IUC Subjective Incidence on Leased Vehicles: CAAD Process 231/2014-T

Process: 231/2014-T

Date: November 4, 2014

Tax Type: IUC

Summary

Process 231/2014-T addresses the subjective incidence of IUC (Imposto Único de Circulação) on vehicles held under financial leasing and long-term rental agreements. Banco A SA, acting as liquidator of a credit institution specializing in automotive financing, challenged 553 IUC self-assessments totaling €23,721.41 for 210 vehicles from 2009-2012. The central legal issue concerns whether banks and financial institutions registered as vehicle owners under leasing and LTR contracts qualify as taxable persons for IUC purposes. The Claimant argued that mere registration ownership for security purposes in financing arrangements should not trigger IUC liability, which should instead fall on the lessees or users who have actual possession and beneficial use of the vehicles. CAAD accepted jurisdiction and permitted cumulative assessment of all 553 tax acts in a single arbitration proceeding, recognizing the identity of applicable legal provisions and factual circumstances across all assessments. The procedural decision established important precedent for bulk challenges to repetitive tax assessments affecting financial institutions. The tribunal's analysis focused on distinguishing between formal legal ownership for financing security versus the substantive criteria for IUC subjective incidence under Portuguese tax law, examining whether legislative intent requires actual vehicle use and possession rather than mere registered ownership to establish tax liability.

Full Decision

ARBITRAL DECISION[1]

I REPORT

A) The Parties and Constitution of the Arbitral Tribunal

Banco A SA, legal entity no. …, with registered office … in Lisbon, hereinafter designated as "Claimant", presented a request for constitution of a singular Arbitral Tribunal, pursuant to the provisions of Article 10, and paragraph (a), of paragraph 1, of Article 2, of the Legal Regime of Tax Arbitration, approved by Decree-Law no. 10/2011, of 20 January, hereinafter designated as "LRTA" and of Articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, to assess the claim that opposes it to the Tax and Customs Authority, hereinafter designated as "Respondent" or "TCA", with a view to the annulment, on grounds of illegality, of a set of 553 self-assessments of Unique Vehicle Tax (UVT), relating to the years 2009 to 2012, in the global amount of €23,721.41, relating to 210 motor vehicles, all identified by their respective registration number in the respective self-assessments itemized in the table attached as Annex A to the request for arbitral decision, which is hereby deemed to be fully reproduced.
The request for constitution of the Arbitral Tribunal, presented on 6 March 2014, was accepted by the Esteemed President of CAAD on 7 March 2014 and automatically notified to the Tax and Customs Authority. The Claimant chose not to designate an arbitrator, and therefore, pursuant to the provisions of paragraph 1, Article 6 of the LRTA, the undersigned was designated by the Ethics Council of the Administrative Arbitration Center on 23 April 2014 as arbitrator of the singular Arbitral Tribunal. The appointment was accepted and the parties, notified of the acceptance, did not refuse the designation, in accordance with the terms provided in paragraphs (a) and (b), of paragraph 1, Article 11, of the LRTA, in conjunction with the provisions of Articles 6 and 7 of the Code of Ethics.

Thus, in compliance with the provisions of paragraph (c), of paragraph 1, Article 11, of Decree-Law no. 10/2011, of 20 January, with the wording introduced by Article 228, of Law no. 66-B/2012, of 31 December, the singular Arbitral Tribunal was constituted on 12 May 2014.

On 13 May 2014, an arbitral order was issued for submission of a Response within the legal timeframe, of which the Respondent "TCA" was notified on 16 May 2014, in accordance with the provisions of paragraphs 1 and 2, Article 17, of the LRTA. On 11 June 2014, the TCA submitted its Response to the file together with annexed documents. By arbitral order of 13 June 2014, the parties were heard on the possibility of waiving the holding of the meeting provided for in Article 18 of the LRTA, with the TCA expressing its agreement with the waiver and the Claimant expressing interest in holding the same, which was scheduled for 10 July 2014. On 8 July 2014, the TCA requested the attachment to the file of the Administrative Process (AP).

On 10 July 2014, at 2:00 p.m., the meeting provided for in Article 18 of the LRTA was held, of which minutes were drawn up and are attached to the file and are hereby deemed to be fully reproduced. At the meeting held, the Claimant requested the attachment to the file of a set of documents to strengthen the evidence presented with the invoices already attached to the file with the submission of the arbitral request, namely: copies of accounting extracts proving the payments of some invoices attached to the file, on a random basis, while remaining available to attach all other documents if the Tribunal deems it necessary. The TCA did not object to the attachment of documents, without waiving the time for examination. The tribunal set a period of 10 days, counting from the notification of the attachment, for the TCA to examine the documents and to pronounce on them, if it so wished. The parties waived the submission of pleadings as they understood that their positions were already duly clarified in the pleadings attached to the file. A date was also set for issuance of the arbitral decision by 7 November 2014.

After the period for examination set for analysis and pronouncement on the documents attached to the file by the Claimant, the Respondent TCA did not pronounce on the documents attached to the file by the Claimant.

On 23 September 2014, the TCA requested the attachment to the file of two arbitral decisions issued in cases nos. 150/2014-T and 220/2014-T, alleging that these were cases concerning identical subject matter to that of the present file, in which the decisions were unfavorable to the claimant parties based on a certain interpretation of the probative value of invoices. The tribunal ruled in favor of attachment to the file of said arbitral decisions and, in compliance with the principle of contradiction, notified the Claimant and set a period for it to pronounce, if it so wished. The Claimant pronounced on the matter by request filed with the file on 6/10/2014, which is hereby deemed to be fully reproduced.

B) Procedural Requirements

The Arbitral Tribunal is regularly constituted and is materially competent, in accordance with Article 2, paragraph 1, paragraph (a) of Decree-Law no. 10/2011, of 20 January.

The Parties enjoy legal personality and capacity, are legitimate and are legally represented (See Articles 4 and 10, paragraph 2, of DL no. 10/2011 and Article 1, of Ordinance no. 112/2011, of 22 March). The legitimacy of the Claimant Banco A SA, to present the present request for arbitral decision in the capacity of liquidator of the company B, SA, is demonstrated by the content of the minutes attached to the arbitral request and information on the registration of the deed of dissolution of the company, attached as ANNEX B to the arbitral request and which are hereby deemed to be fully reproduced.

As for the cumulation of claims, seeking the joint assessment of the legality of 249 UVT self-assessments, relating to the years 2009 to 2012, although they constitute autonomous acts, the requirements laid down in paragraph 1, Article 3, of the LRTA and Article 104 of the CPC are met, the cumulation is to be admitted. Thus, the cumulation of requests in the same arbitral request for declaration of illegality of all tax acts of UVT self-assessment and respective compensatory interest associated with them is accepted, given the identity of the tax and the assessment of the tax acts in question depends on the assessment of the same factual circumstances and the application of the same rules of law.

The process does not suffer from nullities that invalidate it and no exceptions were raised that preclude judgment on the merits of the case, so the Tribunal is in a position to issue the arbitral decision.

C) THE CLAIM FILED BY THE CLAIMANT

The Claimant files the present request for arbitral decision seeking the illegality and consequent annulment of the acts of self-assessment of Unique Vehicle Tax and respective Compensatory Interest, relating to the years 2009 to 2012, in the global amount of €23,721.41, with reference to two hundred and ten vehicles, identified by their respective registration number in the list contained in the request for arbitral decision (Annex A), which is hereby reproduced, as well as in the notes demonstrating the self-assessment of tax and the respective compensatory interest, all attached to the file and which are hereby deemed to be fully reproduced.

It bases its claim on the illegality of the tax self-assessments and respective interest, alleging in summary the following:

a) The Claimant (and before it "B") is a credit institution with a strong presence in the national market, with financing in the automotive sector being one of the areas of activity of particular relevance;

b) A substantial part of its activity amounts to the conclusion, among others, of financial leasing and long-term rental (LTR) contracts, intended for the acquisition, by companies and individuals, of motor vehicles;

c) These contracts comply, as results from their own legal configuration, with a common script, peculiar to this type of financing: the Claimant, after being contacted by the customer – who, at that stage, has already chosen the type of vehicle it wishes to acquire, its characteristics (make, model, accessories, etc.), and even its price – acquires the vehicle from the supplier indicated to it by the customer, and subsequently proceeds to its delivery to said customer – who thus assumes the quality of lessee;

d) During the period to be stipulated in the contract, this lessee maintains the temporary use of the vehicle – which remains the property of the Claimant –, by means of remuneration to be paid to the Claimant in the form of rents;

e) Being legally obliged to, at the end of the contract, acquire the vehicle through payment of a residual value;

f) The motor vehicles identified in the list attached to the Request as ANNEX A (whose registration number is in column C) were given in LTR by the Claimant (strictly speaking, by B, having subsequently transferred to the Claimant) to the customers also identified therein (column K);

g) All these customers acquired, at the end of their respective contract, the motor vehicle on which the same was based, through payment of the corresponding residual value, as results from the sales invoices attached as documents nos. 211 to 420 identified in the table (column N), attached as ANNEX A to the arbitral request;

h) In the case of the motor vehicles identified with the registration numbers … and …, their acquirers were not the former lessees, but third parties to whom these indicated that the vehicles be transferred and the corresponding residual values be invoiced;

i) Which in no way alters the Claimant's factual position, as, during the currency of the contracts, it was merely a lessor; once the contracts came to an end, it ceased to be the owner of these vehicles;

j) The Claimant was recently notified to proceed with the payment of the UVT self-assessments contained in the present arbitral request (Annex A), having made payment as evidenced by documents attached to the file as documents nos. 1 to 210 (identified in column O);

k) The requirement to pay the UVT in question, relating to the years 2009 to 2012, occurred even though the TCA knew – or should have known – that the motor vehicles in question were no longer the property of the Claimant at the time (in the year) in which the tax should have been paid;

l) This is because, on the dates to which the tax facts that gave rise to the UVT self-assessments in question refer, the Claimant was no longer the owner of the vehicles to which the same refer;

m) It exemplifies with the case of the motor vehicle with the registration number … and with two of the self-assessments relating to it, with nos. 2010… and 2011…, relating to the years 2010 and 2011, with its former lessee C becoming the owner of this vehicle on 04.01.2006; a factual scenario, it alleges, that repeats itself in relation to all other tax acts identified in the table annexed to the Request;

n) It paid all the self-assessments now contested under Decree-Law 151-A/2013 (Exceptional Regime for Regularization of Tax and Social Security Debts), so it may benefit from payment of the amount of tax, in the amount of €23,721.41, with waiver of payment of the corresponding compensatory interest.

The legal basis for the request for arbitral decision rests, in summary, on the following:

a. The Claimant cannot be considered a taxpayer of UVT, even though, in the year to which the UVT in question refers, the transfer of said vehicles was not duly registered with the Motor Vehicle Registry;

b. Although the tax acts do not expressly mention the reasons that led to the issuance of the self-assessments, which constitutes a defect of lack of grounds, which it expressly invokes, the Claimant understands that the reason underlying the self-assessments is the fact that the transfer of property by the lessees, in accordance with the terms provided in their respective contracts, was not registered with the Motor Vehicle Registry;

c. Registration, or its absence, cannot be considered a determining element of the Claimant's tax liability;

d. The essential single issue to be decided is: whether the circumstance that the transfer of the vehicles identified in the table attached as ANNEX A, to their former lessees (or, in the specific cases identified above, to third parties indicated by them), at the end of the LTR contract, was not registered with the Motor Vehicle Registry, makes that transfer inapplicable to the TCA, for the purposes of collecting the tax from its previous owner;

e. The responsibility for paying the UVT whose self-assessment is contested does not fall, nor has it ever fallen, to the Claimant, and therefore the self-assessment carried out by the TCA is intrinsically illegal – due to the Claimant's lack of substantive legitimacy;

f. As arbitral jurisprudence (invoking arbitral decisions nos. 14/2013-T, 26/2013-T and 27/2013-T) has highlighted, not even during the currency of a financial leasing contract should the leasing entity be considered a UVT taxpayer; all the more so, it will not be after the end of the leasing contract and the exercise, by the leasing entity, of its right to acquire the asset by the residual value; the lessee also becomes owner of the vehicle in question, with the provisions of paragraph 1 of Article 3 of the CUVT then applying;

g. It also invokes, in summary, the provisions of Articles 408, paragraph 1 and 874 of the Civil Code, the regime resulting from Decree-Law no. 54/75 of 12 February, as well as the jurisprudence resulting from various arbitral decisions already rendered on similar cases and, finally, attaches Opinion of Prof. Dr. Agostinho Cardoso Guedes.

It concludes by petitioning for the declaration of illegality and consequent annulment of the tax self-assessment acts relating to the UVT concerning the 210 vehicles identified by their respective registration number in the list attached as ANNEX A, relating to the years 2009 to 2012, with the consequent reimbursement of the amount of €23,721.41, relating to the tax paid by the Claimant, plus compensatory interest for deprivation of said amount, in accordance with Article 43 of the General Tax Act.

D) – THE RESPONDENT'S RESPONSE

The Respondent alleges in its response, in summary, that the Claimant's position is unfounded, which understanding incurs a skewed reading of the letter of the law, in an interpretation that does not attend to the systematic element, which violates the unity of the regime established throughout the CUVT and, more broadly, throughout the entire fiscal legal system that ignores the ratio legis of the regime established in the CUVT". It bases its allegation on the provisions of paragraphs 1 and 2, of Article 3 of the CUVT, which determine, respectively, that "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" and that UVT taxpayers are "the owners (or in the situations provided for in paragraph 2, the persons enumerated therein), being considered as such the persons in whose name the same are registered".

The Respondent alleges, in Article 16 of its Response, «that there is exclusive responsibility of only one of the taxpayers, as a rule the owner by virtue of paragraph 1, except in cases where a financial leasing contract, sale with reservation of ownership or long-term rental of the vehicle has been concluded (and registered), in which, by virtue of paragraph 2, the UVT taxpayer becomes one of the subjects indicated therein, and only this one.» It further alleges that the legislator did not use the expression "are presumed", as it could have done, indeed similarly to what occurs in other legal norms, exemplifying some situations provided for in the law; the Respondent understands that in cases where the tax legislator uses the expression "are considered", it is not establishing a presumption; it lists, by way of merely illustrative example, various norms contained in different tax codes that use the expression "are considered". To understand that the legislator established a presumption here is based on an interpretation contrary to law, because "the legislator's clear choice was to consider that, for purposes of UVT, those who as such appear in the motor vehicle registry shall be considered owners;" it invokes, in defense of this understanding, the decision rendered within the scope of Case no. 210/13.0BEPNF, by the Administrative and Tax Court of Penafiel.

It concludes that this is the interpretation that attends to the systematic element and preserves the unity of the fiscal-legal system, in addition to which any other interpretation would be to ignore the teleological element of interpretation of the law, the ratio of the regime established in the article in question, and, likewise, throughout the CUVT.

It adds that the failure to update the registry, in accordance with the provisions of Article 42, of the Motor Vehicle Registry Regulation, shall be imputable in the legal sphere of the UVT taxpayer and not in that of the State, as the subject of this tax; another understanding would cast the TCA into absolute uncertainty. This understanding is reinforced by invoking parliamentary debates surrounding the approval of DL no. 20/2008, of 31 January, from which it transcribes excerpts, to conclude that the legislator intentionally wished to establish a solution from which it results that UVT is due by the persons appearing in the registry as owners of the vehicles. It also invokes Recommendation no. 6-B/2012, by the Ombudsman, which it attached as document no. 2 annexed to the response, directed to the Secretary of State for Public Works, Transport and Communications.

In addition to all this, the Respondent alleges that the interpretation conveyed by the Claimant is contrary to the Constitution, because the principle of contributory capacity is not the only nor the main principle that informs the tax system; beside it, we find others with the same constitutional dignity, such as the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality. In the Respondent's view, "the interpretation proposed by the Claimant, which devalues the registry reality in detriment of an 'informal reality' and insusceptible to a minimum control by the Respondent, offends the basilar principle of trust and legal certainty that should inform any legal relationship, here including the tax relationship.

Finally, having regard to the rules of burden of proof, it further alleges the lack of proof of the transfer of ownership of the vehicle, given that, in the TCA's view, invoices are not, in themselves, documents capable of proving the conclusion of a synallagmatic contract such as a sale and purchase. The Claimant did not attach a copy of the financial leasing contracts. It further alleges the non-compliance with the provisions of Article 19 of the CUVT, on the part of the claimant.

To reinforce this position regarding the lack of probative value of the invoices attached to the file to demonstrate the transfer of ownership of the vehicles in question in the file, the TCA came to request the attachment to the file of arbitral decisions nos. 115/2014-T and 220/2014-T.

It concludes that the UVT self-assessment acts do not suffer from illegality nor are the legal requirements met for the awarding of compensatory interest. And, also as regards responsibility for arbitral costs, the Respondent understands that, inasmuch as the transfer of ownership of motor vehicles is not within its control, the UVT is assessed in accordance with the registry information duly transmitted by the Institute of Registry and Notary; that is, the UVT is not assessed in accordance with information generated by the Respondent itself. Thus, it was not the Respondent that gave rise to the filing of the request for arbitral decision, but rather the Claimant itself, which, moreover, only now has furnished documentary evidence relating to the transfer of ownership, which did not occur within the scope of the prior administrative procedure, so the Claimant should be condemned to pay the arbitral costs arising from the present request, in accordance with Article 527, paragraph 1 of the New Code of Civil Procedure, as per Article 29, paragraph 1 – (e) of the LRTA, in line, moreover, with a similar issue decided within the scope of case no. 72/2013-T, which took place in this arbitration center.

It concludes, by the inadmissibility of the arbitral request, advocating for the legality of the contested tax acts and the absolution of the Respondent on the claim.

II. QUESTIONS TO BE DECIDED

Having regard to the positions of the Parties assumed in the arguments presented, the Tribunal must decide the following questions:

1st) On the defect of lack of grounds;

2nd) On the subjective incidence of UVT, the effects of motor vehicle registry and the possible existence or not of a rebuttable presumption in this matter;

3rd) On proof of transfer of ownership of the vehicles and the rebuttal of the presumption;

4th) On the right to payment of compensatory interest.

5th) On responsibility for payment of arbitral costs.

III. SUBSTANTIVE LEGAL GROUNDS

A) Established Facts

As a matter of fact relevant to the decision to be rendered, the Tribunal considers the following facts to be established:

1st) The Claimant BANCO A SA, succeeded to the position of the company B, SA, as is demonstrated by the content of the minutes attached to the arbitral request and information on the registration of the deed of dissolution of the company, by virtue of being the sole shareholder of the dissolved company on 31 December 2008;

2nd) The Claimant is a credit institution whose substantial activity consists of financing the sector, through the conclusion, among others, of financial leasing and long-term rental (LTR) contracts, intended for the acquisition, by companies and individuals, of motor vehicles;

3rd) The Claimant was notified to pay 553 unique vehicle tax self-assessments, relating to the years 2009 to 2012, relating to 210 vehicles with the registration numbers duly identified in the UVT self-assessments attached to the file as documents nos. 1 to 210 annexed to the arbitral request, all duly itemized in the table attached to the Request as Annex A, which are hereby deemed to be fully reproduced;

4th) All motor vehicles referenced in the UVT self-assessments were acquired by their respective lessees (Claimant's customers) at the end of the contract, in a date prior to that of the tax facts, as results from the content of the invoices mentioned in the above-mentioned list, with the exception of the motor vehicles identified with the registration numbers … and …, as results from documents attached to the file with documents nos. 211 to 420;

5th) These latter vehicles were acquired, not by the former lessees, but by third parties to whom these indicated that the vehicles be transferred and the corresponding residual values be invoiced;

6th) The tax self-assessments were issued and notified for payment to the Claimant, which total the global amount of €23,721.41.

7th) The Claimant made payment of all the tax self-assessments contested in the file, which is proven by documents attached with nos. 1 to 210 annexed to the arbitral request;

8th) As of the date of the tax facts, the motor vehicles referenced in the UVT self-assessments here contested were registered in the motor vehicle registry in the ownership of B, in the capacity of owner;

9th) As of the date of the tax facts, the vehicles identified in the contested self-assessments were registered in the motor vehicle registry in the ownership of "B" in the capacity of owner;

10th) The acquirers of the vehicles in question in the file did not proceed to timely registry, so in the databases of the Motor Vehicle Registry, the Claimant still appeared as the owner of the same;

11th) To prove the facts supra described, the Claimant attached to the file copies of invoices concerning the payment of the residual value provided for in the financial leasing contracts as a condition of acquisition of ownership of the vehicles identified in each of the tax self-assessments contested in the file, contained in documents attached to the Request – See Docs. 1 to 211 and 212 to 420; and also the accounting extracts attached to the file on 8/07/2014 and which are hereby deemed to be fully reproduced;

12th) As of the date of the tax self-assessment acts, the TCA had sufficient information elements regarding the contractual situation of the vehicles in question in the present file, namely, the existence of the financial leasing contracts and the identification of the respective lessees, as unequivocally results from the content of the information contained on page 13 of the AP attached to the file by the TCA, where it states: "this Financial Service cannot explain what criterion caused the issuance of the self-assessments in the name of the owner even when the lessee was recorded in the system…"- See AP attached to the file;

13th) As of the date of the tax facts, the TCA had sufficient information regarding the existence of the financial leasing contracts as well as those contained in the Claimant's accounting which the TCA could not be unaware of, as well as all those communicated to it already within the scope of the present request for arbitral decision.

B) SUBSTANTIATION OF ESTABLISHED FACTS

The decision on factual matters in the terms supra described is based on the documentary evidence that the Parties attached to the present process, namely the Claimant, annexed to the claim filed and in the Administrative Process, attached to the file by the Tax Authority. The Tribunal considered in particular that the factual reality underlying the business situations concerning the various vehicles, proven by documents attached annexed to the arbitral request, as well as by documents subsequently attached to the file, as deliberated at the meeting of 10 July 2014 (accounting extracts proving payment of invoices attached annexed to the Request), concerning the vehicles that are the subject of the contested self-assessments and also the information contained in the administrative process.

C) UNPROVEN FACTS

There are no other facts given as unproven, as all facts relevant to the assessment of the claim have been established.

IV – SUBSTANTIVE LEGAL GROUNDS

With the factual matters established, it is important to address the legal questions indicated above, corresponding, in summary, to the illegality issues raised by the Claimant in the present arbitral request. Let us then address the first question to be decided.

1st - On the Alleged Defect of Lack of Grounds

The Claimant alleges violation of the duty to state grounds, given that "the tax acts do not expressly mention the reasons that led to the issuance of the self-assessments, which constitutes a defect of lack of grounds".

Immediately thereafter, however, the Claimant states that it understands that the reason underlying the self-assessments is the fact that the transfer of property by the lessees, in accordance with the terms provided in their respective contracts, was not registered with the Motor Vehicle Registry. This is what the Claimant's allegation of the defect of lack of grounds amounts to.

There is no doubt that substantiation is a requirement of tax acts in general, being a constitutional requirement (Article 268 of the CRP) and a legal one (Article 77 of the General Tax Act). It can be said, in short, that it is a settled understanding among us, both in doctrine and in case law, that legally required substantiation must meet a minimum set of characteristics.

Substantiation is the strict initiative and obligation of the administration (power/duty), being understood as ex officio, with substantiations on demand not being admissible, and it must accompany the performance of the act, with ex post facto substantiations making no sense. Substantiation must, furthermore, be clear, that is, understandable by an average recipient, avoiding polysemic or deeply technical concepts, and it must contain all essential elements that were determinative of the decision taken, indicating the legal norms and the motivation of the act.

Notwithstanding the foregoing, it is known that substantiation can also be express or tacit, by reference to prior opinions, information or proposals, as indeed results expressly from the provisions of paragraph 1, Article 77 of the General Tax Act.

That said, it must be emphasized that, as the tax act is an act of significant onerousness in the legal sphere of its addressee, the same must be carefully substantiated so as to convince the taxpayer of the underlying legality and the criteria that presided over its quantification.

However, it is also now settled, for both doctrine and case law, that substantiation must be expressed through a succinct exposition of the grounds of fact and law, with the lack of substantiation being equivalent to the adoption of grounds which, by obscurity, contradiction or insufficiency, do not concretely clarify the motivation of the act.[2]

In the case of the present file, in each of the contested tax acts there is properly identified, with indication of the tax in question (UVT), the periods to which the tax relates, as well as the amount determined in the respective self-assessment and the deadline for payment.

Precisely for this reason, the Claimant understood perfectly (or surmised), as the addressee of the tax acts, all the factual and legal situation underlying the situation, understood its content. And to this it adds that substantiation is to be assessed in accordance with "the concrete circumstances, among which stand out those of the type of act, those of the taxpayer's participation in the procedure and its extent (…)".[3]

In the present file, the Claimant (as successor of B) as the former owner of the vehicles in question, party to the financial leasing contracts referenced in the file and duly documented, was in a position to identify the concrete circumstances underlying the procedure that will have led to the contested self-assessments, in sufficient terms to understand them clearly.

In this respect, it cannot be overlooked that the Claimant's quality as a reference financial institution in the market naturally reinforces its ability to understand the succession of facts that reveal the substantiation of the act that was notified to it, as it did indeed understand, which amply revealed in the arbitral request it presented.[4]

The Claimant thus reveals a total understanding of the substantive grounds of the tax acts, with which it is in disagreement, but fully aware of their scope. From the confrontation of all elements contained in the arbitral request itself, based on the content of the tax acts notified to the Claimant as addressee, it is possible to conclude that it properly understood the grounds of the same, as is evidenced in the argumentation adduced.

Understanding, therefore, that it is sufficiently perceptible to an average recipient, placed in the position of the concrete addressee, what the substantiation of the tax acts contested in the present file is, the allegation of the defect of lack of grounds should be rejected.

Having established this, we turn to the second question to be decided in the present file, which is whether the Claimant should or should not be considered as a taxpayer of UVT in light of the applicable legal framework. It is important, therefore, to decide whether the Claimant should be qualified as a taxpayer of the Unique Vehicle Tax, assessed in relation to the years 2009 to 2012, as to the vehicles identified in the request for arbitral decision.

As the Claimant itself refers in the arbitral request, the substantive question to be decided is whether the circumstance that the transfer of the vehicles identified in the table attached as ANNEX A, to their former lessees (or, in the specific cases identified above, to third parties indicated by them), at the end of the LTR contract, was not registered with the Motor Vehicle Registry, makes that transfer inapplicable to the TCA, for the purposes of collecting the tax from its previous owner.

The decision of this question implies assessing the terms of the configuration of the subjective incidence of UVT in light of the provisions of Article 3, of the Code of the Unique Vehicle Tax (CUVT), namely, the question of whether the subjective incidence rests strictly on the registration of the vehicle ownership in the Motor Vehicle Registry, or whether the registry operates only as a rebuttable presumption of tax incidence, in accordance with the provisions of Article 73 of the General Tax Act. On this matter, there is already abundant and fairly settled arbitral case law expressed in various decisions mentioned by the parties and in some others rendered after the presentation of the present request for arbitral decision, which will be referred to at the appropriate time.

2nd - On the Subjective Incidence of UVT, the Effects of Motor Vehicle Registry and the Possible Existence or Not of a Rebuttable Presumption

The fundamental legal framework applicable in this matter is that provided for in Articles 1 to 6 of the CUVT, approved by Law no. 22-A/2007, of 29 June.

Article 1 of the CUVT defines the objective incidence of the tax, distinguishing vehicles by specified categories, a norm that appears clear and without difficulties of application. However, the same does not apply to the norm of subjective incidence contained in paragraph 1, Article 3 of the CUVT, which is at the origin of the present dispute and thus constitutes a question to be decided in the case under review.

Analysis of both provisions (Articles 1 and 3) allows one to conclude that in the functioning of UVT, the motor vehicle registry has a fundamental role. What is important, therefore, is to determine the meaning and scope of the norm of subjective incidence contained in Article 3, paragraph 1 of the CUVT and the possible existence or not of a rebuttable presumption, connected with the question of the legal effects of motor vehicle registry, raised by the Claimant.

On this question, the positions of the parties are summarized as follows:

for the Claimant, it cannot be considered a taxpayer of UVT, even though, in the year to which the UVT in question refers, the transfer of said vehicles was not duly registered with the Motor Vehicle Registry, as registration, or its absence, cannot be considered a determining element of the Claimant's tax liability;
for the Respondent, Article 3, paragraph 1 of the CUVT establishes a norm of tax incidence and not mere rebuttable presumption.

Let us therefore see what results from the legal regime in force and its application to the concrete case in the file.

Article 3 of the CUVT provides that:

"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 – Equivalent to owners are financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract".

Paragraph 1, Article 11 of the General Tax Act 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".

The interpretation and application of the legal norm presupposes the performance of an interpretive activity, which must be objective, balanced, and in accordance with the letter and spirit of the law. Any text, and the law is no exception, contains multiple meanings and frequently contains ambiguous or obscure expressions. For that reason, although the letter of the law is "the guiding thread" of the interpreter, it must be interpreted having in account the underlying objectives, "the ratio" or the motivation of the legislator in establishing the norm in question.[5]

To these elements is added another according to which the interpretation of the legal norm must respect the "unity of the legal system", its coherence and intrinsic logic. Article 9 of the Civil Code (CC) provides the rules and fundamental elements for interpretation of the legal norm, which tax law interpretation must also obey, which begins by stating that interpretation should not be limited to the letter of the law, but should reconstruct from it the "legislative thought".[6]

To these general principles are added, further, the principles contained in the General Tax Act, namely in Article 73, which establishes that presumptions contained in norms of tax incidence always admit proof to the contrary.

With regard to the question under analysis, it is important to highlight the contribution of arbitral decisions already rendered in cases nos. 14/2013-T, of 15 October, 26/2013-T of 19 July, 27/2013-T, of 10 September, 217/2013-T of 28 February and, more recently, in the decisions rendered in cases 286/2013-T, of 2 May 2014, 293/2013-T, of 9 June 2014, 46/2014-T of 5 September among others, revealing a refined reflection on the fundamental question under review. It is, therefore, in this framework, using the fundamental hermeneutic principles just referred to, accepted by the case law of our superior courts, that we must seek to find the appropriate interpretation of the norms in question.

Thus, as to the question of knowing, given the literal content of paragraph 1, Article 3 of the CUVT, what the scope of the expression "being considered as such", given that in the current version the legislator did not use the term "are presumed" (which was contained in the defunct Tax on Vehicles Regulation), the Tribunal understands that it can only be the following: the legislator presumes (considers) that the owners are the persons in whose name the vehicles are registered. This means that such presumption, implicit, is naturally rebuttable in accordance with the provisions of Article 73 of the General Tax Act.

The presumption established in Article 3, paragraph 1 of the current CUVT was already established in the earlier versions of the codes abolished with the entry into force of the CUVT. Already Article 3 of the Tax on Vehicles Regulation (approved by Decree-Law no. 143/78) established that: "the tax is due by the owners of the vehicles, being presumed as such, until proof to the contrary, the persons in whose name the same are registered or registered". Similarly, Article 2 of the Regulation of Circulation and Road Haulage Taxes (approved by Decree-Law no. 116/94) established that: "the taxpayers of circulation tax and road haulage tax are the owners of the vehicles, being presumed as such, until proof to the contrary, the natural or legal persons in whose name the same are registered".

In fact, in the current version of the Code, only the verb changed, with the legislator now opting for the expression "being considered". It is certain that, between the earlier legislative versions and the current one, the General Tax Act came into force, which expressly established the principle contained in Article 73, from which it results that any presumption in the matter of tax incidence always admits proof to the contrary. Consequently, it becomes indifferent whether an express presumption or an implicit presumption is adopted, as one, like the other, are equally rebuttable.

Thus, it is understood that the fact that the legislator, in the current version of the CUVT, opted for an implicit presumption (using the expression "being considered") instead of an express presumption (with recourse to the expression "being presumed"), as happened previously, does not translate into a substantial alteration as regards the subjective incidence of the tax. It is not, therefore, the ownership appearing in the motor vehicle registry, a condition, in itself, determinative of tax incidence in the matter of UVT, but mere rebuttable presumption.

It is further added that, contrary to what is alleged by the Respondent, we can easily point out various examples, drawn from the tax legal system, in which the legislator opted for the use of the verb "to consider", with a presumptive meaning. Besides which, as has already been said above, as this is a norm of tax incidence, 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 the annotation to paragraph 3, Article 73 of the General Tax Act, "presumptions in the matter of tax incidence may be explicit, revealed by the use of the expression is presumed or similar (…). However, presumptions may also be implicit in norms of incidence, namely of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not unfeasible to ascertain the real value". And there are many examples of norms in which the verb "to consider" is used to establish rebuttable presumptions, as occurs with the provisions of paragraph 2 of Article 21 of the CIRC, in Article 89-A of the General Tax Act or in Article 40, paragraph 1 of the CIRS among others. The Respondent does allege, however, in the response presented, that this same term "being considered" is also normally used by the tax legal system to define situations distinct from presumptions. Now, such appears normal, namely, in the case of other tax norms in which the legislator used the formula "is considered" or "are considered", but assigning it another meaning, as these are expressions that, depending on context, may assume a plurality of meanings, without from this can be drawn the conclusion that the Respondent intends.
Taking into account that the legal system must form a coherent whole, the examples referred to above, as well as the doctrine and case law indicated, allow one to conclude 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 "is considered" can serve as the basis for presumptions. And, as referred to above, with the literal element being the first instrument of interpretation of the legal norm, in search of legislative thought, it is important to confront it with the other elements of interpretation, namely the rational or teleological element, the historical element and the systematic one.

And, also in this line of reflection, the Tribunal cannot follow the argumentation put forward by the Tax Authority. As regards the historical element, it must be noted 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 concerning the taxpayers of the tax as being those in whose name the vehicles were registered or registered. That version of the law used the literal expression "being presumed as such".

However, having regard to the purposes of the tax in question, it must be recognized that the use of the expression "is considered", in the current version, contemplates an expression with an effect similar to that one, embodying, likewise, a presumption. This same occurs in the formulation contained in paragraph 1, Article 3 of the CUVT, in which a presumption was established, revealed by the use of the expression "being considered", of meaning similar and of value equivalent to the expression "being presumed", in use since the creation of the tax in question. The use of the expression "being considered" is justified, solely by appearing more in tune with the reinforcement given to vehicle ownership, which came to constitute the tax base event, in accordance with the terms contained in Article 6 of the CUVT.

Therefore, in light of the literal element of interpretation, nothing prevents the understanding that the provisions of paragraph 1, Article 3 of the CUVT, establishes a rebuttable presumption.

Thus, as to the subjective incidence of the tax, it is to be concluded that there are no alterations compared to the situation previously in effect within the scope of the Municipal Tax on Vehicles, Circulation Tax and Road Haulage Tax, as is indeed broadly recognized by doctrine, with a rebuttable presumption continuing to apply in this matter.[7]

This understanding is, moreover, the only one that appears adequate and in accordance with the principle of material truth and justice, underlying fiscal relationships, with the objective of taxing the real and effective owner and not the one who, by circumstances of diverse nature, often amounts to nothing more than an apparent and false owner, by appearing in the motor vehicle registry.

And, in this sense, the arbitral decisions rendered in cases nos. 150/2014-T and 220/2014-T also confirm the same understanding already embodied in earlier arbitral decisions, among which, the one invoked in the file by the Claimant. Furthermore, and in the same sense, arbitral judgment no. 63-2014-T, of 15 September, notes that: "(…) if the legislator had, as the Respondent intends, established in the law a non-presumptive qualification of who is owner of the vehicles (a legal fiction), it would thereby be establishing, through a different formulation, a rule in all aspects identical to the hypothetical rule referred. It would be basing the subjective incidence of the tax on a legal fiction, in total disconnection from any economic substance as the basis of the subjective incidence. (…) And, if so, it will necessarily also be concluded that Article 3, no. 1, can only establish a presumption of vehicle ownership, even with all the negative consequences that this conclusion will certainly carry, in terms of efficiency of the administration of the tax."

For this to be the case, the person registered in the motor vehicle registry must be permitted to present probative elements sufficient to demonstrate that the effective owner is, in fact, a person different from the one appearing in the registry, and who initially, and in principle, was presumed to be the true owner. Otherwise, the supremacy of the formal truth of the registry over material truth would be accepted, and it would be admitting a gross violation of the fundamental fiscal principles enunciated and, further, of the principle contained in Article 73 of the General Tax Act, according to which there are no irrebuttable presumptions in the matter of fiscal incidence.

To all that which is left set forth above, would be added the violation of the principles of legality, proportionality and justice, as well as that of the investigative, enshrined, respectively, in Articles 55 and 58 of the General Tax Act.

Moreover, it is possible to extract yet another argument from the provisions of Article 7 of the Land Registry Code (which constitutes the fundamental legal basis in the matter of registration of property), which provides that "definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it." In light of the principle of uniformity and intrinsic coherence of the legal system, no acceptable ground appears for the principle in effect in property registration in general to suffer an inflection or even unjustified "trampling" in the matter of motor vehicle registry.

But, if any doubt persisted, it could always be said that, as regards the elements of interpretation of a rational or teleological bent, the statement of reasons of Bill no. 118/X of 07/03/2007, underlying Law no. 22-A/2007, of 29/06, is sufficiently expressive in clarifying that the reform of automobile taxation is implemented by means of the displacement of part of the tax burden from the moment of vehicle acquisition to the phase of circulation and aims to "form a coherent whole" which, although intended for the collection of public revenue, intends that the same be collected "in the measure of the environmental costs that each individual causes to the community", further 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, thereby making it 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 raison d'être of this tax figure", further noting that "it is this principle that dictates the taxation of vehicles depending on their ownership and until the moment of scrapping (…)".

Thus, the logic and rationality of the new system of automobile taxation presupposes and aims for a taxpayer coincident with the owner of the vehicle, on the assumption that it is this one, and not another, the real and effective subject causing environmental damage, as results from the principle of equivalence inscribed in Article 1 of the CUVT. This principle of equivalence, which informs the current unique vehicle tax, has underlying it the polluter-pays principle, and concretizes the idea, inscribed in it, that he who pollutes must therefore pay. It is, after all, about achieving the negative environmental externalities that result from the use of motor vehicles, are assumed by their owners and/or the users, as costs that only they should bear.

In this respect, the position expressed in the recent Arbitral Decision no. 286/2013-T of 2 May 2014, is quite illuminating in stating that:

"It is this principle (of equivalence) that dictates the taxation of vehicles depending on their ownership and until the moment of scrapping, the common use of a specific tax base, the review of the framework of tax benefits in effect and the allocation of a portion of the revenue to the municipalities of their respective use.

Now, to claim, as the Respondent does, that the legislator, in Article 3, no. 1 of the CUVT, fixed, whatever the underlying technical means, the subjective incidence of the tax in the persons in whose name the vehicles are registered, with total independence from whether or not, in the relevant tax period, they are holders of the right of use of the vehicle, especially of its ownership, would imply disregarding that purpose which presides over the tax normativity, well manifested in the objective incidence and in the tax base associated with the various categories of vehicles (cf. Articles 2 and 7 of the CUVT). For a registry entry, without correspondence with the underlying ownership, has no value to give satisfaction and compliance with such purpose, as it is not the persons in whose name the vehicles are registered when they are not holders of rights over their use that cause environmental and road costs, but rather such environmental and road costs are caused by the effective users of the vehicles, in accordance with the relevant substantial legal situations, even if they do not appear, as they should, in the motor vehicle registry. The registry, in fact, in no way vouches or serves as to the principle of equivalence established in Article 1 of the CUVT. Moreover, to assume that the determinative element of the subjective incidence of the tax is simple and exclusively the motor vehicle registry also does not allow affirming a connection with any manifestation of contributory capacity relevant, which, as a rule, in taxes not strictly commutative, is essential, as there must exist, without prejudice to practicability requirements, some effective connection between the tax and a materially relevant economic requirement capable of justifying the tax. The raison d'être of the tax figure thus removes the idea that its incidence is related strictly and exclusively to the very registry entry of the ownership of the tax vehicles and not to the substantial situations attributive of the right of use of the vehicles (Article 3, nos. 1 and 2 of the CUVT) to which the registry is intended to give publicity (cf. Article 1 and Article 5 of Decree-Law no. 54/75, of 12 February, with later amendments, which regulates motor vehicle registry)."[8]

This is, also, the position of the arbitral tribunal in the present file, endorsing the positions already previously embodied in the various arbitral decisions mentioned above, whereby it is understood that the rebuttable presumption, inscribed in paragraph 1, Article 3 of the CUVT, corresponds to the interpretation most suited to the pursuit of the objectives sought by the legislator.

Another understanding would imply accepting the possibility of taxing legal or natural persons without responsibility in the production of any environmental damage, while the real causes of that same damage would not be subject to the tax, absolutely frustrating the purposes of regulation of the law itself, that is, its true ratio legis.

For all that which is set forth above, neither can the understanding contained in the judgment rendered by the Administrative and Tax Court of Penafiel, within the scope of case no. 210/13.0BEPNF, invoked by the Tax and Customs Authority in the present file, be endorsed, namely, when it states that "actual ownership and possession of the vehicle is irrelevant to the verification of the subjective and objective incidence and the tax base event of the tax". A judgment which, as the Claimant rightly notes, is far from representing a settled understanding on this question.

In summary, having gone through all relevant elements of interpretation, all point to the fact that the expression "being considered" has a meaning equivalent to the expression "being presumed". Consequently, it results from the provisions of paragraph 1, Article 3 of the CUVT, the establishment of a legal presumption which, in light of the provisions of Article 73 of the General Tax Act, can only be understood as rebuttable. This presumption may be overturned or rebutted should, within the scope of the ongoing self-assessment procedure, it come to be demonstrated that it is not the true owner of the vehicle, the taxpayer of the tax in question. It can be said that the legislator, in the new CUVT, did not feel the need to maintain in the new norm of incidence an express and rebuttable presumption, since after the entry into force of the General Tax Act (1999) "presumptions established in norms of incidence always admit proof to the contrary". Therefore, in light of the content of Article 73 of the General Tax Act, it would be technically incorrect to use the expression "being presumed as such, until proof to the contrary", contained in the earlier version in effect.

In light of the new norm of incidence, the taxpayer of UVT is the owner or the financial lessee or, furthermore, the acquirer with reservation of ownership, even though they do not appear in the motor vehicle registry, provided that sufficient proof is made to rebut the legal presumption arising from the registry, by virtue of the principle of equivalence legally established.

It now remains to analyze the question of whether, in the present file, the Claimant presented sufficient proof to rebut the presumption, proving the transfer of ownership, given that the Respondent alleges that invoices are not, in themselves, documents capable of proving the conclusion of a synallagmatic contract such as a sale and purchase.

3rd) On Proof of Transfer of Ownership of Vehicles and Rebuttal of the Presumption

The Respondent alleges "the lack of proof of the transfer of ownership of the vehicles", as the documents attached by the claimant to prove the transfer of ownership are invoices, which are unilateral documents, from which the actual existence of the underlying transaction cannot be extracted, in the terms in which it comes to be alleged by the Claimant.

The Respondent alleges the lack of sufficient proof presented by the Claimant, by considering that invoices are not, in themselves, documents capable of proving the conclusion of a synallagmatic contract such as a sale and purchase. It now reinforces its thesis in arbitral decisions nos. 150 and 220/2014-T, as well as in Arbitral Judgment no. 63/2014-T. However, this tribunal does not follow, with due respect, the understanding expressed therein as to the probative value of invoices nor as to the rigor of the probative requirements for rebuttal of the presumption, for the reasons stated below.

In this respect, let it be clarified that the attachment to the file of said decisions was admitted, despite the moment in which it occurred, in absolute compliance with the principle of contradiction and having regard to the interest of the question raised by the TCA. Opportunity was given to the Claimant to pronounce itself, which it did by request filed with the file on 6 October 2014.

Let us, therefore, address the question of the probative value of the documents attached for the purposes intended by the Claimant, that is, for the rebuttal of the presumption resulting from the motor vehicle registry.

It is important to note that the vehicles in question in the file were subject to financial leasing contracts, within the scope of the economic activity carried out by the Claimant, that is, the transactions occurred within the scope of the performance of its corporate purpose. There is no doubt that the vehicles in question were acquired by the Claimant solely for the purpose of transferring them to the lessees within the scope of the financial leasing or LTR contracts contracted. This is, moreover, recognized by the TCA itself in the information contained in the AP attached to the file, from which it can be extracted that the respective lessees were recorded in the information available in the Tax Service.

In this respect, we cannot ignore the peculiarities contained in the CUVT with regard to the rule of subjective incidence of UVT during the currency of a financial leasing contract or LTR. This question was already dealt with in detail in Arbitral Decision no. 14-2013-T, of 15 October, from which we highlight in summary the following conclusions, to which this tribunal adheres, namely:

"(…) during the currency of a financial leasing contract, although the lessor remains the owner of the asset in question, only the lessee has the exclusive use of the leased asset, using it as if he were the true owner. (…) It is certain that the financial lessee is equivalent to an owner for purposes of paragraph 1 of Article 3 of the CUVT, that is, to be a UVT taxpayer (See paragraph 2 of Article 3). (…) Thus being, as it is, not having the lessor, by legal and contractual obligation, the potential for use of the vehicle and having the lessee exclusive use of the automobile, we reaffirm the conclusion we had already reached that, in our view, the ratio legis of the CUVT dictates that in accordance with the said paragraph 2 of Article 3 of this Code, it is the lessee who is responsible for payment of the tax, since it is he who has the potential for use of the vehicle and causes the road and environmental costs inherent thereto. The same conclusion is reached when one verifies the importance given to the users of leased vehicles in Article 19 of the CUVT. Indeed, in accordance with the provisions of this article, entities that proceed, in particular, to the financial leasing of vehicles are obliged to provide to the TCA (former DGCI), the tax identity of the users of the leased vehicles for purposes of the provisions of Article 3 of the CUVT (subjective incidence), as well as of paragraph 1 of Article 3 of the Law of its approval, since in accordance with this norm of Law no. 22-A/2007, if the revenue generated by UVT is incident upon vehicles that are subject to long-term rental or operational leasing, it must be allocated to the municipality of residence of the respective user (underlined).

(…)

Here arrived, we are of the opinion that if on the date of the occurrence of the tax base event a financial leasing contract is in force with an automobile as its object, the taxpayer of the tax is not the lessor but rather, in light of paragraph 2 of Article 3 of the CUVT, the lessee, which, in our view, makes all the sense, as it is this one who has the use of the vehicle and, as such, the inherent polluting potential, independent of the registration of the right of ownership remaining in the name of the lessor, as will be explained further below."

And it concludes:

"(…) One of the obligations of the lessor is to sell the asset to the lessee, should the latter wish to do so. It is evident that with the conclusion of the sales and purchase contract, the heretofore lessee becomes the owner with full right, coming to be covered directly by paragraph 1 of Article 3 of the CUVT."

In the case of the present file, considering the factual matters considered as established and all that comes set forth above, it is to be concluded that the Claimant cannot be considered a taxpayer of the tax in any of the contested tax acts, because as of the date of the tax facts it was no longer the owner of the vehicles, having transferred them in favor of the respective lessees or of third parties indicated by them. In fact, it was never a taxpayer of the tax, neither during the currency of the financial leasing contract, by virtue of the provisions of paragraph 2 of Article 3 of the CUVT, nor after the lessee (or third party) acquired it, now by virtue of the provisions of paragraph 1 of the same article.

Moreover, it is the TCA itself that in the information contained on page 13 of the AP states that it has no explanation for the fact that the self-assessments issued in-house were not issued in the name of the lessees as these were recorded in the information system of the tax authorities.

It is certain that the two hundred and ten vehicles referenced in the tax self-assessments here contested, with reference to the periods in question (years 2009 to 2012), were acquired in accordance with the contractually provided terms by their respective lessees (of which two were acquired by third parties indicated by these) in dates prior to that of the occurrence of the tax facts.

Thus, it is verified that the Claimant as of the date of the facts was not a taxpayer of UVT, with reference to the vehicles mentioned in the contested tax self-assessments, in light of the principles legally contained in paragraph 1 of Article 3 of the CUVT, nor was it before, by virtue of the provisions of paragraph 2 of the same legal rule.

But, so that there is no doubt, the content of the internal information issued by the Tax Service is noted, contained in the AP, on page 13:

"(…) this Tax Service cannot explain what criterion caused the issuance of the self-assessments in the name of the owner even when the lessee was recorded in the system, absent other information, the following should be taken into account:

(…) We are facing self-assessments issued in-house preceded by notification of prior hearing (…)

After the hearings it was decided to annul the self-assessments and consequent notification to the lessee when conditions were met for such. Now, a large part of these self-assessments paid by the Bank relate to the year 2009, which is already time-barred…"

That is, it is the TCA itself that acknowledges it has no explanation for the issuance of self-assessments issued in-house in the name of the owner when the respective lessees were recorded in the system. It also acknowledges that, in this type of case, after prior hearings, it is practice to annul self-assessments issued in-house with consequent notification to the lessee. In the case in question, the procedure was not such solely for a reason of tax convenience, namely: a large part of the self-assessments issued in-house related to the year 2009, already time-barred.

Thus, the TCA's own understanding does not coincide with what came to be invoked in its response.

Therefore, this tribunal, in harmony with what was already decided in earlier arbitral decisions, understands that while the financial leasing contracts were in effect, the Claimant was not a taxpayer of the tax, but rather the respective lessees, by virtue of the provisions of paragraph 2 of Article 3 of the CUVT; after having transferred the vehicles, whether that transfer occurred in favor of the former lessees, or occurred in favor of third parties indicated by them, neither could it be by virtue of the provisions of paragraph 1 of Article 3 of the CUVT.

The Claimant attached to the file copies of invoices and, later, accounting extracts identifying the entity and contract, relating to payments of some of the vehicles mentioned in the file. The Respondent did not raise any objection regarding falsity of the documents attached to the file. It did not pronounce on the documents attached at said meeting, despite the time for examination given to it. It did not dispute the accounting value nor the consequent tax value of the invoices attached to the file, what it questions solely is their probative value to reveal the existence of the underlying sales and purchase contract to the transfer of ownership alleged by the Claimant.

From the Administrative Process itself, the existence of said financial leasing contracts is proven, recognized by the TCA in the content of the information that preceded the opinion of the Management regarding the non-revocation of the self-assessment acts issued in-house contested in the present file. What remains, therefore, is to know whether invoices are documents of sufficient probative value to prove the realization of the transfer of ownership that occurs in this type of contracts after payment of the residual value, as for the purposes of the present decision the tribunal bases itself fundamentally on these documents from which the existence of the invoiced transaction can be extracted.

The transfer of ownership of a movable asset, even though subject to registry, as occurs with a motor vehicle, operates by mere effect of the contract, in accordance with the provisions of Article 408, paragraph 1 of the Civil Code. The sales and purchase contract has a real nature, that is, the transfer of ownership of the sold asset, or the transfer of the alienated right, has as its basis the contract itself. Motor vehicles are movable assets, the transfer of ownership of which does not follow special formalism.

In Portuguese law, the fact that determines the transfer of ownership of a movable asset (even though subject to registry) is the contract expressed by the will of the parties. Indeed, the buyer becomes the owner of the sold vehicle by means of the conclusion of the sales and purchase contract, independent of the registry, which is assumed as a condition of effectiveness and opposability against third party acquirers.

Thus, proof of the existence of this sales and purchase contract may be carried out by any means, with the invoice being an accounting document suitable for this purpose, as for many others, namely tax purposes, since from this document the main taxes to which this entity is subject are processed, as occurs with the corporate income tax or the apportionment of value added tax. In this sense, it is not accepted that its probative force be questioned solely for the purpose of proof of the transfer of ownership of the vehicle, under penalty of falling into a legal absurdity of, from the same document, recognizing that the transaction existed for purposes of incidence of tax on income but did not exist for purposes of proving the sale and purchase (precisely the same one that generated said tax on income).

Moreover, the documents in question, the invoices presented by the Claimant, also benefit from the presumption of truthfulness contained in Article 75 of the General Tax Act, which corresponds to a conscious design of the legislator in this matter, which cannot be forgotten or demoted to a secondary role for reasons of mere tax convenience.

The Claimant further attached copies of the supporting documents, in a significant number, of the payments of the residual values made with reference to the respective financial leasing contracts underlying the transactions of the vehicles in question in the file, all duly recorded with the competent Tax Service, as is recognized in the AP, so that no doubt remains regarding the demonstration of the true holders of the respective contracts and acquirers thereof, after payment of the corresponding residual value. Therefore, it is the acquirers of the vehicles who are the subjects of the incidence of the tax.

Having established this, it is settled that proof of the existence of this sales and purchase contract may be carried out by any means, and that the invoice is an accounting document suitable for this purpose, just as it is for all tax purposes, namely, for determination of taxable matter in corporate income tax and/or value added tax, it is not accepted that, as a document it may be suitable for this purpose (which presupposes acceptance of the underlying transaction) and not be suitable for proof of the transaction itself. On the other hand, its unilateral nature does not prevent the TCA from extracting from this type of document, which is, moreover, the essential basis of all tax architecture, all the consequences, as has been said, for purposes of generating tax. Thus, invoices constitute documents of sufficient probative value for this purpose as long as in proper time they have also produced all their effects, namely tax effects, benefiting from the presumption of truthfulness provided for in Article 75 of the General Tax Act.

In other words, the documents (invoices) that served the TCA, in time, to collect the taxes due, precisely because they title the existence of commercial transactions between the subjects identified therein, cannot lose their validity, solely and only for the purposes now intended by the TCA, as means of proof of the sale of the assets in question. Such argumentation appears unacceptable in light of the most elementary general principles of law from which, without difficulty, the prohibition against abuse of rights is derived.

In effect, in the situation of the file, we are dealing with sales and purchase contracts of movable assets, which, by application of the provisions of Article 219 of the CC, are not subject to any special formalism. Ownership transfers by mere effect of the contract and although these (motor vehicles) are subject to compulsory registration, this does not have constitutive effects but merely presumptive effects as to the existence of the ownership right.

For all that which is set forth above, nothing prevents proof of the transfer of ownership from being able to be made by any means, provided that it is proven that the transfer occurred.

In this point, we do not follow the understanding expressed in the arbitral decisions attached to the file by the TCA, that only the presentation of the declaration of sale, necessary for registration in the registry, proves the transfer. Such understanding is reductive and would make the proof necessary for rebuttal of the presumption disproportionate and excessively burdensome for the seller, if not even "diabolical", especially as we cannot overlook that the declaration of sale is a document intended to be delivered to the buyer as the buyer is the interested party and legal obligor to effect the registry.

Requiring as the sole and exclusive means of proof the presentation of the declaration of sale on the part of the seller would correspond, in practice, to leaving the seller totally unprotected, requiring him as the sole means of proof that document which it is practically certain he cannot present because he does not have it in his possession.

It is further added that the burden of proof required of the seller to rebut the presumption resulting from the registry consists in requiring him to prove that he was no longer the owner as of the date of the tax fact. We are thus dealing with the need to provide proof of a negative fact, that "diabolical proof", which while not being inadmissible, as one can resort to proof of positive facts demonstrating it, cannot be made difficult to the point of being inaccessible or impossible to perform. The added difficulty of proof of negative facts must have as its corollary, by virtue of the constitutional principle of proportionality, "a lesser probative requirement on the part of the applier of law, giving relevance to proofs less significant and convincing than those that would be required if such difficulty did not exist, applying the Latin maxim 'iis quae difficilitoris sunt probationis leviores probationes admittuntur'."[9]

In effect, it must be considered that, as the Claimant has a business nature and a substantial part of the activity making up its corporate purpose consists of concluding financial leasing and LTR contracts intended for the acquisition of motor vehicles, the documents (invoices/receipts) that were attached to the file by the Claimant are subordinated to rigorous legal requirements of an accounting and tax nature, with implications, as has already been said, in the collection of other taxes.

Thus, and beyond all that which is left set forth above, it is further added that it is the tax legislation itself that attributes to invoices a legal value from which credibility and sufficient probative value result for proof of the existence of the transfer of ownership of the assets contained therein. Thus, reference is made by way of merely illustrative example to legal norms contained in Articles 29, paragraph 1, paragraph (b) and 19, paragraph 2 of the Value Added Tax Code or of Articles 23, paragraph 6 and 123, paragraph 2 of the Corporate Income Tax Code. Now, once those invoices have been accepted by the TCA as credible for the determination of the respective taxes on added value and on income, a question that is not in dispute in the file, these enjoy the presumption of truthfulness, which is attributed to them by Article 75, paragraph 1 of the General Tax Act.

It would be up to the Respondent to present and demonstrate concrete and substantiated indicia that the accounting documents presented did not correspond to reality or that this had been subject to an inspection leading to its correction or declaration of falsity. If such did not occur and those same documents served as the basis for the assessment of other taxes, they enjoy a presumption of truthfulness (which the TCA did not overcome) in accordance with the provisions of paragraph 2 of Article 75 of the General Tax Act, whereby they are suitable means of sufficient proof for rebuttal of the presumption contained in Article 3, paragraph 1 of the CUVT, in the terms already referred to above.

In this conformity, given the very special relevance that tax legislation attributes to invoicing, the circumstance that the Claimant completes the presentation of this invoicing relating to the sale with accounting extracts and a detailed listing of customers proving the existence of the sales and purchase contracts of the vehicles, this tribunal understands that the invoicing is suitable and enjoys the presumption of truthfulness, which is conferred upon it by the provisions of Article 75, paragraph 1 of the General Tax Act.

In these terms, it is concluded that these means of proof are sufficient to rebut the presumption based on the motor vehicle registry and which results from Article 3, paragraph 1 of the CUVT, whereby as of the date of the tax facts, the Claimant was no longer the owner of the said motor vehicles.

Finally, as regards the question of the effects of the registry, for economy of means in the already lengthy statement of reasons of the present decision, it is again adhered to the position according to which the registry has constitutive effects resulting from the same a rebuttable presumption, also being the case that the TCA cannot be seen as a third party for purposes of registry. In this respect, excerpts are highlighted from the Opinion attached to the file by the Claimant, issued by Prof. Dr. Agostinho Cardoso Guedes, the following:

"Once the vehicle is sold to the lessee, the latter becomes its owner, and, in that case, Article 3, no. 1 of the CUVT becomes applicable.

Indeed, Article 874 of the Civil Code defines the sales and purchase contract as "the contract by which the ownership of a thing, or another right, is transferred, by means of a price". Similarly, Article 879 of the same statute provides as an essential effect of the sales and purchase contract the "transfer of ownership of the thing or the holding of the right".

We are in the domain of contracts with real efficacy, that is, contracts whose conclusion unleashes a real effect, the transfer, constitution, modification or extinction of a real right, and which, in accordance with Article 408, paragraph 1 of the Civil Code, is produced "by mere effect of the contract"

(…)

What is at issue is whether, and to what extent, the subjection of motor vehicles to public registration alters the fundamental rule of our private law, contained in Article 408, paragraph 1 of the Civil Code, according to which ownership is transferred by mere effect of the contract, without need of any other act or formality, prior, contemporaneous or subsequent.

On this question, Article 1 of the Land Registry Code fixes the purposes of this registry in the following terms: "Land registry is intended essentially to give publicity to the legal situation of real property, with a view to the security of immovable property transactions".

Article 7 of the Land Registry Code completes this function, providing that "definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it".

That is, the primary function of the registry is to give publicity to the legal situation of assets and, moreover, the inscription in the registry of certain assets constitutes a twofold presumption: on one hand, it is presumed that the right exists in the precise terms in which the registry defines it, on the other, it is presumed that such right belongs to the holder in whose favor it is registered, again, in the precise terms in which the registry defines it.

These presumptions are rebuttable by proof to the contrary, as expressly results from Article 350, paragraph 2 of the Civil Code.

There is, in effect, any norm in the Land Registry Code that suggests that registry is a condition of validity of the business transactions subject to it, or, in sales and purchase cases, that it is a condition of the production of the respective translative effect.

(…)

In a recent amendment to the Land Registry Code, the legislator came to clarify what is meant by third party in this context. Thus, according to Article 4, paragraph 4 of the Land Registry Code "Third parties, for purposes of registration, are those who have acquired from a common author rights incompatible with each other"

However, the Tax Administration does not meet the legal requirements of the concept of third party for purposes of registry (provided for in Article 5, paragraph 4 of the Land Registry Code), for which reason it cannot require the seller to pay the tax due by the buyer (owner) from the moment in which the presumption of Article 7 is overturned by proof of the respective sale.

(…)

Proof to be made by any means, as the law does not require written form for this contract.

Thus, and in particular, proof may be made by confession, verbal or written, by witnesses or by document. In the latter case, for example, proof may be made by presenting a declaration of sale (including the declaration prepared for purposes of registry) or an invoice/receipt of the vehicle sale." (underlined)

It is thus verified that this arbitral jurisprudence is reconciled with the best doctrine produced among us, in conformity with the principles in effect in Portuguese law and in order to the coherence and uniformity of the legal system of which tax law is an integral part and must obey.

Given, therefore, the legal and case law notion of "third party" for purposes of registry, we deem settled the understanding that the TCA does not meet the requirements of that notion, and cannot, in this manner, invoke the absence of registration to justify the ineffectiveness of the sales and purchase contracts of motor vehicles. Thus, if the new owner of the vehicle does not provide for the registration of his right of ownership, it is presumed that this right continues to be that of the seller (former owner), being capable, however, of this presumption being rebutted by proof to the contrary. In other words, provided that proof is made, by any means, of the respective sale. (Cf. Articles 1 of DL no. 54/75, 7 of the Land Registry Code and 350, paragraph 2 of the CC).

Invoices constitute documents of sufficient probative value for this purpose, as well as other accounting documents, such as the extracts proving payment of the residual values attached to the file. But, clearly, the probative value of the invoice for payment of the residual value, associated with the financial leasing contract in question, is sufficient for the proof that fell to the Claimant to rebut the presumption.

In these terms, the TCA cannot avail itself of the non-updating of the property registry, to require payment of the tax from the former owner in whose name the vehicle is registered if, by any means, it is presented with sufficient proof of the respective sale.

According to paragraph 1 of Article 1 of Decree-Law no. 54/75, of 12 February:

[Document truncates here in the original Portuguese version]

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) on vehicles registered in a bank's name?

Under Article 3 of the IUC Code, the taxable person is generally the individual or entity in whose name the vehicle is registered. However, for financial leasing contracts governed by Decree-Law 149/95, Article 11 establishes a special regime where IUC liability falls on the lessee (user) rather than the lessor (financing entity), despite the vehicle being registered in the lessor's name for security purposes. For long-term rental and other financing arrangements, the standard rule applies unless specific contractual or legal provisions transfer the tax obligation to the actual user. Banks registered as owners purely for security interests in financing operations may argue they lack the economic substance and beneficial use that characterize IUC's subjective incidence, though this requires case-by-case analysis of the specific contractual arrangement and applicable legal framework.

Can a bank challenge IUC tax assessments through CAAD tax arbitration proceedings?

Yes, banks and financial institutions have full standing to challenge IUC assessments through CAAD arbitration proceedings under Article 2(1)(a) of the RJAT (Legal Regime of Tax Arbitration). As demonstrated in Process 231/2014-T, CAAD accepted jurisdiction over a bank's challenge to 553 IUC self-assessments, affirming that credit institutions registered as vehicle owners possess legitimate interest to contest their classification as taxable persons. The tribunal also permitted cumulative assessment of multiple tax acts in a single proceeding when they share identical legal issues and factual circumstances, as required by Article 3(1) of RJAT and Article 104 of the CPC. This procedural efficiency is particularly relevant for financial institutions holding large vehicle portfolios under leasing or financing arrangements, allowing comprehensive resolution of systemic classification issues rather than requiring hundreds of individual arbitration requests.

What is the subjective incidence rule for IUC on leased or financed vehicles in Portugal?

The subjective incidence rule for IUC on leased vehicles depends on the specific legal framework governing the financing arrangement. For financial leasing contracts under Decree-Law 149/95, Article 11 explicitly designates the lessee as the taxable person, creating an exception to the general rule in IUC Code Article 3 that taxes the registered owner. This legislative choice reflects the economic reality that lessees possess, use, and derive benefit from the vehicles despite legal title remaining with the financing entity. For other financing modalities like long-term rental or secured loans where vehicles remain registered to the bank, the application of Article 3's general rule becomes contentious. Courts and arbitration tribunals examine whether the financing entity's purely formal ownership for security purposes, without actual possession or use, satisfies the substantive criteria for IUC liability, or whether the tax obligation should follow the principle that IUC targets those who actually place vehicles in circulation on public roads.

IUC Subjective Incidence: Bank Challenges 553 Vehicle Tax Assessments at CAAD

Table of Contents

Summary

Full Decision

ARBITRAL DECISION[1]

I REPORT

A) The Parties and Constitution of the Arbitral Tribunal

B) Procedural Requirements

C) THE CLAIM FILED BY THE CLAIMANT

D) – THE RESPONDENT'S RESPONSE

II. QUESTIONS TO BE DECIDED

III. SUBSTANTIVE LEGAL GROUNDS

A) Established Facts

B) SUBSTANTIATION OF ESTABLISHED FACTS

C) UNPROVEN FACTS

IV – SUBSTANTIVE LEGAL GROUNDS

1st - On the Alleged Defect of Lack of Grounds

2nd - On the Subjective Incidence of UVT, the Effects of Motor Vehicle Registry and the Possible Existence or Not of a Rebuttable Presumption

3rd) On Proof of Transfer of Ownership of Vehicles and Rebuttal of the Presumption

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IUC Subjective Incidence: Bank Challenges 553 Vehicle Tax Assessments at CAAD

Table of Contents

Summary

Full Decision

ARBITRAL DECISION[1]

I REPORT

A) The Parties and Constitution of the Arbitral Tribunal

B) Procedural Requirements

C) THE CLAIM FILED BY THE CLAIMANT

D) – THE RESPONDENT'S RESPONSE

II. QUESTIONS TO BE DECIDED

III. SUBSTANTIVE LEGAL GROUNDS

A) Established Facts

B) SUBSTANTIATION OF ESTABLISHED FACTS

C) UNPROVEN FACTS

IV – SUBSTANTIVE LEGAL GROUNDS

1st - On the Alleged Defect of Lack of Grounds

2nd - On the Subjective Incidence of UVT, the Effects of Motor Vehicle Registry and the Possible Existence or Not of a Rebuttable Presumption

3rd) On Proof of Transfer of Ownership of Vehicles and Rebuttal of the Presumption

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