IUC Subjective Incidence: Vehicle Registration vs Ownership in Financial Leasing Disputes

ARBITRAL DECISION

I. REPORT

1. A… – CREDIT FINANCIAL INSTITUTION, S.A., legal entity no. …, with registered office on Rua …, Lot …, in Lisbon, requested the constitution of an arbitral tribunal in tax matters, raising a request for arbitral pronouncement against the act of implicit dismissal of an administrative complaint and, consequently, against the acts of assessment of the Single Motor Vehicle Tax (IUC) relating to the years 2009 to 2012 and the motor vehicles identified by their respective registration number in the list and documents attached to the request (Doc. 2), the annulment of which it seeks. As a consequence of the said annulment, it requests the condemnation of the Tax Authority to reimburse the amount which it considers unduly paid, in the total amount of € 21,948.31, plus the corresponding compensatory interest charged in accordance with the law. The Applicant furthermore petitions the condemnation of the Respondent to pay the costs of the present litigation.

2. As grounds for the request, submitted on 12-05-2016, the Applicant alleges, in essence, that, having duly submitted an administrative complaint against the IUC assessments in question, it was not the subject of a decision within the legal deadline, and thus it is presumed to have been implicitly dismissed, for the purposes of submitting the present request for arbitral pronouncement.

3. As grounds for the said administrative complaint and the present request for arbitral pronouncement, the Applicant invokes the fact that it is not the taxpayer subject to the obligation of IUC relating to the tax periods and vehicles to which the assessments in question relate.

4. According to the allegations of the Applicant, the said vehicles, although they were registered in its name at the date to which the tax facts related to those assessments, were no longer its property, having been sold to third parties or delivered to the respective lessees under contracts of financial leasing or long-term lease with option to purchase.

5. In response to what was requested, the Tax Authority and Customs Authority (AT) pronounced itself in the sense of the lack of merit of the present request for arbitral pronouncement, maintaining the tax acts contested in the legal order and, accordingly, absolving the defendant entity.

6. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax Authority and Customs Authority on 24-05-2016.

7. Pursuant to the provisions of paragraph a) of no. 2 of article 6 and of paragraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable deadline, and notified the parties of that appointment on 08-07-2016.

8. Having been duly notified of that appointment, the parties did not express any will to refuse the appointment of the arbitrator in accordance with the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and of articles 6 and 7 of the Deontological Code.

9. Thus, in accordance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 25-07-2016.

10. The duly constituted arbitral tribunal is materially competent, given the provisions of articles 2, no. 1, paragraph a), of the RJAT.

11. The parties have standing and legal capacity and have legitimacy (articles 4 and 10, no. 2, of the RJAT, and article 1 of Ordinance no. 112-A/2011, of 22/03).

12. No nullities occur, although the Respondent has invoked an exception regarding the timeliness of the administrative complaint for the purposes of assessment and decision relating to the timeliness of the request for arbitral pronouncement.

13. Given the knowledge that emerges from the procedural documents submitted by the parties, notably from the administrative proceeding, which is deemed sufficient for the decision, the Tribunal decided to dispense with the meeting referred to in article 18 of the RJAT.

II. FACTUAL MATTERS

1. With relevance for the assessment of the exception raised by the Respondent which, if upheld, will prevent knowledge of the merits of the claim, the following factual elements are highlighted, which, based on the documentary evidence attached to the file, are considered proven:

14.1. The Applicant is a financial institution which, within the scope of its corporate purpose, carries out all the operations and provides all the services permitted to banks, with the exception of the receipt of deposits;

14.2. Within the scope of its activity, it enters into contracts with its clients for long-term lease (ALD), short-term lease (renting) and financial leasing (leasing) of motor vehicles.

14.3. To this effect, the Applicant acquires new vehicles from the respective national importers, the ownership of which, at the end of the said contracts, is transferred to the corresponding lessees or to third parties.

14.4. With respect to the vehicles, which it identifies by their respective registration number, and the tax periods from 2009 to 2012, the Applicant made voluntary payment of the tax, using for this purpose the payment notes made available by AT through its respective portal.

14.5. However, it reacted against the said acts of assessment through an administrative complaint in which, in essence, it alleges that it is not the taxpayer subject to the tax obligation, since, at the date of the occurrence of the respective tax event, given that the vehicles in question had already been transferred to third parties or were given to the respective lessees under contracts of financial leasing, long-term lease or operational leasing, these with promise of purchase and sale.

14.6. The administrative complaint, as appears from the elements that make up the present proceeding, namely from the administrative proceeding attached, directed against 339 acts of IUC assessment relating to the periods and vehicles referred to above, was submitted on 12-10-2015.

14.7. More than 4 months elapsed without the said administrative complaint being the subject of a decision by the competent body, and thus it is presumed to have been implicitly dismissed.

1. With respect to the invoked exception of untimeliness, there are no factual elements relevant to the decision that have not been proven.

III. ON THE EXCEPTION OF UNTIMELINESS

1. The Applicant considers that the present request for arbitral pronouncement is timely, the deadline for its submission being counted from the end of the legal deadline for decision of the administrative complaint referred to above.

2. Against such understanding, the Respondent pronounces itself, invoking the exception of untimeliness of the present request in the following terms:

"9. The Applicant considers that the request for arbitral pronouncement is timely, the deadline for its submission being counted from the considered implicit dismissal of the administrative complaint no. …2015….

However, it is not so, and let us see why.

1. The administrative complaint, as appears from the administrative proceeding attached, being in the phase of prior hearing, verified, after analyzing all the assessments complained of which refer to the years 2009 to 2012, that, having that complaint been submitted on 12-10-2015 and the most recent payment date being 26-10-2013, the deadline of 120 days (article 102, no. 1 of the CPPT, pursuant to article 70, no. 1 of the same Code) has been far exceeded.

2. Concluding, therefore, in its draft decision, that the administrative complaint is partially untimely.

3. Now, the Applicant can never attempt to justify the timeliness of the request for arbitral pronouncement on the basis of the dismissal, in this case implicit, of an untimely administrative complaint.

4. Otherwise, the door would be open to continue discussing the legality of tax acts in relation to which the respective deadlines for challenge have already expired.

5. That is to say, the applicant cannot base the timeliness of recourse to the arbitral tribunal on the submission of an untimely administrative complaint petition.

6. Nor can the tribunal fail to assess the question of the timeliness of the administrative complaint, for the purposes of assessment and decision relating to the timeliness of the request for arbitral pronouncement, which the AT disputes, in accordance with the documents contained in the administrative proceeding.

Let us see:

1. Article 16 of the CIUC provides in its no. 1 that it is the competence of the Tax Administration to assess the tax.

2. Although no. 2 of the same article states that the assessment of the tax is done by the taxpayer itself, we are not in the presence of a "self-assessment" in the true sense, since it is the Tax Administration that carries out the determination of the amount to be paid by the taxpayer who merely prints the tax payment form due, not performing any calculation operation.

3. Thus, we are not in the presence of a self-assessment, the Applicant merely proceeding to pay the amounts determined by the Tax Administration and corresponding to the IUC to be paid.

4. In this way, the Applicant could not resort to the procedure provided for in article 131 of the CPPT, as we are not in the presence of a self-assessment, nor in the presence of error attributable to the services, but rather in the presence of a tax assessment.

5. Now, if it is a tax assessment, the deadline that the Applicant had to submit the administrative complaint is 120 days, after the end of the deadline for voluntary payment of the tax liabilities legally notified to the taxpayer, in accordance with the combined provisions of articles 68, 70 and 102 of the CPPT.

6. The administrative complaint that the Applicant submitted on 2015-10-12 covered the years 2009 to 2012.

7. The end of the deadline for voluntary payment most recent and relating to the IUC assessments of that time period (2009 to 2012) occurred on 2013-10-26.

8. Thus, the deadline of 120 days - which ended on 2014-02-13 - for the Applicant to file an administrative complaint against those assessments had been exceeded, being the said complaint untimely.

9. It thus follows that the request for arbitration submitted by the Applicant and now under consideration is untimely in relation to the IUC assessments.

10. No. 1 of article 10 of the Regime for Arbitration in Tax Matters (RJAT), approved by Decree-Law no. 10/2011, of 20 January, provides that the request for constitution of an arbitral tribunal is submitted:

"a) Within 90 days, counted from the facts provided for in nos. 1 and 2 of article 102 of the Code of Tax Procedure and Process, as to acts susceptible to autonomous challenge and, likewise, from the notification of the decision or the end of the legal deadline for decision of the hierarchical appeal;

b) Within 30 days, counted from the notification of the acts provided for in paragraphs b) and c) of article 2, in the remaining cases."

1. And nos. 1 and 2 of article 102 of the CPPT, under the heading "Judicial challenge. Deadline for submission" provide that:

"1 - The challenge shall be submitted (…) from the following facts:

a) End of the deadline for voluntary payment of tax liabilities legally notified to the taxpayer;

b) Notification of the remaining tax acts, even when they do not give rise to any assessment;

c) Citation of subsidiary taxpayers in fiscal enforcement proceeding;

d) Formation of the presumption of implicit dismissal;

e) Notification of the remaining acts that may be subject to autonomous challenge in accordance with this Code;

f) Knowledge of the acts harmful to legally protected interests not covered in the preceding paragraphs.

2 - In case of dismissal of an administrative complaint, the deadline for challenge shall be 15 days after notification."

1. In this way, having the administrative complaint been submitted when the deadline had already been exceeded, then the deadline that applies to the challenge, now submitted to this arbitral tribunal, are the 90 days after the date of the end of the deadline for voluntary payment of the IUC.

2. In the situation in question, the request for constitution of an arbitral tribunal submitted by the Applicant was filed on 2016-05-12.

3. With respect to the IUC assessments, the end of the payment deadline occurred on 9-10-2013, 10-10-2013, 11-10-2013, 14-10-2013, 15-10-2013, 16-10-2013, 17-10-2013 and 26-10-2013.

4. It is thus untimely the request made by the Applicant, since it was filed on 2016-05-12.

5. Thus, the Tax Authority should be absolved of the claim.

6. Untimeliness constitutes a peremptory exception, in accordance with article 576 of the Civil Procedure Code (applicable subsidiarily by article 29 of the RJAT), which imports the absolution of the Tax Authority from the claim, since it prevents the legal effect of the facts alleged by the Applicant."

7. Having been notified of the response of the Tax Authority (AT) and of the exception invoked by it, the Applicant, with respect to this, came to exercise its right to be heard, in the following terms:

"5. First of all, it is important to make clear that the Administrative Complaint that preceded this request for arbitral pronouncement (PI) was not the subject of a final express dismissal order.

1. In effect, the present arbitral request was submitted following the implicit dismissal of the Administrative Complaint - as appears from the content of the PI.

2. The Applicant was notified of the draft dismissal of the Administrative Complaint, and not of the final express decision of dismissal of the Administrative Complaint – which, as far as is known, was never issued.

3. It being the case that the Applicant was notified of that draft dismissal only on 13.05.2016, for the purposes of exercising the right of prior hearing, as evidenced by the attached document as doc. 1.

4. Now, on 13.05.2016 the present request for arbitral pronouncement had already been submitted – it was submitted on 12.05.2016, as appears from the marks of this arbitral proceeding.

5. Indeed, by that date, the legal deadline of 4 months which AT had to examine the administrative complaint (article 57, no. 1 of the LGT) had long been exceeded,

6. The taxpayer cannot be left indefinitely waiting for the response of AT, it being the case that AT is legally obliged to examine, in due time, all petitions addressed to it by taxpayers (article 56, no. 1 of the LGT).

7. And the Administrative Complaint, as mentioned, did not have a final express dismissal decision, either on the basis of its alleged untimeliness, total or partial, or for any other reason.

8. Therefore, contrary to the understanding of the Respondent, this Arbitral Tribunal is not bound to assess the question of the timeliness of the Administrative Complaint, in total or in part – since it was not duly and definitively raised by the AT."

9. Having set out, by transcription, the positions of the Parties on the exception of untimeliness invoked by the Respondent, it is found that two questions are raised which it is important to address and resolve from the outset:

a) That of the competence of the tribunal to assess and pronounce itself on the untimeliness of the administrative complaint and its projection with respect to the timeliness of the present request for arbitral pronouncement;

b) That of knowing whether or not the IUC is a tax that should be self-assessed by its respective taxpayers.

1. As to the first question, the Respondent considers that the tribunal cannot "fail to assess the question of the timeliness of the administrative complaint, for the purposes of assessment and decision relating to the timeliness of the request for arbitral pronouncement", expressing the Applicant the understanding that "this Arbitral Tribunal is not bound to assess the question of the timeliness of the Administrative Complaint, in total or in part – since it was not duly and definitively raised by the AT."

2. The assessment of the timeliness of the request for arbitral pronouncement is, as it could not be otherwise, the competence of the arbitral judge. This assessment cannot fail to focus on the timeliness of the submission of an administrative complaint subject to silent dismissal when it is this fact that determines the beginning of the counting of the deadline for submission of the said request.

3. In this sense, the Respondent is accompanied by the conclusion that the timeliness of the request for arbitral pronouncement cannot be justified on the basis of the implicit dismissal of an untimely administrative complaint, since "Otherwise, the door would be open to continue discussing the legality of tax acts in relation to which the respective deadlines for challenge have already expired."

4. The competence of the judge for the assessment of the untimeliness of the administrative complaint that serves as the legal basis for the opening of the deadline for judicial challenge was already addressed by the Supreme Administrative Court, in a ruling of 02-07-2003.[i]

5. Referring to the pertinent rules of the Tax Procedure Code (CPT), and corresponding provisions of the Code of Tax Procedure and Process (CPPT), applicable to the arbitral proceeding by virtue of the provisions of article 29 of the RJAT, the said ruling concludes that:

"... the competence for the assessment of the possible untimeliness of the administrative complaint that serves as the legal basis for judicial challenge, and in the meantime, based on the submission and non-decision in timely and useful manner of that, as if transferred, by clear choice of the legislator, to the tax judge of 1st instance to whom it is incumbent to decide the judicial challenge and to whom it is equally incumbent to verify, prior and procedurally, the verification/occurrence of the necessary conditions of procedurability, where the question of the timeliness of the administrative complaint that serves as its legal basis is to be included."

1. In these terms, it is considered that the assessment of the timeliness of the administrative complaint whose implicit dismissal determines the beginning of the counting of the deadline for submission of a request for arbitral pronouncement is within the scope of the material competence of this tribunal.

2. However, the assessment, in concreto, of the question of the timeliness of the administrative complaint depends, moreover, on the determination of another element, that is, knowing whether the assessment of the IUC is the competence of the Tax Administration, as the Respondent intends, or whether, differently, such competence is attributed to the taxpayer itself (self-assessment) as the Applicant's understanding.

3. Sustaining its position in this matter, the Respondent alleges that "Article 16 of the CIUC provides in its no. 1 that it is the competence of the Tax Administration to assess the tax" and "Although no. 2 of the same article states that the assessment of the tax is done by the taxpayer itself, we are not in the presence of a 'self-assessment' in the true sense, since it is the Tax Administration that carries out the determination of the amount to be paid by the taxpayer who merely prints the tax payment form due, not performing any calculation operation." Therefore "...we are not in the presence of a self-assessment, the Applicant merely proceeding to pay the amounts determined by the Tax Administration and corresponding to the IUC to be paid."

4. Disagreeing with such understanding, the Applicant considers, citing some doctrine and various arbitral decisions, that "... contrary to the understanding of the Respondent/AT, we are indeed in the presence of self-assessments of IUC. ... In effect, the Applicant went to the Tax Portal/Internet, downloaded the respective IUC payment notes and proceeded to pay the IUC – as appears from the marks of the present file. ... That is, it was the Applicant itself who assessed and paid the IUC – thus being cases of self-assessment of IUC. ... In effect, the AT did not issue official IUC assessments to the Applicant, setting it deadlines for payment of this tax."

5. However, the understanding expressed by the Applicant is not endorsed. This matter was already the subject of assessment in an Arbitral Decision of 05-08-2014, assuming then the position that follows:

"47. Self-assessment, carried out by the taxpayer itself based on the elements it ascertains and declares to the AT for the purposes of control, depends on legal provision that expressly assigns such competence to it.

1. This is not the case of IUC. Fully computerized, the procedure for assessment of this tax is based on the use, by the Tax Authority and Customs Authority, of the elements contained in the databases of vehicles and motor vehicle property, as, in fact, has been clearly stated by the tax authority itself.[ii]

2. As a rule, the assessment of this tax operates through the internet, via the Tax Portal, under the conditions of registration and access to electronic declarations, the use of this means being mandatory for legal entities, except in cases where, due to lack of elements, the assessment cannot be carried out electronically. This is what occurs, namely, in cases where the vehicle is not included in those databases, because it is not registered in Portuguese territory or "whenever there is error or omission of taxable vehicle in the database, which does not allow the taxpayer to assess the tax through the internet." (CIUC, art. 16, nos. 2 and 3).

3. Except in the cases referred to in the preceding number, and whenever the taxpayer is a natural person, recourse to assessment through the tax portal on the internet may be ruled out, with the assessment being requested by the taxpayer in any tax service, in customer service (CIUC, art. 16, no. 3).

4. Taking as reference the elements contained in the database, relating to the identification of the vehicle and characteristics relevant to the objective definition of tax incidence and application of the corresponding tax rate as well as the subjective incidence, the assessment is carried out by electronic means, and the competent collection document is immediately issued, by the same means, of which, in addition to other elements relevant to payment, the demonstration of the respective assessment is included (CIUC, art. 16, no. 4).

5. In normal situations, as, possibly, will be the case of those that appear in the present proceeding, it is the responsibility of the taxpayer to take the initiative to provoke the assessment, through the internet, in the manner referred to above or at any tax service, if such possibility does not prove viable as a result of error or omission of the database or whenever the use of that means is not mandatory.

6. The reference to the circumstance that the assessment is done by the taxpayer itself through the internet does not imply that one is in a situation in which the assessment of the tax in question - determination of the amount of tax due in function of the elements relevant to its quantification - is deferred to the taxpayer. What happens is that the assessment operations are carried out by electronic means, managed by the Tax Authority and Customs Authority, and the taxpayer is not permitted to alter in the slightest any of the elements that are relevant to them.

7. This is what clearly results from the text of the law: in case of error or omission in the database, the taxpayer will have to request the assessment at any tax service (CIUC, art. 16, no. 3, para. c).

8. However, the legislator's option for the intensive use of electronic means in the procedure for assessment of this tax, resorting to the use of databases relating to the registration and property registration of the vehicles subject to it, and to the electronic route made available to taxpayers as a means of fulfilling the obligation, would not fail to raise some doubts as to the functional competence to carry out the assessment, namely, with respect to the guarantees of taxpayers.

9. This question was promptly solved by no. 1 of article 16 of the CIUC, which peremptorily establishes that "The competence for assessment is of the Tax Authority and Customs Authority." And, to dispel any doubts that might remain, the said rule would, moreover, be the subject of clarification, through Law no. 83-C/2013, of 31 December, to the effect that, "for all legal purposes, the tax act is considered to be performed in the tax service of the residence or headquarters of the taxpayer.""

10. Seeing no reason to modify the understanding thus expressed, one cannot fail to conclude that, in the present case, the Applicant could not have filed an administrative complaint against the assessments in question under the provision of article 131 of the CPPT in order to benefit from the deadline provided therein for complaint of self-assessment.

11. As the Respondent alleges, the deadline for filing an Administrative Complaint against the acts of assessment of IUC is 120 days after the end of the deadline for voluntary payment of the tax liabilities legally notified to the taxpayer, in accordance with the combined provisions of articles 68, 70 and 102 of the CPPT.

12. In the present case, it is verified that the administrative complaint that the Applicant submitted on 12-10-2015 includes IUC assessments relating to the years 2009 to 2012, and the end of the deadline for voluntary payment of the tax to which those assessments relate occurred on 26-10-2013.

13. Thus, as the Respondent alleges, "the deadline of 120 days – which ended on 2014-02-13 - for the Applicant to file an administrative complaint against those assessments had been exceeded, being the said complaint untimely" and thus "the request made by the Applicant is untimely, since it was filed on 2016-05-12"

14. The Respondent thus concludes that "it should be judged to be well-founded, as proven, the exception invoked in accordance with the provisions of article 577-e of the CPC, as amended by Law no. 41/2013, of 26 June, which gives rise to the absolution of the instance in accordance with article 278/1-d) of the same statute."

V. DECISION

In these terms, and with the grounds set out, the Arbitral Tribunal decides:

a) To judge well-founded the exception raised by the Tax Authority and Customs Authority, and in consequence, to absolve the Respondent from the instance;

b) To judge, in consequence, that the knowledge of the question on the merits is prejudiced.

Value of the proceeding: € 21,948.31

Costs: Under article 22, no. 4, of the RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, I hereby fix the amount of costs at € 1,224.00, to be borne by the Applicant.

Lisbon, 22 December 2016,

The arbitrator, Álvaro Caneira.

[i] Cf. Proc. 16/03, of which Counselor Alfredo Madureira was rapporteur

[ii] As binding information made available on the AT website, approved by Order of the Deputy Director General of the Heritage Tax Area, of 18.4.2011: "The DGCI only assesses IUC in relation to vehicles that fall within the objective incidence of the tax, in accordance with the elements provided by the IRN, IP (respective Motor Vehicle Registration Records) and by the IMTT (former DGV), which constitute the IUC database".