CAAD 261/2015-T: IUC Subjective Exemption for Vehicle Rental Companies and Legal Presumptions

ARBITRAL DECISION

I. - REPORT

A - PARTIES

A..., legal entity no. ..., with registered office at Building ..., ..., Plot ..., ... floor - Lisbon, hereinafter referred to as "Claimant", filed a request for the constitution of an arbitral tribunal, pursuant to the provisions of paragraph 2 of Article 10 of Decree-Law No. 10/2011, of January 20 (Legal Regime of Arbitration in Tax Matters, hereinafter referred to as "LRAT"), with a view to adjudicating the following dispute between itself and the Tax and Customs Authority (which succeeded, among others, the Directorate-General of Taxation) hereinafter referred to as "Respondent" or "TCA".

B - REQUEST

1 - The request for constitution of the arbitral tribunal was accepted by the Esteemed President of CAAD on April 20, 2015 and, on the same date, notified to the TCA.

2 - The Claimant failed to nominate an arbitrator, wherefore, pursuant to the provisions of paragraph 1 of Article 6 of the LRAT, the undersigned was designated on 12-06-2015 by the Ethics Council of the Administrative Arbitration Centre as arbitrator of a Sole Arbitral Tribunal, having accepted in accordance with the legal provisions.

3 - The Parties were, on 2-06-2015, duly notified of such designation and did not manifest any intention to refuse it, in accordance with the combined provisions of subsections a) and b) of paragraph 1 of Article 11 and Articles 6 and 7 of the Code of Ethics.

4 - In these circumstances, in accordance with the provisions of subsection c) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of January 20, as amended by Article 228 of Law No. 66-B/2012, of December 31, the arbitral tribunal was duly constituted on 10-07-2015.

5 - On December 5, 2015, the Arbitral Tribunal deemed the holding of the meeting provided for in Article 18 of the LRAT to be dispensed with, having regard both to the orders issued to this effect in the SGP, the fact that the dispute concerned fundamentally a matter of law, and the will of the parties to dispense with said meeting.

6 - The present Claimant requests that this Arbitral Tribunal:

a) - Declare the illegality and consequent annulment of both the assessment act relating to the Single Circulation Tax (hereinafter referred to as "SCT"), and the assessment act of compensatory interest (CI) associated therewith, contained in the assessment of which it was notified, which is referenced in the case file, relating to the year 2013 and concerning the vehicle identified in the proceedings, with registration number ...-... -....

b) - Condemn the Tax and Customs Authority to refund the amount of € 36.92, which it indicates as the value of the claim.

c) - Condemn the Tax and Customs Authority to pay compensatory interest, relating to the payment of the amount illegally assessed and paid.

C - CAUSE OF ACTION

7 - The Claimant, in the substantiation of its request for arbitral ruling, states, in summary, the following:

8 - That it is an institution that pursues the activity of renting motor vehicles and providing services associated with fleet management.

9 - That it was the recipient of the SCT assessment notice, numbered 2013..., relating to the vehicle with registration number ...-... -....

10 - That it proceeded to pay the amount relating to the SCT assessment identified with number 2013....

11 - That it is not a taxpayer of the SCT relating to the vehicle with registration number ...-... -..., given that the same had already been sold on the date of tax accrual.

12 - That even if the vehicle had not been registered in the name of the purchaser, this would not preclude the SCT from applying to the actual owners of the vehicle, provided that the transfer is demonstrated.

13 - That the SCT complies with the principle of equivalence, seeking to tax taxpayers in measure of the environmental and road cost they cause, wherefore the interpretation of the expression "being considered", mentioned in paragraph 1 of Article 3 of the Single Circulation Tax Code, which understands that the same constitutes an irrebuttable presumption of ownership based on registration, would directly conflict with said principle.

14 - That in light of Article 3, paragraph 1 of the Single Circulation Tax Code, given that the vehicle in question was sold on a date prior to the date of tax accrual, the taxpayer should be the new owner of that same vehicle.

15 - That the accounting document attached to the proceedings, relating to the customer/purchaser extract of the vehicle, proves the sale of the vehicle at its residual value.

D - RESPONDENT'S REPLY

16 - The Respondent, the Tax and Customs Authority (hereinafter referred to as "TCA"), presented, on 25-09-2015, its Reply.

17 - In said Reply, the TCA considers, first and foremost, as a preliminary matter, the failure to attach certain documents to the request for arbitral ruling, namely those relating both to the payment of the SCT and to the payment of the CI, and also those concerning the receipt of the price of the sale of the vehicle.

18 - With respect to the aforementioned documents, the TCA also considers that, in light of the provisions of Article 423 of the Code of Civil Procedure, which establishes deadlines for the attachment of said documents, having the same not been presented with the pleadings in which the corresponding facts are alleged, their subsequent presentation became precluded.

19 - On the other hand, in its Reply, the TCA considers that the allegations of the Claimant cannot at all be sustained, insofar as they constitute an interpretation and application of the legal norms applicable to the case that is notoriously erroneous, insofar as,

20 - 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 regard the systematic element, violating the unity of the regime established throughout the Single Circulation Tax Code and, more broadly, throughout the entire legal-tax system, and further deriving from an interpretation that ignores the ratio of the regime established in the Single Circulation Tax Code. (See Article 16 of the Reply)

21 - It states that the tax legislator in establishing in Article 3, paragraph 1 of the Single Circulation Tax Code who are the taxpayers of the SCT established, expressly and intentionally, that these are the owners (or in the situations provided in paragraph 2 the persons mentioned therein), being considered as such the persons in whose names they are registered. (See Article 27 of the Reply)

22 - It emphasizes that the legislator did not use the expression "it is presumed" as it could have done, for example, in the following terms: "the taxpayers 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 names they are registered." (See Article 28 of the Reply)

23 - It considers that the wording of Article 3 of the Single Circulation Tax Code corresponds to a clear option of legislative policy adopted by the legislator, whose intention, within the scope of its freedom of legislative formation, was that, for purposes of the SCT, those who appear as such in the register be considered owners. (See Article 39 of the Reply)

24 - It states that said understanding has already been adopted by the Jurisprudence of our courts, transcribing, for this purpose, part of the sentence of the Administrative and Tax Court of Penafiel, handed down in Process No. 210/13.OBEPNF. (See Articles 40 and 41 of the Reply)

25 - On the systematic element of interpretation, it considers that the solution advocated is intolerable, finding the understanding upheld by the Claimant no legal support whatsoever. (See Article 44 of the Reply)

26 - On the "ratio" of the regime, the TCA considers that, in light of a teleological interpretation of the regime established throughout the Single Circulation Tax Code, the interpretation advocated by the Claimant, to the effect that the taxpayer of the SCT is the actual owner regardless of not appearing in the motor vehicle register as such, is manifestly erroneous, insofar as it is the very ratio of the regime established in the Single Circulation Tax Code that constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the owner of the vehicle, as it appears in the motor vehicle register. (See Articles 67 and 68 of the Reply)

27 - It adds that the Single Circulation Tax Code carried out a reform of the vehicle taxation regime in Portugal, substantially altering the motor vehicle taxation regime, with the taxpayers of the tax becoming the owners appearing in the property register, regardless of the circulation of the vehicles on public roads. (See Article 74 of the Reply)

28 - In this sense, it states that this is the understanding inscribed, in particular, in Recommendation No. 6-B/2012 of 22-06-2012, of the Ombudsman addressed to the Secretary of State for Public Works, Transport and Communications.

29 - It also considers that the interpretation conveyed by the Claimant is, beyond what has already been stated, at variance with the Constitution, insofar as 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 122 of the Reply)

30 - It adds that the invoice attached to the proceedings does not constitute sufficient proof to "undermine the (supposed) legal presumption established in Article 3 of the Single Circulation Tax Code," insofar as it lacks the character of a bilateral transaction, a lack which "[…] could be remedied by proof of receipt of the price […]" contained therein, by the Claimant. (See Articles 84 and 96 of the Reply)

31 - It further states that it was not the Respondent that gave rise to the filing of the request for arbitral ruling, but rather the Claimant, and consequently the Claimant should be condemned to pay the arbitration costs "in accordance with Article 527/1 of the New Civil Procedure Code by virtue of Article 29/1-e) of the LRAT," also stating that the legal presupposites that confer the right to compensatory interest have not been met, emphasizing that the Claimant has not presented proof of payment, either of the SCT or of the CI, relating to the 10 assessments it contested. (See Articles 148, 149 and 150 of the Reply)

32 - It considers, in conclusion, that, given all the arguments presented, the request for arbitral ruling should be judged to lack merit, maintaining in the legal order the tax assessment act contested, and accordingly absolving the Respondent of the claim.

E - ISSUES TO BE DECIDED

33 - It is necessary, therefore, to consider and decide.

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

a) The norm of subjective tax incidence contained in Article 3, paragraph 1 of the Single Circulation Tax Code establishes a presumption or not.

b) What is the legal value of the motor vehicle register in the economy of the Single Circulation Tax Code, particularly for purposes of the subjective tax incidence of this tax.

c) If, on the date of the occurrence of the tax event, the vehicle had already previously been transferred, although the right of ownership therein remains registered in the name of its previous owner, for purposes of the provisions of Article 3, paragraph 1 of the Single Circulation Tax Code, whether the taxpayer of the SCT is the previous owner or the new owner.

F - PROCEDURAL PRESUPPOSITES

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

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

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

38 - Taking into account the tax administrative proceedings, a copy of which was attached to the proceedings by the TCA, and the documentary evidence forming part of the proceedings, it is now necessary to present the factual matter relevant to the understanding of the decision, as set out in the terms mentioned below.

II - GROUNDS

G - FACTUAL GROUNDS

39 - On the matter of relevant fact, this tribunal establishes as proven the following facts:

40 - The Claimant is an institution that pursues the activity of renting motor vehicles and providing services associated with fleet management.

41 - The Claimant sold the vehicle with registration number ...-... -..., on 23-03-2010.

42 - The Claimant was the recipient of the SCT assessment notice, numbered 2013..., relating to the vehicle with registration number ...-... -....

43 - The Claimant proceeded to pay, on 23-01-2015, the amount relating to the SCT assessment and CI, in the total amount of € 36.92.

44 - The Claimant attached to the proceedings both the invoice for the sale of the vehicle with registration number ...-... -..., and the corresponding accounting extract, which proves that it received the value of the sale of the vehicle.

GROUNDS FOR PROVEN FACTS

45 - The facts deemed proven are based on the documents mentioned, relative to each of them, insofar as their correspondence to reality was not questioned.

UNPROVEN FACTS

46 - There are no facts deemed as unproven, given that all facts considered relevant for adjudication of the claim were proven.

H - LEGAL GROUNDS

47 - The factual matter has been established; it now becomes necessary to proceed with its legal subsumption and determine the Law applicable to the underlying facts, in accordance with the issues to be decided set forth in paragraph 34.

48 - The essential and decisive issue in these proceedings, relative to which there are absolutely opposite understandings between the Claimant and the TCA, is to determine whether the norm of subjective tax incidence contained in paragraph 1 of Article 3 of the Single Circulation Tax Code establishes a rebuttable presumption or not.

49 - The positions of the parties are known. Indeed, for the Claimant, the expression "being considered," inscribed in Article 3, paragraph 1 of the Single Circulation Tax Code, should be understood as a rebuttable legal presumption.

50 - The Respondent, for its part, considers that the wording of Article 3 of the Single Circulation Tax Code corresponds to a clear option of legislative policy adopted by the legislator, whose intention, within the scope of its freedom of legislative formation, was that, for purposes of the SCT, those who appear as such in the register be considered owners.

I - INTERPRETATION OF THE NORM OF SUBJECTIVE TAX INCIDENCE CONTAINED IN PARAGRAPH 1 OF ARTICLE 3 OF THE SINGLE CIRCULATION TAX CODE

51 - On this matter, that is, whether the norm of subjective tax incidence contained in paragraph 1 of Article 3 of the Single Circulation Tax Code establishes a presumption, it should be noted that the established jurisprudence at CAAD points to the understanding that said norm establishes a legal presumption. Indeed, from the very 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 Processes No. 14/2013-T, 26/2013-T and 27/2013-T, to the most recent, which may be indicated as the Decision handed down in the context of Process No. 69/2015-T, passing through numerous Decisions handed down in the year 2014, of which are mentioned, by way of mere example, the Decisions handed down in Processes No. 34/2014-T, 120/2014-T and 456/2014-T, all point to the understanding that paragraph 1 of Article 3 of the Single Circulation Tax Code establishes a rebuttable legal presumption.

To this end, consideration should also be given to the understanding inscribed in the Decision of the Central Administrative Court of the South, handed down on 19-03-2015, Process 08300/14, available at: www.dgsi.pt, when therein it is expressly stated that Article 3, paragraph 1 of the Single Circulation Tax Code "[…] establishes a legal presumption that the holder of the motor vehicle register is its owner, and such presumption is rebuttable by virtue of Article 73 of the General Tax Law".

This is an understanding in which we fully concur and which is given, without further ado, as valid and applicable in the present case, not considering, consequently, other developments to be necessary, given the abundant grounds set forth in the aforementioned Decisions and in said Decision.

52 - Being this the understanding that, with respect to Article 3, paragraph 1 of the Single Circulation Tax Code, is fully adopted by this tribunal, it is important, however, to further note the lack of merit in the Respondent's position when, in Articles 121 and 122 of its reply, it argues that the interpretation that goes to the effect that a rebuttable legal presumption is established in paragraph 1 of Article 3 of the Single Circulation Tax Code violates the constitutional principles of confidence and legal certainty, of efficiency of the tax system and of proportionality.

Let us consider, then, this matter.

Let us see,

• Regarding the principle of proportionality, it should be noted first and foremost that the same, insofar as it is materially inherent to the regime of rights, freedoms and guarantees, inscribing itself in their protection, aims, essentially, to discipline the action of the Public Administration in order that its activity in its relationship with individuals be guided by the choice of measures most equitably adequate for the pursuit of the public interest.

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

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

With respect to the principle of proportionality, it should also be noted what J. J. Gomes Canotilho and Vital Moreira tell us, in CONSTITUTION OF THE PORTUGUESE REPUBLIC, ANNOTATED, VOLUME I, 4th Edition, 2007, Coimbra Editora, pp. 392/393, when they consider that said principle is divisible into three sub-principles, namely: "[…] a) principle of suitability (also called principle of suitability); b) principle of necessity (also called principle of necessity or of indispensability); c) principle of proportionality in the strict sense, which means that the restrictive legal means and the ends obtained must be in a "just measure," preventing the adoption of restrictive legal measures that are disproportionate, excessive, in relation to the ends obtained […]".

Said sub-principles have, all of them, a common denominator, which is the just balance 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 adequate interpretation of paragraph 1 of Article 3, with a view to the pursuit of the legal purposes provided for in Article 1 of the Single Circulation Tax Code, which are translated into the taxation of actual owners of motor vehicles (and not necessarily those in the register) in measure of the environmental and road cost they cause.

As Professor J. J. Gomes Canotilho states in Constitutional Law and Theory of the Constitution, Almedina - Coimbra, 1998, pp. 264 et seq., the most important field of application of the principle of proportionality or of the prohibition of excess, which has constitutional basis in Articles 18, paragraph 2 and 266, paragraph 2 of the Portuguese Constitution, "[…] is that of the restriction of rights, freedoms and guarantees by acts of the public powers. However, the logical domain of application of the principle of proportionality extends to conflicts of legal goods of any kind." The administration, adds the aforementioned author, idem, "[…] must always observe, in each concrete case, the requirements of the prohibition of excess […]".

In this same sense points the jurisprudence, specifically the decision of the Supreme Administrative Court of 01-07-1997, Process No. 041177, available at: www.dgsi.pt, when it considers that the principle of proportionality in the broad sense comprises the congruence, suitability or idoneity of the means or measure to achieve the legally proposed purpose and, in the strict sense, encompasses the prohibition of excess.

The principle of proportionality is a corollary of the principle of justice, which means and implies that in its action the Public Administration should harmonize the specific public interest it has to pursue with the rights and legitimate interests of individuals possibly affected by its acts, interests and rights which, in the case at hand, are reduced to the non-taxation in SCT of persons who are no longer owners of the vehicles and who, consequently, in no way contribute to the effectuation of any road and environmental cost.

What matters is to balance the legal purposes and the means to pursue them, and, in the framework of a judgment of balance, identify the means most adequate for this purpose, which, in the case, are translated into the interpretation adopted by the arbitral tribunal.

It could be said, moreover, that the understanding that said paragraph 1 of Article 3 of the Single Circulation Tax Code establishes a rebuttable legal presumption corresponds to the only interpretation that coherently accords with said principle of equivalence, and which appears in line with the principles of justice and proportionality.

The interpretation that understands that a rebuttable legal presumption is established in paragraph 1 of Article 3 of the Single Circulation Tax Code is, therefore, the only one that permits ensuring the pursuit of the purposes aimed at by law - to tax the owners of motor vehicles in measure of the environmental and road cost they cause - as established in Article 1 of the Single Circulation Tax Code, which means that the taxpayers of the SCT are, presumably, the persons in whose names the vehicles are registered, that is, the aforementioned taxpayers 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 said legal purposes, only thus, it is reaffirmed, are the aforementioned principles of proportionality and justice shown to be satisfied.

The contrary understanding, that is, that considered by the TCA, which interprets paragraph 1 of Article 3 of the Single Circulation Tax Code as not establishing a rebuttable legal presumption, understanding that the taxpayers of the SCT are, definitively, the persons in whose names the vehicles are registered, in the just measure in which it leads to the imposition of a tax burden on one who may no longer be the owner of the vehicle in question and who, in this way, does not pollute, removing from tax liability one who, in reality, is the actual cause of environmental and road damage resulting from the use of vehicles of which they are the true owners, gives evidence that the legally prescribed purposes would not, at all, be achieved, thus not respecting the principle of equivalence which, in the framework of the Single Circulation Tax Code, has an absolutely structuring function. Such understanding, that one, is not shown, in these circumstances, to be in harmony with the principle of proportionality.

The interpretation made by the tribunal, in the decision which it now reformulates, had exactly into account the principle of proportionality when, contrary to what the Respondent intended, it takes, in due account, that the definitive register does not produce constitutive effect by being intended to give publicity to the registered act, functioning only as a mere rebuttable presumption of the existence of the right and when, in homage to that principle, it regards the principle of equivalence as a fundamental element of the Single Circulation Tax Code.

• 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 the ordinary sense, corresponds to the capacity/work methodology oriented toward the optimization of the work executed or of the services provided, which means producing the maximum, in quantity and quality, with the minimum of costs and means, having nothing to do with the observance of legally established principles and with respect for the rights of citizens, whether in the capacity of taxpayers or not.

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 the annotations to Article 55 of the General Tax Law, it is a principle that obliges "[…] the tax administration to refrain from imposing on taxpayers obligations that are unnecessary to the satisfaction of the purposes it aims to pursue".

In this framework, 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 either 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, specifically the inquisitorial principle and the discovery of material truth, and obviously the application of said principle of efficiency cannot be made either to the prejudice of the rights of citizens or by the absence of observance of the legal purposes. [1]

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

With respect to good faith, it should be noted what Professor Freitas do Amaral states when, in Course of Administrative Law, Vol. II, Almedina, 2002, pp. 135/136, citing Professor V. Fausto de Quadros, tells us that "[…] the Public Administration is obliged to obey bona fide in its relations with individuals. More: it should even set the example to individuals of the observance of good faith, in all its manifestations, as the essential core of its ethical behavior. Without this, one could never affirm that the State (and with it other public entities) is a person of good repute".

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, generates confidence of citizens in the legal protection of the Public Administration.

Regarding the principles of legal certainty and of protection of confidence, Professor J. J. Gomes Canotilho tells us in Constitutional Law and Theory of the Constitution, Almedina - Coimbra, 1998, p. 250 et seq., that 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 connected with the subjective components of security, designedly the calculability and predictability of individuals in relation to the legal effects of acts of the public powers". In any case, adds the aforementioned 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 his acts or public decisions inciding on his rights, positions or legal relations founded on legal norms in force and valid are linked to the legal effects foreseen and prescribed by those same norms".

It follows from this doctrine that persons when selling their vehicles should be assured that, should they proceed with the sale of vehicles of which they are owners, and the same are not registered in the name of the purchasers, the legal effects resulting therefrom will be those foreseen and resulting from the legal norms in force and from their adequate interpretation, in light of the legal purposes of those same norms, which, in the present case, led the arbitral tribunal to consider the register as a rebuttable 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 by way of the interpretation made by the arbitral tribunal, when it considers that a rebuttable legal presumption is established in paragraph 1 of Article 3 of the Single Circulation Tax Code, permitting any citizen who proceeds to sell, to a third party, a motor vehicle, the possibility of demonstrating that, when the SCT was accrued, they were no longer its owner nor responsible for the payment of that tax.

• Beyond what has been stated above, it will be important to further know whether the interpretation adopted by the arbitral tribunal, beyond not conflicting with any of the aforementioned principles, is inscribed directly and substantively in the context of the constitutional order.

With respect to the interpretation of law in light of the Constitution, or of interpretation in conformity with the Constitution, Professor Jorge Miranda tells us, in Manual of Constitutional Law, TOME II, Introduction to the Theory of the Constitution, 2nd edition, Coimbra Editora, 1987, p. 232 et seq., that what is at issue, first and foremost, is "[…] taking into account, within the systematic element of interpretation, that which relates to the Constitution. Indeed, 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 that a rebuttable legal presumption is established in paragraph 1 of Article 3 of the Single Circulation Tax Code is supported by various elements of interpretation, among which the systematic element may be mentioned, 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.

On the aforementioned systematic element it is important to state the following:

a) In the understanding of BAPTISTA MACHADO, in Introduction to Law and to Legitimizing Discourse, p. 183, the systematic element "[…] comprises the consideration of the other provisions that form the complex normative body of the institute into which the norm to be interpreted is integrated, that is, that regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that belongs to the norm to be interpreted in the global legal 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 the case the principle of equivalence, does not exist in isolation, but is rather connected by an intimate nexus with other principles that integrate, at the more global level, the respective legal order, in the case, with the other principles embodied in the system inscribed in the Single Circulation Tax Code, and with other constitutionally established principles. In that sense, each article of a given legal instrument, in the case the Single Circulation Tax Code, will only be comprehensible if we situate it both before the other articles that follow or precede it and before the constitutional order.

c) With respect to the systematization of the Single Circulation Tax Code, environmental concerns were determinant in that said principle of equivalence was, from the outset, inscribed in the first article of said Code, which necessarily leads to the subsequent articles, insofar as they are based on such principle, being influenced by it. This occurred, in particular, with the tax base, which came to be constituted by various elements, particularly those relating to levels of pollution, and with the rates of the tax, established in Articles 9 to 15, which were influenced by the environmental component, and, naturally, also with the subjective incidence itself, provided for in Article 3 of the Single Circulation Tax Code, which cannot escape the aforementioned influence.

d) Said principle of equivalence, as noted by Sérgio Vasques, in Special Consumption Taxes, Almedina, 2001, p. 122 et seq., implies that "[…] the tax must correspond to the benefit that the taxpayer derives from public activity; or to the cost that the taxpayer imputes to the collective by its own activity". Adds the aforementioned author, idem, that "Thus, a tax on motor vehicles based on a rule of equivalence will be equal only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause wear and different environmental cost, pay different tax as well." For this reason, as also stated by the cited author, idem, the concretization of the principle of equivalence dictates special requirements "[…] with respect to the subjective incidence of the tax [..]."

Said principle that informs the current Single Circulation Tax is inscribed in the environmental concerns established in paragraph 2, subsection a) of Article 66 of the Portuguese Constitution and in the necessity of - with a view to ensuring the right to the environment, within the framework of sustainable development - to "Prevent and control pollution and its effects and harmful forms of erosion," concerns which are, manifestly, considered in the interpretation defended by the arbitral tribunal.

On the other hand, the provision in subsection h) of paragraph 2 of Article 66 of the Constitution, when it establishes that, within the framework of sustainable development, it is incumbent on the State to "ensure that fiscal policy reconciles development with protection of the environment and quality of life," has as a corollary the polluter-pays principle, which concretizes the idea inscribed therein that he who pollutes should, for this reason, pay, thus the interpretation defended by the arbitral tribunal is in perfect accord with the constitutional order.

e) It is also important to leave a brief note, merely to raise the question of why the rules contained in Article 9 of the Civil Code bind the interpreter of ordinary legislation, given that said Code occupies no prominent place in the legal system.

To this question Professor Jorge Miranda responds, ibidem, p. 230, when he considers that the "[…] conclusion toward which one tends is that rules such as these are valid and effective, not because they are contained in the Civil Code - for this occupies no prominent place in the legal system - but directly, as such, by translating a legislative will, not contradicted by any other provisions, concerning the problem of interpretation (which are not only technical-legal) with which they deal."

Adds the aforementioned author, idem, that "rules on these matters can be considered substantially constitutional and it would not be surprising to see them elevated to the Constitution in formal sense."

With respect to the problem of interpretation and its rules, as can be drawn from Professor José de Oliveira Ascensão, in The Law, Introduction and General Theory, 2nd edition, Calouste Gulbenkian Foundation, 1980, pp. 352/353, should be emphasized the mandatory character of these rules and their binding nature for the interpreter.

The interpretation that the arbitral tribunal makes of paragraph 1 of Article 3 of the Single Circulation Tax Code and the criteria that, for this purpose, it considered, as expressly mentioned in the Decision handed down in the context of Process No. 196/2014-T, from the literal element, to the systematic element, passing through the historical and rational (or teleological) element, do not thus collide with any constitutional principles.

Paragraph 1 of Article 9 of the Civil Code provides that the search for the legislative thought should "[…] especially take into account […] the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied," circumstances and conditions which, today more than ever, are of sensitivity toward the environment and of respect for matters related to it, and which are shown to be inscribed in the constitutional order.

Thus, in light of what has been stated, it does not seem, with all due respect, that the Respondent is correct, 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 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 perceived that the interpretation made by the tribunal concerning paragraph 1 of Article 3 of the Single Circulation Tax Code contends with any constitutional norms or principles in force.

J - ACQUISITION OF VEHICLE OWNERSHIP AND THE VALUE OF REGISTRATION

53 - First and foremost, it should be added, in light of what will be explicitly stated below concerning the value of registration, that purchasers of vehicles become owners of those same vehicles by way of the conclusion of the corresponding purchase and sale contracts, with registration or without it.

54 - There are three articles of the Civil Code that are important to take into account with respect to the acquisition of ownership of a motor vehicle. They are, first, Article 874, which establishes the notion of a purchase and sale contract as being "[…] the contract by which the ownership of a thing, or another right, is transmitted, by means of a price"; Article 879, in subsection a) of which it is established, as essential effects of the purchase and sale contract, "the transmission of ownership of the thing or of the holder of the right" and Article 408, which has as its heading contracts with real effects, and establishes in paragraph 1 that "the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, except for exceptions provided by law." (emphasis ours)

We are, in effect, in the domain of contracts with real effects, which means that their conclusion produces the transfer of real rights, in the case, motor vehicles, determined by mere effect of the contract, as expressly follows from the norm previously mentioned.

55 - With respect to said contracts with real effects, it is important to note the teachings of Pires de Lima and Antunes Varela, when, in annotations to Article 408 of the Civil Code, they tell us that "From these contracts so-called real (quoad effectum), because they have as their immediate effect the constitution, modification or extinction of a real right (and not merely 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 (cf. arts. 1129, 1142 and 1185) ".

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

56 - Also from the jurisprudence, specifically from the Decision of the Supreme Court of Justice No. 03B4369 of 19/02/2004, available at: www.dgsi.pt, it is derived that, in light of the provision of Article 408, paragraph 1, of the Civil Code, "the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, except for exceptions provided by law." This is the case of the contract for the purchase and sale of a motor vehicle (Articles 874 and 879 subsection a) of the Civil Code), which does not depend on any special formality, being valid even when concluded in verbal form - cf. Decision of the Supreme Court of Justice of 3-3-98, in CJSTJ, 1998, year VI, Tome I, page 117". (emphasis ours)

57 - Having the purchase and sale contract, in light of what has been stated, the nature of a real contract, with the aforementioned consequences, account must also be taken of the legal value of the motor vehicle register object of that contract, insofar as the transaction of said good is subject to public registration.

58 - Indeed, Decree-Law No. 54/75, of February 12, relating to the registration of motor vehicles, establishes in paragraph 1 of Article 1 that "The registration of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and their respective trailers, with a view to the security of legal commerce." (emphasis ours)

59 - While it is clear, in light of said norm, what the purpose of registration is, there is, however, no clarity, within the scope of said Decree-Law, regarding the legal value of that registration, it being important to consider Article 29 of said legal instrument, relating to the registration of motor vehicle ownership, when therein it is provided that "The provisions relating to the registration of real property are applicable, with the necessary adaptations, to the registration of motor vehicles, […]." (emphasis ours)

60 - In this framework, in order that we may achieve the sought knowledge regarding the legal value of the registration of motor vehicle ownership, it is important to take into account what is established in the Property Registration Code, approved by Decree-Law No. 224/84, of July 6, when it provides in its Article 7 that "definitive registration constitutes a presumption that the right exists and belongs to the titleholder inscribed in the precise terms in which the registration defines it." (emphasis ours)

61 - The combination of the provisions in the articles mentioned above, particularly that established in paragraph 1 of Article 1 of Decree-Law No. 54/75, of February 12 and in Article 7 of the Property Registration Code, permits considering, on the one hand, that the fundamental function of registration is to give publicity to the legal situation of the vehicles, permitting, on the other hand, to presume that the right exists and that such right belongs to the titleholder in whose favor the same is registered, in the precise terms in which it is defined in the registration.

62 - Thus, definitive registration constitutes nothing more than the presumption that the right exists and belongs to the titleholder inscribed, in the exact terms of the registration, but a rebuttable presumption, admitting, for this reason, counter-evidence, as follows from the law and jurisprudence has been pointing out, being able, to this end, to be seen, among others, the Decisions of the Supreme Court of Justice Nos. 03B4369 and 07B4528, respectively of 19/02/2004 and 29/01/2008, available at: www.dgsi.pt.

63 - The function legally reserved to registration is, thus, on the one hand, to publicize the legal situation of the goods, in the case, vehicles and, on the other hand, to permit us to presume that the right over those vehicles exists and that the same belongs to the titleholder, as such inscribed in the register, which means that registration does not have a constitutive nature of the right of ownership, but only declarative, hence why registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer.

64 - Thus, if the buyers of vehicles, as their "new" owners, do not immediately promote the appropriate registration of their right, it is presumed, for purposes of the provision of Article 7 of the Property Registration Code and of paragraph 1 of Article 3 of the Single Circulation Tax Code, that the vehicles continue to be the property of the person who sold them and who remains in the register as their owner, such person being the taxpayer of the tax, with the certainty, however, that such presumptions are rebuttable, whether by force of the provision in paragraph 2 of Article 350 of the Civil Code, or in light of the provision of Article 73 of the General Tax Law. Hence, from the moment when the presumptions in question are overcome, by means of proof of said sales, the TCA cannot persist in considering the seller of the vehicle, who, in the register, continues to be listed as its owner, as the taxpayer of the SCT.

L - MEANS OF PROOF PRESENTED

65 - Taking always into account the verbal nature which purchase and sale contracts of motor vehicles may have, proof of the sale of such good may be made by any means, in particular by way of invoices - receipts, relating to the sales of the vehicles.

66 - To this end, that is, regarding proof of the sale of motor vehicles supported by invoices - receipts, it is important to note the understanding inscribed in the Decision of the Central Administrative Court of the South, handed down on 19-03-2015, Process 08300/14, available at: www.dgsi.pt, when it states that "[…] The invoice should be viewed as the accounting document through which the seller sends to the buyer the general conditions of the transaction carried out (appearing) in the phase of calculation of the amount to be paid by the buyer, [ ] not constituting proof of payment of the price by that buyer and, consequently, proof that the purchase and sale was concluded (only the issuance of invoice/receipt or of receipt constitutes proof of payment and satisfaction of obligation) [ ]".

67 - The Claimant, as a means of proof that it proceeded with the sale of the vehicle, identified in the present proceedings, on a date prior to the date of tax accrual, attached, from the outset, a copy of the invoice relating to such alleged sale.

68 - It should, moreover, be emphasized that nothing permits considering that the invoice presented, as support for the sale of the vehicle in question in the proceedings, does not reflect and correspond to the sale which, allegedly, was concluded.

69 - The invoice attached to the proceedings, as proof of the alienation of the vehicle, taking into account the corporate purpose of the Claimant and its business activity, translated, in particular, in the rental of motor vehicles and provision of services associated with fleet management, is shown to be entirely adjusted to the mentioned business reality, being absolutely credible the sale of the vehicle which the invoice presented aims to prove, not identifying, at all, elements that embody any simulated contract, rather permitting the conclusion that we are before an invoice that reproduces the real and true sale of the vehicle to the person indicated therein.

70 - Having, however, in mind what is stated in the preceding Article 66, and the necessity of proceeding with the investigation of the material truth regarding the facts, the arbitral tribunal, considering, in particular the provision of Article 13 of the Tax Procedure Code and of Article 99 of the General Tax Law, promoted diligences to the end that the invoice, presented as proof of the aforementioned sale, be complemented with other information, aimed, in particular, at the verification of the actual receipt of the value relating to the sale of the vehicle in question.

71 - With respect to the provision in the last of the aforementioned articles, that is, in Article 99 of the General Tax Law, it is important to note what, in annotations to this article, has been marked 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. 859, when, with respect to the inquisitorial principle, they state that "It is affirmed, without margin for doubt, the full inquisitorial principle of the tax tribunal in the domain of tax procedure […]. The inquisitorial principle applies to all tax courts that have cognizance of matters of fact, justifying the rejection of application of those norms of civil procedure that establish certain moments for the presentation of documents (cf. Articles 523, 524 and 706 of the Code of Civil Procedure) […]," articles which correspond, respectively, to the current Articles 423 and 425 of the Code of Civil Procedure, with Article 706 having been repealed.

72 - In this framework, it is useful to recall the teachings of Jorge Lopes de Sousa, in Tax Procedure and Process Code, Annotated and Commented, Volume I, 6th Edition, Áreas Editora, SA, Lisbon, 2011, p. 174, when, in annotations to Article 13 of the aforementioned Code, he states that "The limitation of the powers of cognition to the alleged facts, beyond those of official knowledge, does not have clear justification in tax procedure nor can be understood in absolute terms. Indeed, while it is undeniable that there are some similarities between civil declaratory procedure and tax impugnal processes […] it is also manifest that there are substantial differences […]," which "reveals that one is not before a process in which the dispositive principle applies fully".

73 - The TCA, when considering that there is no legal basis for the said documents to have been requested, as appears, from the outset, in the Preliminary Matter to its Reply, in particular by violation of what is determined in Article 423 of the Code of Civil Procedure, where it is provided that the presentation of documents must occur with the respective pleadings, does not consider, at all, what is stated in the preceding Article 71, that is, that the inquisitorial principle applies to all tax courts that have cognizance of matters of fact, justifying the rejection of application of those norms of civil procedure that establish certain moments for the presentation of documents.

74 - The Claimant, within the deadline conceded for that purpose, came to complement said invoice with other proofs, in particular with the corresponding accounting extract, capable of proving that the value relating to the sale of said vehicle had, by it, actually been received, which demonstrates the transfer of ownership of that good, on a date prior to the date of tax accrual.

75 - Said accounting extract, and moreover the invoice that complements it, relating to the sale of the vehicle, enjoy the presumption of truthfulness which paragraph 1 of Article 75 of the General Tax Law confers upon them, it being incumbent upon the TCA, in light of the provision of Article 75, paragraph 2 of the General Tax Law, within the framework of the reasoned and objective reasons it might have had, to demonstrate that the information inscribed therein does not correspond to reality, thus being considered as sufficient means of proof to overcome the presumptions in question in the proceedings, that is, the presumption established in Article 7 of the Property Registration Code and that established in paragraph 1 of Article 3 of the Single Circulation Tax Code, which means that, at the time the tax was accrued, the Claimant was not the owner of the vehicle in question.

76 - The total amount resulting from the assessments associated with the aforementioned vehicle amounts to € 36.92, with € 35.06 corresponding to the SCT and € 1.86 to compensatory interest.

77 - In these circumstances, and in sum, taking into account that the presumption established in Article 3, paragraph 1 of the Single Circulation Tax Code was rebutted, with respect to the vehicle identified in the proceedings, whose sale occurred on 23-03-2010, that is, on a date prior to the date of tax accrual, which refers to the month of August 2013, the Claimant should be considered, with respect to the aforementioned vehicle, not to have been the taxpayer of the tax in question, as of the date to which the assessments in question refer.

78 - The TCA, when it considers that the taxpayers of the SCT are, definitively, the persons in whose names the motor vehicles are registered, without considering that Article 3, paragraph 1 of the Single Circulation Tax Code embodies a presumption, is proceeding with the illegal assessment of the SCT with respect to the vehicle identified in the proceedings, based on the erroneous interpretation and application of the norms of subjective tax incidence of the Single Circulation Tax, contained in the aforementioned Article 3 of the Single Circulation Tax Code, which configures the commission of tax acts lacking in legality due to error as to the factual and legal presupposites, determining the annulment of the corresponding tax acts, by violation of law.

M - REFUND OF THE AMOUNT PAID AND COMPENSATORY INTEREST

79 - With respect to the refund requested, it should, first and foremost, be noted the lack of merit in the Respondent's position when it questions the right that, with respect to said refund, belongs to the Claimant, insofar as proof of payment was not made, either of the tax or of the compensatory interest with respect to "all 10 assessments it contested." Indeed, beyond there not being 10 assessments at issue in the proceedings, it is drawn from the Tax Administrative Process/Tax Office - Lisbon ... that "The assessment in question, of the vehicle with registration number ...-... -..., concerns the SCT of the year 2013, whose month of registration is August; not having the tax been paid within the respective deadline, a variance was generated which occurred during the month of October/2014; in the context of said variance process the taxpayer A... was not upheld; with the variance closed a spontaneous assessment was generated which was paid by the taxpayer on 23-1-2015".

80 - Pursuant to subsection b) of paragraph 1 of Article 24 of the LRAT, and in conformity with what is established therein, the arbitral decision on the merits of the claim, which may not be subject to appeal or challenge, binds the tax administration as from the end of the deadline provided for appeal or challenge, the latter having to - in the exact terms of the decision of the arbitral tribunal in favor of the taxpayer and until the end of the deadline provided for the voluntary performance of decisions of tax court judgments - "Restore the situation that would exist if the tax act subject of the arbitral decision had not been committed, adopting the acts and operations necessary for the purpose." (emphasis ours)

81 - These are legal commands that are in full harmony with the provision of Article 100 of the General Tax Law, applicable to the case by force of the provision in subsection a) of paragraph 1 of Article 29 of the LRAT, in which it is established that "The tax administration is obliged, in case of total or partial success of complaints or administrative appeals, or of judicial process in favor of the taxpayer, to the immediate and full restoration of the situation that would exist if the illegality had not been committed, comprising the payment of compensatory interest, in accordance with the terms and conditions provided by law." (emphasis ours)

82 - The case contained in these present proceedings gives rise to the manifest application of the aforementioned norms, wherefore, in the sequel of the illegality of the acts of assessment referenced in these proceedings, and of the payment of the sum of € 36.92, as shown in the document issued by the Chief of the Tax Office of Lisbon..., integrating the administrative tax proceedings, there must be a refund of the amount paid, either as tax or as compensatory interest, as a way of achieving the restoration of the situation that would exist if the illegality had not been committed, amount which, in the case at hand, amounts to the total of € 36.92.

83 - As to compensatory interest, it appears manifest that, in light of what is established in Article 61 of the Tax Procedure Code and the requirements of the right to compensatory interest being met, that is, verified the existence of error imputable to the services resulting in payment of the tax debt in an amount superior to that legally due, as provided in paragraph 1 of Article 43 of the General Tax Law, the Claimant has the right to compensatory interest at the legal rate, calculated on the sum of € 36.92.

CONCLUSION

84 - In the circumstantial framework that has been referred to, the TCA, in committing the acts of assessment in question in these proceedings, founded on the idea that Article 3, paragraph 1 of the Single Circulation Tax Code does not establish a rebuttable presumption, makes an erroneous interpretation and application of this norm, committing an error as to the legal presupposites, which constitutes violation of law.

85 - On the other hand, because the TCA, as of the date of the occurrence of the tax event, considered the Claimant to be the owner of the vehicle referenced in these proceedings, considering it as such to be the taxpayer of the tax, when such ownership, with respect to the vehicle in question, was no longer inscribed in its legal sphere, basing itself, thus, on factual matter divergent from the actual reality, commits an error as to the factual presupposites, and therefore of violation of law.

III - DECISION

86 - Accordingly, in light of all that has been stated, this Arbitral Tribunal decides:

• To judge the request for arbitral ruling to have merit, on the grounds of violation of law, insofar as it concerns the annulment of the acts of assessment of SCT and CI, relating to the vehicle referenced, relating to the year 2013;

• To annul, consequently, the acts of assessment of SCT and CI, relating to the year 2013, relating to the vehicle, as stated above;

• To condemn the TCA to the payment of compensatory interest at the legal rate, calculated from the date of payment of the sum of € 36.92, relating to the assessments associated with that vehicle, until its full refund.

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

VALUE OF THE CASE

In conformity with the provision of Articles 306, paragraph 2 of the Code of Civil Procedure (former Article 315, paragraph 2) and 97-A, paragraph 1 of the Tax Procedure Code and of Article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of € 36.92.

COSTS

In accordance with the provision of Article 12, paragraph 2, final part, and of Article 22, paragraph 4, both of the LRAT, and of Article 4 of the Regulation of Costs in Tax Arbitration Proceedings and of Table I attached thereto, the total amount of costs is fixed at € 306.00.

Let it be notified.

Lisbon, January 7, 2016

The Arbitrator

António Correia Valente

(The text of the present decision was prepared by computer, in accordance with Article 131, paragraph 5 of the Code of Civil Procedure (former Article 138, paragraph 5), applicable by referral of Article 29, paragraph 1, subsection e) of Decree-Law No. 10/2011, of January 20 (LRAT), governed in its drafting by the orthography prior to the Orthographic Agreement of 1990.)

[1] See the study on this matter, prepared by Professor Carlos Pestana Barros, in Science and Technical Taxation, 2005, No. 416, pp. 105-12