owner-user-financial lessees of the vehicles be taxed, so that the expression "is considered" is used in the normative provision in question in a sense similar to "is presumed", reason by which there is no doubt that a legal presumption is established.
On the other hand, article 73 of the LGT establishes that "(…) the presumptions established in the norms of tax incidence always admit proof to the contrary, so that they are rebuttable (…)".
Thus, given that article 3(1) of the CIUC establishes a presumption juris tantum [and, therefore, rebuttable], the person who is registered in the registry as owner of the vehicle and who, for that reason, was considered by the Tax Authority as the taxpayer of the tax, may present elements of proof aiming to demonstrate that the holder of the property, on the date of the tax fact, is another person, to whom the property was transferred.
C - Subsumption
Having analyzed the elements brought to the proceedings by the Claimant and the proven facts, the conclusion is drawn that the latter was not the owner of the vehicles to which the assessments in question relate on the date of the respective tax facts, because it had meanwhile already transferred the ownership thereof, in accordance with civil law, or because some of the vehicles were, on the dates of the tax facts, subject to finance lease contracts executed between the claimant, as lessor, and various lessees.
On the other hand, the documentary elements, consisting of copies of the respective sales invoices – which were not contested by the AT – enjoy the evidentiary force provided for in article 376 of the Civil Code and the presumption of truthfulness conferred by article 75(1) of the LGT, thus having idoneity and sufficient force to rebut the presumption which supported the assessments made.
These property transfer operations are enforceable against the Tax and Customs Authority, because, although facts subject to registration only produce effects in relation to third parties when registered, in view of the provision of article 5(1) of the Code of Predial Registration [applicable by cross-reference from the Motor Vehicle Registration Code], the Tax Authority is not a third party for the purposes of registration, since it is not in the situation provided for in article 5(2) of the said Code of Predial Registration, applicable by force of the Motor Vehicle Registration Code, that is: it did not acquire from a common author rights incompatible with each other.
As to proof of sale of vehicles, it may be made by any means, since the Law does not require specific form, namely, written form.[9]
Returning to the questions to be decided and in summary conclusive form the following answers can then be given:
A - [Can the AT prevail itself of the absence of updating of the registration of the property right to consider as IUC taxpayers the persons in whose name the vehicles are registered at the Motor Vehicle Registry Office?]
The Tax and Customs Authority can only prevail itself of the registered reality of the automobile if the outdating of the legal situation, namely as to the ownership of the vehicle or its finance lease regime, is not proven.
B - [What is the legal value of motor vehicle registration in the economy of the CIUC, namely for the purposes of the subjective incidence of this tax?]
Motor vehicle registration, in the economy of the CIUC, represents a mere rebuttable presumption of the taxpayers of the tax.
C - [If, underlying all the questions outlined above, the rule of subjective incidence contained in article 3(1) of the CIUC establishes or does not establish a presumption?]
Answer rendered moot by the previous conclusions.
In these circumstances, the 27 mentioned and now impugned assessments should be annulled and, consequently, the respective amounts paid should be reimbursed to the Claimant, by the Tax and Customs Authority, in the total amount of €969.15, as requested.
Compensatory Interest
The Claimants request the reimbursement of the IUCs improperly paid, in the total amount of €969.15, increased by compensatory interest, at the legal rate, pursuant to article 43 of the LGT and article 61 of the CPPT.
The claimant paid the assessed amounts, as stated in item n) of the established factual matter.
In accordance with the provision in article 24(b) of the RJAT, the arbitral decision on the merits of the claim that does not admit appeal or challenge binds the tax administration from the end of the period provided for appeal or challenge, and this must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for spontaneous execution of judgments of tax court proceedings, "restore the situation that would exist if the tax act subject to the arbitral decision had not been made, adopting the acts and operations necessary for this purpose", which is in harmony with the provision of article 100 of the LGT [applicable by force of the provision in article 29(1)(a) of the RJAT] which establishes that "the tax administration is obliged, in case of full or partial merits of a claim, judicial challenge or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation subject to the dispute, including the payment of compensatory interest, if applicable, from the end of the period of execution of the decision".
Although article 2(1)(a) and (b) of the RJAT uses the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning in the CAAD, making no reference to condemnatory decisions, it should be understood that the competencies thereof comprise the powers which in judicial challenge proceedings are attributed to the tax courts, this being the interpretation which is attuned to the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which is proclaimed, as the first guiding principle, that "the tax arbitration process must constitute an alternative procedural means to judicial challenge proceedings and to the action for recognition of a right or legitimate interest in tax matters".
Judicial challenge proceedings, despite being essentially a process of annulment of tax acts, admits the condemnation of the Tax Administration to payment of compensatory interest, as is inferred from article 43(1) of the LGT, which establishes that "compensatory interest is due when it is determined, in amicable claim or judicial challenge, that there was an error attributable to the services which resulted in payment of the tax debt in an amount higher than legally due" and from article 61(4) of the CPPT (in the wording given by Law no. 55-A/2010, of 31 December, which corresponds to article 2 in the original wording), which provides that "if the decision that recognized the right to compensatory interest is judicial, the payment period is counted from the beginning of the period of its spontaneous execution".
Thus, article 24(5) of the RJAT, when it says that "payment of interest is due, irrespective of its nature, in accordance with the terms provided in the general tax law and in the Code of Tax Procedure and Process" must be understood as allowing recognition of the right to compensatory interest in arbitral proceedings.
In the case in question, it is manifest that, following the partial illegality of the assessment act, there is cause for reimbursement of the tax, by force of the said articles 24(1)(b) of the RJAT and 100 of the LGT, for such is essential to "restore the situation that would exist if the tax act subject to the arbitral decision had not been made", in the part corresponding to the correction that was considered illegal.
As regards compensatory interest, it appears that the AT, with the elements it held at the time of the assessments, acted in accordance with the Law, that is, assessing the claimant based on the elements it knew and, namely, those that appeared in the motor vehicle registry. It was only subsequently that the claimant came to demonstrate that the presumption of registered ownership did not hold.
It does not thus appear at the very least clear that we are faced with a defect of violation of substantive law, embodied in an error in the legal premises, attributable to the Tax Administration.
Consequently, the Claimant does not have the right to compensatory interest, pursuant to article 43(1) of the LGT and article 61 of the CPPT.
III – DECISION
In accordance with the foregoing, this Arbitral Tribunal decides:
a) To judge the requests for annulment of IUC assessments as founded, and, in consequence, annulling these tax acts, it condemns the Tax and Customs Authority to reimburse to the claimant the respective amounts paid as requested, and
b) To judge the request for compensatory interest as unfounded.
Value of the Case
In accordance with the provision of article 306(2) of the CPC and article 97-A(1)(a) of the CPPT and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the case is valued at €969.15.
Costs
The party giving rise to the costs is condemned thereto, it being understood that the party giving rise thereto is the party that loses – articles 527(1) and (2) of the CPC.
In this case, responsibility for costs must fall to the AT (losing party), all the more so as it had elements to prevent the continuation of the proceeding in the 30 days following knowledge of the request for constitution of the Arbitral Tribunal, in accordance with article 13(1) of the RJAT.
Thus no reason assists the AT when it claims that it was the claimant that gave rise to the request for constitution of the Tribunal and that this party and not the respondent should be condemned to the costs.
Thus, fixing the amount of costs at €306.00 (three hundred and six euros), in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the Tax and Customs Authority is condemned to payment thereof.
Notify accordingly.
Lisbon, 22 July 2014
The Arbitrator,
(José Poças Falcão)
[1] Cf. the current rules of invoicing (Decree-Laws nos. 197 and 198/2012, of 24 August)
[2] Below, the substantiation of this subject matter will be developed further.
[3] Acronym for Code of Single Vehicle Tax.
[4] Although such subject matter has already been previously addressed lightly in the substantiation of the factual matter.
[5] In which the undersigned was also arbitrator.
[6] The genesis of the legal relationship of tax presupposes the cumulative verification of the three presuppositions necessary to its arising, namely: the real element, the personal element, and the temporal element. (In this sense see, among many other authors, Freitas Pereira, M. H., Tax Law, 3rd Edition, Almedina, Coimbra, 2009).
[7] The financial lessee has exclusive enjoyment of the leased asset, has the right to acquire its respective ownership (without the lessor being able to object), can exercise directly against the seller the rights resulting from the purchase and sale contract executed by the lessor (instead of the latter) and even the risk of perishing and destruction of the leased asset falls on his account (and not on the lessor's account) [cf Decree-Law no. 149/95, of 24 June, successively amended by Decree-Laws nos. 265/97, of 2 October and 30/2008, of 25 February. See especially articles 10(2), 13 and 15.
[8] Under the heading "principle of equivalence" article 1 of the CIUC establishes: "The single vehicle tax obeys the principle of equivalence, seeking to burden taxpayers in proportion to the environmental and road cost that these cause, in the realization of a general rule of tax equality".
On the notion of the principle of equivalence SÉRGIO VASQUES tells us: "In obedience to the principle of equivalence, the tax must be shaped having regard to the benefit that the taxpayer derives from the public activity, or having regard to the cost it imputes to the community by its own activity" (Cf. Special Consumption Taxes, Almedina, 2000, p. 110).
And, further on, this Professor explains, regarding automobiles: "a tax on automobiles based on an equivalence rule will be equal only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different wear and environmental cost, pay different tax also.
[9] The fact that the Law requires a written request for registration of sale does not mean, obviously, a subjection of the contract to written form: one thing is the purchase and sale contract itself, another is the request for registration [See in this sense, the Decision of the Supreme Court of Justice of 14-2-1991, at www.dgsi.pt]
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