IUC Subjective Incidence: CAAD Arbitration Decision on Vehicle Tax Liability (240/2015-T)

ARBITRAL DECISION

I. - REPORT

A - PARTIES

A..., legal entity no. ..., with permanent representation at Rua ... no. ... - Lisbon, hereinafter referred to as "Claimant", filed a request for the constitution of an arbitral tribunal, pursuant to article 10(2) of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFATM"), with a view to the assessment of the following claim against the Tax and Customs Authority (which succeeded, among others, the General Directorate of Taxes) hereinafter referred to as "Respondent" or "TCA".

B - CLAIM

1 - The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 9 April 2015 and, on the same date, notified to the TCA.

2 - The Claimant failed to appoint an arbitrator, and therefore, pursuant to article 6(1) of the LFATM, the undersigned was designated on 03-06-2015 by the Deontological Council of the Administrative Arbitration Centre as arbitrator of a Singular Arbitral Tribunal, having accepted in accordance with the terms legally provided.

3 - The Parties were, on 03-06-2015, duly notified of this designation and did not express a wish to recuse the arbitrator, in accordance with the combined provisions of article 11(1), subparagraphs a) and b), and articles 6 and 7 of the Deontological Code.

4 - In these circumstances, in accordance with article 11(1)(c) of Decree-Law no. 10/2011, of 20 January, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was regularly constituted on 19-06-2015.

5 - Following the order issued by the arbitral tribunal on 27-11-2015, regarding whether the Claimant wished to waive the holding of the meeting provided for in article 18 of the LFATM (Decree-Law no. 10/2011, of 20 January), and whether it dispensed with the submission of arguments, also provided for in the said legal provision, the Claimant stated that, while waiving the holding of the said meeting, it did not dispense with the submission of written arguments.

6 - By order issued by the arbitral tribunal on 04-12-2015, a successive period of 5 days was granted for the Claimant to present written arguments within 5 days, and for the Respondent, if it wished, within the same period and successively, counted from notification of the Claimant's arguments, to submit its counter-arguments to the proceedings.

7 - On 4 January 2016, the Arbitral Tribunal considered waived the holding of the meeting provided for in article 18 of the LFATM, taking into account both the orders issued to this effect in the SGP system, and the circumstance that the dispute concerned, fundamentally, a matter of law, and the parties' wish to waive the said meeting.

8 - The present Claimant requests that this Arbitral Tribunal:

a) - Declare the illegality and consequent annulment of both the act of dismissal of Gracious Complaint no. ...2014..., and the acts of assessment relating to the Single Circulation Tax (hereinafter referred to as SCT), as well as the acts of assessment of compensatory interest (CI) associated therewith, embodied in the assessments of which it was notified, which are referenced in the proceedings, relating to the years 2009, 2010, 2011 and 2012, relating to the vehicles identified in the case file, which are hereby given as fully reproduced herein.

b) - Condemn the Tax and Customs Authority to reimburse the amount of € 3,478.36, which it indicates as the value of the claim.

C - GROUNDS OF CLAIM

9 - The Claimant, in the substantiation of its request for arbitral decision, affirms, in summary, the following:

10 - That it is a credit financial institution which, following a restructuring operation that occurred in the course of 2011, succeeded to all rights and obligations assumed by B ... SA, with tax identification number....

11 - That, as a financial institution, its corporate purpose is the performance of all operations and the provision of all services permitted to Banks.

12 - That, in the framework of its activity, it enters into financial leasing contracts for motor vehicles, and such vehicles are, in large numbers, acquired by the respective lessees after the expiry of the financial leasing contract term, through payment of a certain amount.

13 - That it was notified of various acts of SCT assessments and corresponding compensatory interest, relating to the years 2009 to 2012, and relating to the vehicles identified in the case file, in the total amount of € 3,478.36.

14 - That it filed a gracious complaint against the SCT assessments, identified in the case file, relating to the years 2009, 2010, 2011 and 2012, relating to the vehicles that are also identified in the case file.

15 - That it was notified, through official letter no. ..., of 05-01-2015, from the Administrative Justice Division of the Finance Directorate of Lisbon, of the decision dismissing the aforementioned gracious complaint, no. ... 2014....

16 - That, in the framework of the said gracious complaint, it demonstrated that the vehicles underlying the SCT assessments and compensatory interest in question were the subject of movable financial leasing contracts with subsequent sale, at a date prior to the year to which the said assessments relate.

17 - That it proceeded to pay all amounts relating to the SCT assessments identified in the present proceedings, with a view to avoiding the initiation of tax enforcement proceedings.

18 - That the presumption established in article 3(1) of the SCTC does not allow the conclusion, as the TCA did in the decision dismissing the gracious complaint, that the criterion for defining the subjective incidence of SCT is reduced to ownership, and respective registration of the vehicles.

19 - That, as results from article 73 of the LGT, the presumptions enshrined in tax incidence rules always admit proof to the contrary.

20 - That we are dealing with contracts with real effect, which means that their execution brings about the transfer of real rights, or rather, we are dealing with contracts in which the ownership of the thing sold is transferred, without further ceremony, from the seller to the buyer, having as its cause the contract itself.

21 - That the acquirers of the vehicles become owners of the same vehicles through the execution of the corresponding contracts of sale and purchase, with registration or without it.

22 - That the function legally reserved to registration is, on the one hand, to publicise the legal situation of the vehicles and, on the other, to allow the presumption that a right exists over those vehicles and that the same belongs to the registered owner.

23 - That if at the date when the tax becomes due a financial leasing contract is in effect, or if the vehicle has already been sold, the tax subject is not the lessor/seller, but rather the lessee/buyer, who has the potential for use of the vehicle and the capacity to cause road and environmental costs.

24 - That if the buyers of the vehicles do not promote the registration of their right of ownership, it is presumed that that right continues to belong to the seller, but such presumption can be overcome through proof, by any means, of the execution of the respective contract of sale and purchase.

25 - That is what it did in the context of the gracious complaint and what it now does again, by presenting the financial leasing contracts as well as copies of the corresponding invoices for the sale of the vehicles.

D - RESPONDENT'S REPLY

26 - The Respondent, Tax and Customs Authority (hereinafter referred to as TCA), presented, on 07-09-2015, its Reply.

27 - In its Reply, the TCA considers that the allegations of the Claimant cannot, at all, succeed, insofar as they make an interpretation and application of the legal rules applicable to the case that is notoriously wrong, in that

28 - They reveal an understanding that incurs, not only in a biased reading of the letter of the law, but also in an interpretation that does not heed the systematic element, violating the unity of the regime enshrined throughout the SCTC and, more broadly, throughout the entire legal-fiscal system, further resulting from an interpretation that ignores the rationale of the regime enshrined in the SCTC. (See article 7 of the Reply)

29 - It states that the tax legislator, in establishing in article 3(1) of the SCTC who are the tax subjects of the SCT, established, expressly and intentionally, that these are the owners (or in the situations provided for in (2) the persons mentioned therein), being considered as such the persons in whose name the same are registered. (See article 11 of the Reply)

30 - It emphasizes that the legislator did not use the expression "are presumed" as it could have done, for example, in the following terms: "the tax subjects of the tax are the owners of the vehicles, being presumed as such the natural or legal persons, of public or private law, in whose name the same are registered". (See article 12 of the Reply)

31 - It considers that the wording of article 3 of the SCTC corresponds to a clear option of legislative policy adopted by the legislator, whose intention, within its freedom of legislative conformation, was that, for the purposes of SCT, those who appear as such in the register be considered owners. (See article 23 of the Reply)

32 - It states that the aforementioned understanding has already been adopted by the case law of our courts, transcribing, for this purpose, part of the judgment of the Administrative and Tax Court of Penafiel, handed down in Case no. …/13.OBEPNF. (See articles 24 and 25 of the Reply)

33 - On the systematic element of interpretation, it considers that the solution advocated by the Claimant is intolerable, finding the understanding endorsed by it no legal support whatsoever. (See article 34 of the Reply)

34 - On the "rationale" of the regime, the TCA considers that, in light of a teleological interpretation of the regime enshrined throughout the Code of the SCT, the interpretation advocated by the Claimant, to the effect that the tax subject of SCT is the effective owner regardless of whether the registration of such capacity appears in the vehicle register, is manifestly wrong, in that it is the very rationale of the regime enshrined in the SCTC that constitutes clear proof that what the fiscal legislator intended was to create a tax based on the taxation of the owner of the vehicle, as it appears in the vehicle register. (See articles 57 and 58 of the Reply)

35 - It adds that the SCTC carried out a reform of the regime of taxation of vehicles in Portugal, substantially altering the regime of vehicle taxation, the tax subjects of the tax becoming the owners appearing in the property register, regardless of the circulation of the vehicles on the public road. (See article 60 of the Reply)

36 - In this sense, it states that this is the understanding set out, namely, in recommendation no. 6-B/2012 of 22-06-2012, from the Ombudsman addressed to the Secretary of State for Public Works, Transport and Communications.

37 - The interpretation conveyed by the Claimant is also, in addition to what has already been stated, contrary to the Constitution, in that such interpretation results in the violation of the principle of confidence, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality. (See article 110 of the Reply)

38 - It adds that the documents attached to the proceedings - copies of the financial leasing contracts and settlement notes/debit notes/receipts - do not constitute sufficient proof to "undermine the (supposed) legal presumption established in article 3 of the SCTC", in that they do not prove that the Claimant was not the owner of the vehicles on the dates the tax became due.

39 - It adds that the rules of the vehicle register have (still) not reached the point where mere unilateral invoices can replace the transfer of vehicle ownership, which is subject to mandatory registration.

40 - It further states that it was not the Respondent who gave rise to the filing of the request for arbitral decision, but rather the Claimant, and consequently the Claimant should be condemned to pay the arbitral costs "in accordance with article 527(1) of the New Code of Civil Procedure ex vi of article 29(1-e) of the LFATM", also stating that the legal requirements conferring the right to compensatory interest have not been met.

41 - It considers, in conclusion, that the request for arbitral decision should be judged groundless, maintaining in the legal order the order dismissing the gracious complaint and the impugned tax assessment acts, absolving the Respondent entity of the claim.

E - ISSUES TO BE DECIDED

42 - It is therefore necessary to assess and decide.

43 - In light of the foregoing, relative to the positions of the Parties and the arguments presented, the issues to be decided are, particularly, the following:

a) Whether the rule of subjective incidence contained in article 3(1) of the SCTC establishes or does not establish a presumption.

b) What is the legal value of vehicle registration in the economy of the SCTC, particularly

c) If, at the date of the tax's due date the vehicle has already been previously alienated, although the right of ownership of this continues to be registered in the name of its former owner, for the purposes of article 3(1) of the SCTC, the tax subject of the SCT is the former owner or the new owner.

d) If, in the event it is concluded that a presumption is established in article 3(1) of the SCTC, the documents presented (copies of financial leasing contracts and settlement notes/debit notes/receipts) as proof of the right invoked are suitable means to overcome the said presumption.

F - PROCEDURAL REQUIREMENTS

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

45 - The Parties have legal personality and capacity, are legitimate and are legally represented (cf. article 4 and article 10(2) of Decree-Law no. 10/2011 and article 1 of Ordinance no. 112/2011, of 22 March).

46 - The proceedings do not suffer from defects that would invalidate them.

47 - Taking into account the administrative tax proceedings, a copy of which was attached to the case file by the TCA, and the documentary evidence comprising the proceedings, it is now necessary to present the factual matter relevant to the understanding of the decision, as fixed in the terms mentioned below.

II - GROUNDS

G - STATEMENT OF FACTS

48 - With regard to the relevant factual matter, this tribunal deems the following facts to be established:

49 - The Claimant is a credit financial institution which, following a restructuring operation that occurred in the course of 2011, succeeded to all rights and obligations assumed by B...SA, with tax identification number....

50 - As a financial institution, the Claimant's corporate purpose is the performance of all operations and the provision of all services permitted to Banks.

51 - In the framework of its activity, the Claimant enters into financial leasing contracts for motor vehicles, and such vehicles are, in large numbers, acquired by the respective lessees after the expiry of the financial leasing contract term, through payment of a certain amount.

52 - The Claimant was notified of various acts of SCT assessments and corresponding compensatory interest, relating to the years 2009 to 2012, in the total amount of € 3,478.36, relating to the twenty-two vehicles identified in the case file.

53 - The amounts relating to the SCT assessments identified in the present proceedings were, all of them, paid by the Claimant.

54 - The Claimant filed a gracious complaint against the SCT assessments, identified in the case file, relating to the years 2009, 2010, 2011 and 2012, relating to the vehicles that are also identified in the case file.

55 - The Respondent, in the context of the said gracious complaint, assessed the (il)legality of the primary acts, that is, of the assessment acts challenged, and understood that the same should be maintained.

56 - The decision dismissing the gracious complaint, handed down in the aforementioned circumstances, reaffirmed the legality of the assessment acts in question and confirmed them again, just as they were initially configured.

57 - The Claimant was notified, through official letter no. ..., of 05-01-2015, from the Administrative Justice Division of the Finance Directorate of Lisbon, of the decision dismissing the aforementioned gracious complaint, no. ...2014....

58 - In the context of the said gracious complaint, the Claimant demonstrated that the vehicles relating to the SCT assessments and compensatory interest in question were the subject of movable financial leasing contracts, with sale of the corresponding vehicles, at dates prior to the years to which the said assessments relate.

59 - As means of proving the transfer of ownership of the vehicles, the Claimant attached to the case file, both copies of the financial leasing contracts and settlement notes/debit notes/receipts corresponding to those transfers, and the latter documents present in their description various mentions, namely referring to the acquirer of the vehicle, identified by name and by customer number and tax identification number; to the corresponding number of the financial leasing contract; identifying by this means the vehicle subject of sale, the circumstances of the transfer of the vehicle and the amounts relating to the value of the vehicle and the VAT charged.

60 - The Claimant presented written arguments, in which, in essence, it reiterates the grounds set out in its request for arbitral decision, the same having occurred with the Respondent, in relation to its Reply.

STATEMENT OF PROVEN FACTS

61 - The facts given as proven are based on the documents mentioned, relating to each of them, insofar as their correspondence with reality was not challenged.

FACTS NOT PROVEN

62 - There are no facts given as not proven, given that all facts considered relevant to the assessment of the claim were proven.

H - LEGAL GROUNDS

63 - The factual matter has been established, and it is now necessary to proceed to its legal subsumption and to determine the Law applicable to the underlying facts, in accordance with the issues to be decided set out in article 43.

64 - The essential and decisive issue in the present case, relative to which there are absolutely opposed understandings between the Claimant and the TCA, is whether the rule of subjective incidence contained in article 3(1) of the SCTC establishes or does not establish an ilidible presumption.

65 - The positions of the parties are known. In effect, for the Claimant, the expression "are considered" inscribed in article 3(1) of the SCTC establishes a defeasible legal presumption.

66 - The Respondent, on the other hand, considers that the wording of article 3 of the SCTC corresponds to a clear option of legislative policy adopted by the legislator, whose intention, within its freedom of legislative conformation, was that, for the purposes of SCT, those who appear as such in the register be considered owners.

I - INTERPRETATION OF THE RULE OF SUBJECTIVE INCIDENCE CONTAINED IN ARTICLE 3(1) OF THE SCTC

67 - On this issue, that is, whether the rule of subjective incidence contained in article 3(1) of the SCTC establishes a presumption, it should be noted that the established case law in CAAD points to the fact that the said rule establishes a legal presumption. In effect, from the first Decisions handed down on this matter, in the year 2013, among which may be mentioned, in particular, those handed down in the context of Cases no. 14/2013-T, 26/2013-T and 27/2013-T, up to the most recent ones, such as the Decisions handed down in the context of Cases no. 69/2015-T and 79/2015-T, passing through numerous Decisions handed down in the year 2014, of which those handed down in Cases no. 34/2014-T, 120/2014-T and 456/2014 - T are mentioned by way of mere example, all point to the understanding that article 3(1) of the SCTC establishes a defeasible legal presumption.

To this end, consideration should also be given to the understanding set out in the Judgment of the Central Administrative Court of the South, handed down on 19-03-2015, Case 08300/14, available at: www.dgsi.pt, which endorses the aforementioned case law, when it expressly states therein that article 3(1) of the SCTC "[…] establishes a legal presumption that the holder of vehicle registration is its owner, and such presumption is defeasible by virtue of article 73 of the LGT".

This is an understanding in which we wholly rely and which is given, without further ceremony, as valid and applicable in the present case, it being considered, consequently, unnecessary other developments, given the abundant reasoning set out in the aforementioned decisions and in the said Judgment.

68 - Being this the understanding which, with regard to article 3(1) of the SCTC, is wholly endorsed, it is, however, necessary not to fail to point out the lack of merit that, in our view, assists the Respondent, when it alleges that the interpretation according to which a defeasible legal presumption is established in article 3 of the SCTC violates the constitutional principles of confidence and legal certainty, the efficiency of the tax system and proportionality.

Let us see,

• With regard to the principle of proportionality, it should first be noted that the same, insofar as it is materially inherent in the regime of rights, freedoms and guarantees, being inscribed in their defense, aims, in essence, to regulate the conduct of the Public Administration in order that its activity in its relationship with private individuals be guided by the choice of the most equitably adequate measures for the pursuit of the public interest.

As taught by Prof. Freitas do Amaral, in Course of Administrative Law, Vol II, Almedina, 2002, pp. 127/128 et seq., the "principle of proportionality is a constitutive manifestation of the principle of the Rule of Law", with "[…] the idea being strongly anchored that, in a democratic Rule of Law, the measures of public powers must not exceed what is strictly necessary for the realization of the public interest".

The principle of proportionality, adds the said Professor, ibidem, p. 129, means that "[…] the limitation of goods or interests by acts of public powers must be adequate and necessary for the concrete purposes pursued by such acts, as well as tolerable when confronted with those purposes".

With regard to the principle of proportionality, it should also be noted, as we are told by J. J. Gomes Canotilho and Vital Moreira, in PORTUGUESE REPUBLIC CONSTITUTION, ANNOTATED, VOLUME I, 4th Edition, 2007, Coimbra Editora, pp. 392/393, when they consider that the said principle can be broken down into three sub-principles, namely: "[…] a) principle of suitability (also called principle of appropriateness); b) principle of necessity (also called principle of necessity or indispensability); c) principle of proportionality in the strict sense, which means that the restrictive legal means and the purposes achieved must be situated in a "fair proportion", preventing the adoption of disproportionate, excessive legal measures in relation to the purposes achieved […]".

The said sub-principles have, all of them, a common denominator, which is that of just equilibrium and permanent coherence between the purposes of the law and the means adopted to achieve such purposes, which, in the circumstance and attempting the transposition of said principle to the case at hand, will imply answering the question of what is the most adequate interpretation of article 3(1), with a view to the pursuit of the legal purposes provided for in article 1 of the SCTC, that is, the fiscal burden on the owners of motor vehicles in the measure of the environmental and road cost they cause.

The principle of proportionality has, therefore, in this case, inherent to it the need to seek to achieve the necessary balance between the legally attributed sense of the principle of equivalence, as a structuring and unifying principle of the SCT system, and the sense that should be given to the owners of vehicles, to which article 3(1) of the SCTC alludes, and the said principle of equivalence, as set out in the statement of reasons for Draft Law no. 118/X of 07/03/2007, underlying Law no. 22-A/2007 of 29/06, postulates that the SCT "[…] is subordinated to the idea that taxpayers should be burdened in the measure of the cost they cause to the environment and the road network, and this is the reason for being of this tax figure".

The said principle of equivalence, which informs and shapes the SCTC, is, from the start, referenced in article 1 of the said Code, where it is provided that "The single circulation tax complies with the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost they cause, in the concrete realization of a general rule of tax equality". (emphasis ours) Such principle clearly has underlying it the polluter-pays principle, and concretizes the idea, inscribed therein, that whoever pollutes must, therefore, pay.

It could be said, moreover, that the understanding that the said article 3(1) of the SCTC establishes a defeasible legal presumption corresponds to the only and adequate interpretation that coherently aligns with the said principle of equivalence, and that is in line with the principle of proportionality.

The interpretation that understands that a defeasible legal presumption is established in article 3(1) of the SCTC is, therefore, the only one that permits ensuring the pursuit of the purposes aimed at by the law - to burden the owners of motor vehicles in the measure of the environmental and road cost they cause, - as provided for in article 1 of the SCTC, which means that the tax subjects of the SCT are, presumptively, the persons in whose names the vehicles are registered, that is, the said tax subjects are, in principle, and only in principle, the persons in whose names such vehicles are registered, there being, therefore, no other interpretation capable of achieving the said legal purposes.

The contrary understanding, that is, the one that considers that article 3(1) of the SCTC does not establish a defeasible legal presumption, understanding that the tax subjects of SCT are, definitively, the persons in whose names the vehicles are registered, to the extent that it leads to the imposition of a tax burden on someone who, at all, does not pollute, removing from tax subjection those who, in reality, are the causers of the environmental and road damage, resulting from the use of the vehicles of which they are owners, reveals that the legally established purposes would, at all, not be achieved, thus not respecting the principle of equivalence which, in the framework of the SCTC, has an absolutely structuring function. Such understanding, that yes, does not show, in these circumstances, in harmony with the principle of proportionality.

• As to the efficiency of the tax system, it could be said that the efficiency of the Administration in general, or of the TCA in particular, in common sense, corresponds to the capacity/work methodology oriented toward the optimization of the work performed or of the services rendered, which means to produce the maximum, in quantity and quality, with the minimum of costs and means, having nothing to do with the observance of legally enshrined principles and with respect for the rights of citizens, whether as taxpayers or otherwise.

In the technical sense, it could be said that the principle of efficiency of the tax system is, commonly held, in the domain of tax procedure, as a corollary of the principle of proportionality, which, as is known, imposes an adequate proportion between the legal purposes and the means chosen to achieve those purposes, or, as stated by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in General Tax Law, Annotated and Commented, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488, in annotations to article 55 of the LGT, it is a principle that obliges "[…] the tax administration to refrain from imposing on taxpayers obligations that are unnecessary to satisfy the purposes it aims to pursue".

In this framework, the said principle of efficiency of the tax system will mean the capacity to achieve the legally fixed objectives with the minimum of means, which will have nothing to do with respect for the rights of citizens, nor with the need for observance of other principles to which the tax administration must subordinate its activity, designedly the inquisitorial principle and the discovery of material truth, and obviously the application of the said principle of efficiency cannot be done, either to the detriment of the rights of citizens, or by the failure to observe the legal purposes. [1]

• As to the principle of legal certainty and confidence, it should be noted, first of all, that this latter principle, that of confidence, is a concretization of the principle of good faith, which, having enshrinement in our legal order since 1996, came to have express constitutional inscription, as is evident from article 266(2) of the CRP, where it is established that "The organs and agents of the administration are subordinated to the Constitution and the law and must act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith". (emphasis ours)

With regard to good faith, it should be noted what is referred to by Prof. Freitas do Amaral when, in Course of Administrative Law, Vol. II, Almedina, 2002, pp. 135/136, citing Prof. V. Fausto de Quadros, he tells us that "[…] the Public Administration is obliged to obey bona fide in relations with private individuals. More: it must even set, also there, the example to private individuals of observance of good faith, in all its manifestations, as the essential nucleus of its ethical behavior. Without this, it can never be affirmed that the State (and with it other public entities) is a person of good character".

On the other hand, the principle of confidence is also held to be a consequence of the principle of legal certainty, inseparable from the Rule of Law, which, having to guarantee a minimum of certainty in the rights of persons and in the legal expectations created for them, is generative of confidence of citizens in the legal protection of the Public Administration.

Regarding the principles of legal certainty and protection of confidence, Prof. J. J. Gomes Canotilho tells us in Constitutional Law and Theory of the Constitution, Almedina - Coimbra, 1998, p. 250 et seq., that the said principles are closely associated, being considered that "[…] legal certainty is connected with objective elements of the legal order - guarantee of legal stability, security of orientation and realization of law - while protection of confidence is more linked to the subjective components of security, namely the calculability and predictability of individuals in relation to the legal effects of acts of public powers". In any case, adds the said Professor, idem, that the "[…] general principle of legal certainty in the broad sense (thus encompassing the idea of protection of confidence) can be formulated as follows: the individual has the right to be able to trust that to his acts or to the public decisions affecting his rights, positions or legal relationships founded on valid and effective legal norms, are linked the legal effects foreseen and prescribed by those same norms".

It follows from this doctrine that persons when alienating their vehicles must be secure in the knowledge that, should they proceed to the sale of vehicles of which they are owners, and the same are not registered in the names of the acquirers, the legal effects resulting therefrom will be those foreseen and arising from the legal rules in force and from their adequate interpretation, in light of the legal purposes of those same rules, which, in this case, led the arbitral tribunal to consider registration as a defeasible presumption of the existence of the right and that only persons who cause road and environmental costs should be taxed.

The best way to, in the case at hand, ensure legal certainty, in the broad sense, is thus the one concretized through the interpretation made by the arbitral tribunal, when it considers established in article 3(1) of the SCTC a defeasible legal presumption, permitting any citizen, who proceeds to the sale, to a third party, of a motor vehicle, the possibility of demonstrating that, at the time the SCT became due, they were no longer its owner nor responsible for payment of that tax.

• Beyond what has been stated above, it is also important to know whether the interpretation endorsed by the arbitral tribunal, in addition to not conflicting with any of the referenced principles, is inscribed directly and substantively in the context of the constitutional order.

With regard to the interpretation of the law in light of the Constitution, or the interpretation in conformity with the Constitution, Prof. Jorge Miranda tells us, in Manual of Constitutional Law, TOME II, Introduction to Constitutional Theory, 2nd edition, Coimbra Editora, 1987, p. 232 et seq., that what is at issue, first of all, is "[…] to take into account, within the systematic element of interpretation, that which relates to the Constitution. In effect, each legal provision must not only be understood in the context of the provisions of the same law and each law in the context of the legal order; it must also be considered in the context of the constitutional order [..]". (emphasis ours)

The understanding that considers established in article 3(1) of the SCTC a defeasible legal presumption is based on various elements of interpretation, among which it is appropriate to refer to the systematic element, insofar as interpretation in conformity with the Constitution implies that within the systematic element of interpretation, account be taken of that which relates to the Constitution.

Regarding the said systematic element, the following should be stated:

a) In the understanding of BAPTISTA MACHADO, in Introduction to Law and Legitimizing Discourse, p. 183, the systematic element "[…] comprises the consideration of the other provisions that form the normative complex of the institute in which the rule to be interpreted is integrated, that is, that regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that belongs to the rule to be interpreted in the global order, as well as its consonance with the spirit or intrinsic unity of the entire legal order".

b) It is known that a legal principle, in this case the principle of equivalence, does not exist in isolation, but is linked by an intimate nexus with other principles that integrate, at the broader level, the respective legal order, in this case, with the other principles embodied in the system inscribed in the SCTC, and with other constitutionally enshrined principles. To that end, each article of a given legal instrument, in this case the SCTC, will only be comprehensible if we situate it, both in relation to the other articles that follow or precede it, and in relation to the constitutional order.

c) With regard to the systematization of the SCTC, concerns of an environmental nature were determinative in ensuring that the said principle of equivalence was, from the start, inscribed in the first article of the said Code, which necessarily leads to the subsequent articles, insofar as they are founded on such principle, being influenced by it. This occurred, namely, with the tax base, which became constituted by various elements, particularly those relating to pollution levels, and with the tax rates, established in articles 9 to 15, which were influenced by the environmental component, and, naturally, also with the very subjective incidence, provided for in article 3 of the SCTC, which cannot escape the said influence.

d) The said principle of equivalence, as noted by Sérgio Vasques, in Special Consumption Taxes, Almedina, 2001, p. 122 et seq., implies that "[…] the tax should correspond to the benefit that the taxpayer derives from public activity; or to the cost that the taxpayer imputes to the community by his own activity". The said author adds, idem, that "Thus, a tax on automobiles based on a rule of equivalence will only be equal 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." That is why, as also referred to by the cited author, idem, the realization of the principle of equivalence dictates special requirements "[…] with regard to the subjective incidence of the tax [..]."

The said principle that informs the current Single Circulation Tax is inscribed in the environmental concerns provided for in article 66(2)(a) of the CRP and in the need - with a view to ensuring the right to the environment, in the framework of sustainable development - to "Prevent and control pollution and its effects and harmful forms of erosion", concerns these, which are, manifestly, considered in the interpretation defended by the arbitral tribunal.

On the other hand, the provision in article 66(2)(h) of the Constitution, when it establishes that, in the framework of sustainable development, it is incumbent upon the State to "ensure that fiscal policy reconciles development with environmental protection and quality of life", has as a corollary the polluter-pays principle, which concretizes the idea inscribed therein that whoever pollutes must, therefore, pay, and thus the interpretation defended by the arbitral tribunal is in perfect harmony with the constitutional order.

e) It is still necessary to leave a brief note, merely to raise the question of why the rules contained in article 9 of the Civil Code obligate the interpreter of ordinary legislation, given that the said Code does not occupy any prominent place in the legal system.

To this question Prof. Jorge Miranda responds, ibidem, p. 230, when he considers that the "[…] conclusion to which one is inclined is that rules such as these are valid and effective, not because they are contained in the Civil Code - as this does not occupy any prominent place in the legal system - but, directly, as such, by expressing a legislative will, not contradicted by any other provisions, regarding the problem of interpretation (which are not merely technical-legal) of which they concern."

The said author adds, idem, that "rules on these matters can be considered substantially constitutional and would not even be repugnant to see them raised to the Constitution in the formal sense."

With regard to the problematic of interpretation and its rules, as we derive from Prof. José de Oliveira Ascensão, in The Law, Introduction and General Theory, 2nd edition, Calouste Gulbenkian Foundation, 1980, pp. 352/353, it should be emphasized the imperative character of those rules, and their binding nature for the interpreter.

The interpretation that the arbitral tribunal makes of article 3(1) of the SCTC and the criteria that, for this purpose, it considered, as expressly mentioned in the Decision handed down in the context of Case no. 196/2014-T, from the literal element, to the systematic element, passing through the historical and rational (or teleological) element, do not, therefore, collide with any constitutional principles.

Article 9(1) of the CC provides that the search for legislative thought must "[…] take especially into account […] the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied", circumstances and conditions that, today more than ever, are of sensitivity to the environment and of respect for issues related to it, and that are shown to be inscribed in the constitutional order.

Thus, in light of what has been stated, it does not appear, with due respect, that the TCA has reason, insofar as the interpretation considered by the arbitral tribunal, as being the only one capable of respecting the legal purposes, does not violate any of the principles in question, that is, the principles of confidence and legal certainty, of the efficiency of the tax system and of proportionality, and that, on the other hand, such interpretation is express and substantively in conformity with the principles inscribed in the Constitution.

Thus, it is not apparent that the interpretation made by the tribunal on article 3(1) of the SCTC contends with any constitutional norms or principles in force.

J - ON THE ACQUISITION OF OWNERSHIP OF THE VEHICLE AND THE VALUE OF REGISTRATION

69 - Before anything else, it should be added, in light of what is hereinafter expressly stated regarding the value of registration, that acquirers of vehicles become owners of the same vehicles through the execution of the corresponding contracts of sale and purchase, with registration or without it.

70 - There are three articles of the Civil Code that it is important to take into account, with regard to the acquisition of ownership of a motor vehicle. They are, from the start, article 874, which establishes the concept of a contract of sale and purchase, as being "[…] the contract by which ownership of a thing, or another right, is transferred, through a price"; article 879, in whose subsection a) it is provided, as essential effects of the contract of sale and purchase, "the transfer of ownership of the thing or the title of the right" and article 408, which is entitled contracts with real effect, and establishes in its (1), that "the constitution or transfer of real rights over a determined thing is made by the mere effect of the contract, save the exceptions provided for by law". (emphasis ours)

We are, in effect, in the domain of contracts with real effect, which means that their execution brings about the transfer of real rights, in this case, motor vehicles, determined by the mere effect of the contract, as expressly arises from the aforementioned norm.

71 - With regard to the said contracts with real effect, it is appropriate to note the teachings of Pires de Lima and Antunes Varela, when, in annotations to article 408 of the CC, they tell us that "From these contracts called real (quoad effectum), for having as their immediate effect the constitution, modification or extinction of a real right (and not merely the obligations tending to that result) are distinguished the so-called real contracts (quoad constitutionem), which require the delivery of the thing as an element of their formation (cfr. articles 1129, 1142 and 1185) ".

We are thus dealing with contracts in which the ownership of the thing sold is transferred, without further ceremony, from the seller to the buyer, having as its cause the contract itself.

72 - Also from case law, designedly from the Judgment of the STJ no. 03B4369 of 19/02/2004, available at: www.dgsi.pt, it is derived that, in light of the provision of article 408(1) of the Civil Code, "the constitution or transfer of real rights over a determined thing is made by the mere effect of the contract, save the exceptions provided for by law". This is the case of the contract of sale and purchase of a motor vehicle (articles 874 and 879(a) of the Civil Code), which does not depend on any special formality, being valid even when executed in verbal form - cf. Judgment of the STJ of 3-3-98, in CJSTJ, 1998, year VI, Tome I, page 117". (emphasis ours)

73 - Having the contract of sale and purchase, in light of what has been stated, a real nature, with the aforementioned consequences, it is also necessary to consider the legal value of the vehicle registration which is the subject of that contract, insofar as the transaction of the said asset is subject to public registration.

74 - It is established, in effect, in article 1(1) of DL no. 54/75, of 12 February, relating to the registration of motor vehicles, that "Vehicle registration has essentially the purpose of giving publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce". (emphasis ours)

75 - Being clear, in light of the said norm, what is the purpose of registration, there is, however, no clarity, within the scope of the said Decree-Law, on the legal value of that registration, it being necessary to consider article 29 of the said legal instrument, relating to the registration of motor vehicle ownership, when it provides that "The provisions relating to land registration shall apply, with the necessary adaptations, to the registration of automobiles […]". (emphasis ours)

76 - In this framework, in order for us to achieve the sought knowledge on the legal value of motor vehicle ownership registration, it is necessary to take into account what is established in the Land Registration Code, approved by Decree-Law no. 224/84, of 06 July, when it provides in its article 7 that "the definitive registration constitutes a presumption that the right exists and belongs to the registered owner in the exact terms in which the registration defines it". (emphasis ours)

77 - The combination of the provisions mentioned above, particularly that established in article 1(1) of DL no. 54/75, of 12 February and in article 7 of the Land Registration Code, permits considering, on the one hand, that the fundamental function of registration is to give publicity to the legal situation of vehicles, permitting, on the other hand, to presume that the right exists and that such right belongs to the owner in whose favor it is registered, in the exact terms in which it is defined in the registration.

78 - Thus, definitive registration constitutes nothing more than the presumption that the right exists and belongs to the registered owner, in the exact terms of the registration, but a rebuttable presumption, thus admitting counter-proof, as follows from the law and case law has been pointing out, and to this end reference may be made, among others, to the Judgments of the STJ nos. 03B4369 and 07B4528, respectively, of 19/02/2004 and 29/01/2008, available at: www.dgsi.pt.

79 - The function legally reserved to registration is, therefore, on the one hand, to publicise the legal situation of the assets, in this case, the vehicles and, on the other, to permit us to presume that a right exists over those vehicles and that the same belongs to the owner, as such registered in the registration, which means that the registration does not have a constitutive nature of the right of ownership, but merely declarative, hence registration does not constitute a condition of validity of the transfer of the vehicle from the seller to the buyer.

80 - Thus, if the buyers of the vehicles, as their "new" owners, do not promote, from the start, the adequate registration of their right, it is presumed, for the purposes of article 7 of the Land Registration Code and article 3(1) of the SCTC, that the vehicles continue to be the property of the person who sold them and who remains registered as their owner, and such person is the tax subject of the tax, in the certainty, however, that such presumptions are rebuttable, whether by virtue of what is established in article 350(2) of the CC, or in light of the provision of article 73 of the LGT. Hence, from the moment the said presumptions are overcome, through proof of the said sales, the TCA will not be able to persist in considering as the tax subject of the SCT the seller of the vehicle who, in the registration, continues to appear as its owner.

K - ON THE MEANS OF PROOF PRESENTED

81 - The transfers of the vehicles had as acquirers the persons who in the corresponding financial leasing contracts appeared as lessees, and such transfers occurred, in their entirety, in the time period comprised between the years 1995 and 2002, it being verified that, in two cases, those relating to vehicles with license plates ...-... -... and ...-... -..., the sales occurred still during the validity of the said contracts, and in the remaining cases at dates immediately after the termination of those contracts, that is, in any case, at dates well before those to which the due date of the SCT applies, which, as has been noted, relates to the years 2009 to 2012.

82 - The means of proof presented to prove the alienation of the vehicles, at a date prior to the date of the due date of the tax, are concretized, as has already been mentioned above, both in copies of the financial leasing contracts and in settlement notes/debit notes/receipts corresponding to those transfers.

83 - These latter documents present in their description various mentions, namely referring to the acquirer of the vehicle, identified by name and by customer number and tax identification number; to the corresponding number of the financial leasing contract; identifying by this means the vehicle subject of sale, the circumstances of the transfer of the vehicles and the amounts relating to the value of the vehicles and the VAT charged.

84 - The said documents, insofar as they enjoy the presumption of truthfulness conferred on them in article 75(1) of the LGT, it being incumbent on the TCA, in accordance with article 75(2) of the LGT, in the framework of the reasoned and objective reasons it had, to demonstrate that the information inscribed in them does not correspond to reality, permit considering that such documentation constitutes sufficient means of proof to overcome the presumptions in question in the case at hand, that is, the presumption established in article 7 of the Land Registration Code and that enshrined in article 3(1) of the SCTC, which means that, at the time the tax was due, the Claimant was not the owner of the vehicle in question.

85 - The documents presented, and their combination, permit the tribunal to consider, with a high degree of probability and verisimilitude, that the alienation of the vehicles in question to the corresponding lessees was effected. To this end it is appropriate to note what is written by Jorge Lopes de Sousa, in Code of Tax Procedure and Process, Annotated and Commented, Volume II, 6th Edition, Áreas Editora, SA, Lisbon, 2011, p. 256, in annotations to article 115 of the said Code, when citing ALBERTO DOS REIS, he refers that sufficient proof leads to a judgment of certainty; not of logical, absolute, material certainty, in most cases, but of certainty sufficient for the practical needs of life, of certainty called historical-empirical. That is, what is formed on the basis of sufficient proof is, normally, a judgment of probability, but of probability raised to such a high degree that it is what is sufficient for the reasonable requirements of social security.

86 - In summary, the proof of the sale of the vehicles in question, from the attachment to the case file of the aforementioned documents, appears to be reasonable and proportional, above all, taking into account the corporate purpose of the Claimant, centered on the activity of financing operations for the acquisition of motor vehicles, and on the execution of the corresponding financial leasing contracts, it being, consequently, not surprising, quite the contrary, the transfer to the lessees of the ownership of the vehicles which are the subject of those contracts, as occurred with the vehicles identified in the case file.

87 - In these circumstances, having in mind that the presumption enshrined in article 3(1) of the SCTC was overcome, with regard to the vehicles identified in the proceedings, whose sales occurred between the years 1995 and 2002, that is, at dates prior to those of the due date of the tax, which relate to the years 2009 to 2012, it should be considered that the Claimant, with regard to the said vehicles, was not, on the dates to which the assessments in question relate, a tax subject of the tax in question.

88 - The TCA, when it understands that the tax subjects of SCT are, definitively, the persons in whose names the motor vehicles are registered, without considering that article 3(1) of the SCTC embodies a presumption, is proceeding to the illegal assessment of the SCT, with regard to the vehicles identified in the case file, based on the erroneous interpretation and application of the rules of subjective incidence of the Single Circulation Tax, contained in the said article 3 of the SCTC, which configures the practice of tax acts deficient in legality due to error regarding the factual and legal requirements, determinative of the annulment of the corresponding tax acts, due to violation of law.

L - REIMBURSEMENT OF THE AMOUNT PAID

89 - Pursuant to article 24(1)(b) of the LFATM, and in accordance with what is established therein, the arbitral decision on the merits of the claim to which there is no appeal or challenge binds the tax administration from the end of the period provided for the appeal or challenge, and it must - in the exact terms of the merits of the arbitral decision in favor of the tax subject and until the end of the period provided for the spontaneous execution of the judgments of the judicial tax courts - "Restore the situation that would have existed if the tax act which is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that effect." (emphasis ours)

90 - These are legal commands that are in perfect harmony with the provision of article 100 of the LGT, applicable in this case by virtue of article 29(1)(a) of the LFATM, in which it is established that "The tax administration is obliged, in the case of total or partial success of complaints or administrative appeals, or of judicial proceedings in favor of the tax subject, to the immediate and complete restoration of the situation that would have existed if the illegality had not been committed, […]" (emphasis ours)

91 - The case contained in the present proceedings raises the manifest application of the aforementioned rules, given that as a consequence of the illegality of the assessment acts, referenced in this proceedings, and of the payment of the amount of € 3,478.36, there must, by force of these rules, be reimbursement of the amounts paid, whether as tax or as compensatory interest, as a way to achieve the restoration of the situation that would have existed if the said illegality had not been committed.

CONCLUSION

92 - In the factual framework that has been referred to, the TCA, when it performed the assessment acts in question in the present proceedings, founded on the idea that article 3(1) of the SCTC does not establish a defeasible presumption, makes an erroneous interpretation and application of this rule, committing an error regarding the legal requirements, which constitutes a violation of law.

93 - On the other hand, because the TCA, at the date of occurrence of the tax facts, considered the Claimant to be the owner of the vehicles referenced in the present proceedings, considering it, as such, a tax subject of the tax, when such ownership was no longer inscribed in its legal sphere, based on, therefore, factual matter divergent from the effective reality, commits an error regarding the factual requirements, and therefore a violation of law.

III - DECISION

94 - Wherefore, having regard to all the foregoing, this Arbitral Tribunal decides:

• To annul the decision handed down in the context of the gracious complaint referenced in the case file, no. ...2014...;

• To judge that the request for arbitral decision is substantiated, as proven, on the grounds of a violation of law, as far as concerns the annulment of the assessment acts for SCT, relating to the years 2009 to 2012, relating to all the vehicles identified in the case file;

• To annul, consequently, the assessment acts for SCT, relating to the years 2009 to 2012, relating to the vehicles previously indicated, for which the assessed tax totals the amount of € 3,478.36;

• To condemn the TCA to pay the costs of the present proceedings.

SCT - Assessment of the single circulation tax

VALUE OF THE CASE

In accordance with articles 306(2) of the CPC (ex-315(2)) and 97-A(1) of the CPPT and article 3(2) of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 3,478.36.

COSTS

In accordance with article 12(2), at the end, and article 22(4), both of the LFATM, and article 4 of the Regulations of Costs in Tax Arbitration Proceedings and the attached Table I, the total amount of costs is fixed at € 612.00.

Notify the parties.

Lisbon, 7 January 2016

The Arbitrator

António Correia Valente

[1] See the study on the matter, prepared by Prof. Carlos Pestana Barros, in Science and Tax Technique, 2005, no. 416, pp. 105-126