CAAD Arbitration on IUC Subjective Incidence: Vehicle Tax Liability for 2009-2012

ARBITRAL DECISION

CLAIMANT: A

RESPONDENT: TAX AND CUSTOMS AUTHORITY

I – REPORT

A. – PARTIES

A, hereinafter designated as Claimant, taxpayer no. ..., resident at …, filed a request on 18 March 2014 for the constitution of a singular arbitral tribunal in tax matters, under the terms prescribed in art. 2, no. 1, paragraph a) of Decree-Law no. 10/2011, of 20 January (Legal Regime for Tax Arbitration - RJAT) and in arts. 1, paragraph a) and 2 of Ordinance no. 112-A/2011, of 22 March, with the purpose of resolving the dispute that opposes it to the Tax and Customs Authority, which hereinafter shall be designated as Respondent.

B. – CONSTITUTION OF THE TRIBUNAL

1. The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and automatically notified to the Claimant and the Tax and Customs Authority on 20/03/2014, with the President of the respective Deontological Council designating the signatory as arbitrator of the Singular Arbitral Tribunal, under the terms of art. 6, no. 1, of the RJAT, which task was accepted in accordance with legal provisions.

2. On 08/05/2014, the Parties were notified of this designation, in accordance with the combined provisions of art. 11, no. 1, paragraph b) of the RJAT, in articles 6 and 7 of the Deontological Code, and neither party manifested any intent to refuse the arbitrator's designation.

3. Under these circumstances, the Tribunal was constituted on 26/05/2014, in accordance with the provision of paragraph c), of no. 1, of art. 11 of Decree-Law no. 10/2011, which was notified to the Parties on that date.

C. – CLAIMS

The Claimant requests that the Arbitral Tribunal declare the illegality and consequent annulment of the assessment of the Single Circulation Tax and respective compensatory interest, relating to the vehicle with licence plate ...-...-... and pertaining to the years 2009, 2010, 2011 and 2012, in the total amount of 1,721.00 euros, in the terms described in the Request for Arbitral Opinion, and, consequently

Determine the restitution of the tax that was paid by the Claimant, increased by accrued and accruing interest at the maximum legal rate until full and effective payment.

D. – PROCEDURAL COURSE

Following the notification of the date of constitution of the Arbitral Tribunal on 26/05/2014, the subsequent procedural steps proceeded as follows:

• On 29/05/2014 – The Respondent was notified to, in accordance with nos. 1 and 2 of art. 17 of the RJAT, present its response within a period of 30 days and, if desired, request the production of additional evidence, and remit to the Arbitral Tribunal a copy of the administrative file, by electronic means.

• On 30/06/2014 – The Respondent presented a Response to the Request for Arbitral Opinion, remitted the dispatch designating the legal representatives of the Respondent and inserted the administrative file in the CAAD online "Platform", all of which was notified to the Claimant.

• On 30/06/2014 – The Respondent in the case requested the Tribunal to waive the hearing referred to in art. 18 of the RJAT and to waive the production of pleadings, on the grounds of the absence of exceptions, the non-existence of witnesses to examine, and considering that the issue in question appears to be exclusively one of law.

• On 06/07/2014 – The Parties were notified of the dispatch of the Arbitral Tribunal determining the addition to the file of the TA's request of 30/06/2014 and the notification to the Claimant.

• On 16/07/2014 – The Tribunal scheduled 10/09/2014 for the hearing provided for in art. 18 of the RJAT, which was notified to the Parties.

• On 10/09/2014 – The hearing provided for in art. 18 of the RJAT took place, from which the following resulted:

• The Parties, when heard for this purpose, declared that they would not invoke any exception susceptible to being appreciated and decided prior to the knowledge of the claim.

• As for pleadings, the Parties declared that they waived their production.

• The Tribunal set the date for the delivery of the decision for 22/09/2014.

• On 22/09/2014 – Delivery of the decision.

E. – CLAIMS OF THE CLAIMANT AND ITS GROUNDS

In support of the Request for Arbitral Opinion, the Claimant alleged, in summary, the following:

• The Claimant was the owner of the heavy vehicle, licence plate ...-...-... until the year 2004.

• In 2004, the Claimant handed over this vehicle to Company B, in the context of a dation in payment.

• This dation in payment came to be recognized by a judgment delivered by the Judicial Court of …, within Proceeding no. …, dated …: "the ownership of the heavy vehicle of brand ..., with licence plate ...-...-... was transferred to the Claimant, Company B".

• In the years 2009, 2010, 2011 and 2012, the years to which the assessments under examination pertain, the Claimant was no longer the owner of the vehicle.

• However, on 31 May 2013, the Claimant was notified to render an opinion, in the context of a prior hearing, on the official assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, relating to the vehicle with licence plate ...-...-....

• Not agreeing with the aforesaid project for official assessment, the Claimant presented, on 21 June 2013, a request in exercise of its right of hearing, in accordance with article 60 of the General Tax Law, in terms of which it alleged, in summary, that having the ownership of the aforementioned vehicle been transferred in 2004, the responsibility for payment of the Single Circulation Tax for the years 2009, 2010, 2011 and 2012 would necessarily have to be imputed to B.

• Notwithstanding the above, the Claimant was notified by Office no. ..., dated 09/07/2013, of the maintenance of the act of official assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, relating to the vehicle with licence plate ...-...-..., since "By consultation of the computer elements available at this Finance Service, it appears that the vehicle with the above-mentioned licence plate is registered in your name since 1993/02/15. There is no annotation whatsoever for cancellation of this licence plate (…). Therefore, the tax is due by the owner who is registered on the date of the anniversary of the vehicle's licence plate."

• Having exhausted the administrative remedies at its disposal, the Claimant, on 4 November 2013, presented a Gracious Complaint against the decision maintaining the official assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012.

• The Claimant, although not agreeing with the additional tax assessments, and without waiving the right that it had to complain/contest the tax acts that it deemed illegal, proceeded to pay the tax assessments for the years 2009, 2010, 2011 and 2012 on 5 November 2013, under the principle of solve et repete.

• The Claimant made this payment under the Exceptional Regime for the Regularization of Tax and Social Security Debts, approved by Decree-Law no. 151-A/2013, of 31 October and in effect until 31 December 2013 – which covered the tax debt in question, in accordance with article 1 of the aforementioned Decree-Law no. 151-A/2013 – and, consequently, regularized the payment of the tax allegedly due.

• Not agreeing with the rejection of the Gracious Complaint, the Claimant came to present the present Request for Arbitral Opinion.

• To support its claims, the Claimant alleges that article 1, no. 1 of Decree-Law no. 54/75, of 12 February, relating to the registration of motor vehicles (amended various times, most recently by Law no. 39/2008, of 11/08), provides that "The registration of vehicles has essentially for its purpose to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce."

• And that, in turn, it is important to bear in mind that article 7 of the Code of Real Property Registration, applicable supplementarily to vehicle registration, by virtue of article 29 of the Code of Vehicle Registration, provides that "The definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it."

• Now, no. 1 of article 3 of the Code of the Single Circulation Tax provides that "The persons liable for the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered", that is, what appears in the Vehicle Registration Bureau.

• Thus, article 3 of the Single Circulation Tax Code enshrines a legal presumption, that is, an inference that the law draws from a known fact to establish an unknown fact (article 349 of the Civil Code).

• A presumption that, in its opinion, is rebuttable.

• For article 73 of the General Tax Law determines that "The presumptions enshrined in tax incidence norms always admit proof to the contrary."

• On the other hand, the freedom of legislative configuration is limited by fundamental principles enshrined in the Constitution of the Portuguese Republic, of which, with relevance to the present case, the principle of equality stands out, which, in the tax sphere, translates into the generality and abstraction of the norm that creates the essential elements of the tax, in accordance with the taxable capacity of each one.

• It alleges that the definitive registration constitutes nothing more than the presumption that the right exists and belongs to the registered holder, in the exact terms of the registration, but a rebuttable presumption, thus admitting counterproof.

• Whereby the function legally reserved to the registration is that of giving publicity to the legal situation of the assets (in this case, the vehicles), allowing one to presume that there exists the right over those vehicles and that it belongs to the holder, as such registered in the registration.

• The registration does not have a constitutive nature of the right of ownership, but merely declarative, hence registration does not constitute a condition for the validity of the transfer of the vehicle from seller to buyer.

• And, verifying that at the date when the Single Circulation Tax was exigible (28/02/2009 and subsequent years) the Claimant had already transferred ownership of the vehicle, it appears that the same could not be held responsible for payment of the missing tax.

• Even though the annotation of the subsequent registration of ownership acquired by dation in payment had not yet been perfected in favor of the new owner (in this case, B).

• This is, moreover, in the opinion of the Claimant, the only possible interpretation in light of the principle of legality, in the aspect of the principle of material truth, to which article 103 of the Constitution of the Portuguese Republic alludes.

• Thus, for the reasons set forth, of fact and of law, the official assessment of Single Circulation Tax and respective compensatory interest, relating to the years 2009, 2010, 2011 and 2012, concerning the vehicle with licence plate ...-...-..., in the total amount of € 1,721.00, should be annulled, as illegal, in accordance with article 99, paragraph a) of the Code of Tax Procedure and Process, and consequently, the reimbursement of the said amount (€ 1,721.00) to the Claimant should be ordered.

• And, should the interpretation made by the Tax Administration be considered illegal and the assessment in question be annulled, the Claimant should be compensated for the period of time during which it was deprived of the amount unduly collected.

• In that sense, article 43 of the General Tax Law provides that indemnity interest is due to the taxpayer when it is determined, in an action in which the illegality of the tax is discussed, that there was error attributable to the services from which results payment of tax debt greater than the due amount.

• Thus, should the Claimant's claim be granted, in accordance with the aforementioned legal provision, indemnity interest is due, to be calculated from the date of payment of the tax (05/11/2013) until full and effective payment, such interest to be calculated in accordance with the provisions of article 43 of the General Tax Law, on the amount actually paid by the Claimant.

• In effect, having, in its opinion, the Tax Administration erroneously applied the norms regarding the ownership of the vehicle for purposes of responsibility for payment of the single circulation tax, it appears that the assessment in question only occurred due to the misinterpretation of the law by the Tax Administration and for no other reason – therefore, due to "error" attributable to it.

• Whereby, in addition to the amount mentioned above (€ 1,721.00) relating to tax unduly assessed, the Claimant should also be compensated through indemnity interest calculated from the date of the undue payment of tax (05/11/2013) until full and effective payment, at the rate of 4% per annum, in accordance with articles 35, no. 10, 43, no. 4 of the General Tax Law, 559 of the Civil Code and of Ordinance no. 291/03, of 8 April.

• Accruing interest should also be added, counted from the date of the Request for Arbitral Opinion until full and effective payment, calculated at the maximum legal rate in force.

F. – RESPONSE OF THE RESPONDENT AND ITS GROUNDS

The Respondent, duly notified for this purpose, timely presented its Response, in which, in summary, it alleged the following:

• It confirms the tax acts of assessment of the Single Circulation Tax, relating to the years 2009, 2010, 2011 and 2012 and relating to the vehicle with the licence plate number ...-...-..., embodied in the official assessments identified in the collection documents and in the amount of 1,721.00 euros.

• And that the Claimant presented a Gracious Complaint on 04/11/2013, not agreeing with the assessments in question, which was rejected by dispatch of 16/12/2013 of the Chief of the Finance Service of Leiria 1, and that this rejection constitutes the immediate object of the present Request for Arbitral Opinion.

• It admits that, from the point of view of the rules of civil law and property law, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition for the validity of contracts with real effect.

• It contests the alleged illegitimacy of the Claimant as the taxpayer of the Single Circulation Tax, by virtue of the fact that the vehicle was handed over, after 2004, in dation in payment to Company B, and that the norm of subjective incidence inscribed in no. 1 of article 3 of the Single Circulation Tax Code admits that the person in whose name the vehicle is registered may demonstrate that it is not the owner thereof during the period to which the tax pertains and thus remove the obligation that falls upon it, since, in its opinion:

• What is at issue are the tax acts that embodied the assessment of Single Circulation Tax, relating to the years 2009, 2010, 2011 and 2012, and that no. 1 of article 3 of the Single Circulation Tax Code provides that "The persons liable for the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered."

• The tax legislator, in establishing in article 3, no. 1, who are the persons liable for Single Circulation Tax, established expressly and intentionally that these are the owners (or in the situations provided for in no. 2, the persons enumerated there), being considered as such the persons in whose names the same are registered.

• And that the legislator did not use the expression "are presumed", as it well could have done.

• The tax regulation is full of provisions analogous to that enshrined in the final part of no. 1 of article 3, in which the tax legislator, within its freedom of legislative configuration, expressly and intentionally, enshrines what should be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others.

• Indicating, merely by way of example, articles 2 of the Code of Municipal Tax on Onerous Transfers of Real Estate, 2, 3 and 4 of the Code of Tax on the Income of Natural Persons and 4, 17, 18 and 20 of the Code of Tax on the Income of Legal Persons.

• It concludes, affirming that the interpretation made by the Claimant that the legislator enshrined in article 3, no. 1 of the Single Circulation Tax Code, a presumption as the Claimant refers to in articles 74 to 81, would unequivocally be to make an interpretation contrary to law.

• It further alleges that the systematic element of interpretation of law demonstrates that the solution advocated by the Claimant is intolerable, not finding, the understanding upheld by this, any support in the law, since this results not only from the aforementioned no. 1 of article 3 of the Single Circulation Tax Code, but also from other norms enshrined in the said Code.

• In these terms, and in the same sense, article 6 of the Single Circulation Tax Code provides, under the heading "Taxable Event and Exigibility", in its no. 1:

"The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the licence plate or registration in national territory."

• From the articulation between the scope of the subjective incidence of the Single Circulation Tax and the fact constitutive of the corresponding tax obligation, it unequivocally follows that only the legal situations that are subject to registration (without prejudice to the permanence of a vehicle in national territory for a period exceeding 183 days, provided for in no. 2 of article 6) give rise to the birth of the tax obligation.

• In turn, no. 3 of the same article provides that "the tax is deemed exigible on the first day of the tax period referred to in no. 2 of article 4", that is, the moment from which the tax obligation is constituted has a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear.

• And that, in the same sense, the legislative solution adopted by the tax legislator in no. 2 of article 3 of the Single Circulation Tax Code operates, by making the equalities enshrined therein coincide with the situations in which vehicle registration requires its respective registration.

• Such position is further evident in the circumstance that the Vehicle Registration to which the Tax Administration has or may have access, and the certificate in which the acts subject to registration must appear, whose production may be required by the same Administration to the interested party, contain all the elements intended for the determination of the Taxpayer, without the need for access to contracts of a private nature that confer such Rights, enumerated by the Single Circulation Tax Code as constitutive of the Legal Situation of Taxpayer of this Tax.

• The Tax Administration, taking into account the current configuration of the Legal System, will not have to proceed with the assessment of the Tax based on elements that do not appear in public and authentic records and documents.

• The non-updating of the registration, in accordance with the provisions of article 42 of the Regulation of Vehicle Registration, shall be imputable in the legal sphere of the Taxpayer of the Single Circulation Tax and not in that of the State, as the active subject of this Tax.

• The acceptance of the Claimant's thesis would put in question the statute of limitations of the tax, also, unequivocally, legal security and certainty, as well as the power/duty of the TA to assess taxes.

• Finally, it alleges that, in light of a teleological interpretation of the regime enshrined throughout the Code of the Single Circulation Tax, the interpretation advocated by the Claimant to the effect that the person liable for the Single Circulation Tax is the effective owner, regardless of whether the registration of that quality does not appear in the vehicle registration, is manifestly wrong, in that it is the very ratio of the regime enshrined in the Code of the Single Circulation Tax that constitutes clear proof that what the tax legislator intended was to create a Single Circulation Tax based on the taxation of the owner of the vehicle as it appears in the vehicle registration.

• In its opinion, the Single Circulation Tax Code proceeded with a reform of the regime for taxation of vehicles in Portugal, substantially altering the vehicle taxation regime, with the persons liable for the tax becoming the owners listed in the property registration, regardless of the circulation of vehicles on the public highway. That is, the Single Circulation Tax came to be due by the persons who appear in the registration as owners of the vehicles.

• Adding that, in accordance with no. 1 of article 6 of the Single Circulation Tax Code, the taxable event of the tax is constituted by the ownership and registration of the vehicle, as attested by the licence plate or registration in national territory.

• The exigibility of the tax is deemed to be verified on the first day of the tax period referred to in article 4, no. 2 of the Single Circulation Tax Code, that is, corresponding to "the year that begins on the date of the licence plate or on each of its anniversaries with respect to vehicles of categories A, B, C, D and E, being due by the owner in whose name the same are registered, whether in the IMT, or in the Vehicle Registration Bureau, at the time of fulfillment of the tax obligation, determined in no. 2 of article 4 of the Single Circulation Tax Code.

• Whereby, with the ownership of the vehicle with the licence plate ...-...-... registered in favor of the Claimant, in active situation, in accordance with articles 1 to 6 of the Single Circulation Tax Code, all the elements of objective, subjective and temporal incidence, taxable event and exigibility for the assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, of the said vehicle were met in the legal sphere of the Claimant.

• Resulting thus, clear that the tax acts in dispute do not suffer from any defect of violation of law.

• It further alleges that the interpretation conveyed by the Claimant is contrary to the Constitution.

• For the always proclaimed principle of taxable capacity is not the only nor the principal fundamental principle that informs the tax system.

• Alongside this principle we find others with the same constitutional dignity, such as the principle of confidence and legal security, the principle of efficiency of the tax system and the principle of proportionality.

• Thus imposing itself that in the task of interpreting article 3 of the Single Circulation Tax Code, the principle of taxable capacity be articulated, or if you prefer, tempered, with those other principles.

• The interpretation proposed by the Claimant, an interpretation that fundamentally devalues the registration reality to the detriment of an "informal reality" and not susceptible to a minimum control by the part of the Respondent, is offensive of the basic principle of confidence and legal security that should inform any legal relationship, here including the tax relationship.

• In parallel, the interpretation given by the Claimant is offensive to the principle of efficiency of the tax system, in that it results in a hindrance and increase in costs of the competencies attributed to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent are part.

• The position defended by the Claimant is an understanding that is at the antipodes of that principle and of the very reform of vehicle taxation in that, by seeking to disregard the registration reality, a reality that constitutes the cornerstone upon which the entire edifice of the Single Circulation Tax rests, it generates for the Respondent, and ultimately for the Portuguese State, additional administrative costs, obstruction of the performance of its services, absence of control of the tax and uselessness of the registration information systems.

• Finally, the argument conveyed by the Claimant represents a violation of the principle of proportionality, in that it completely disregards it in confrontation with the principle of taxable capacity, when in reality the Claimant has at its disposal the legal mechanisms necessary and appropriate for the safeguard of its taxable capacity (e.g., vehicle registration), without, however, having exercised them in due time.

• Adding further that the conduct of the Claimant was, in various respects, omissive in that, being able and obliged to have done so, neither did it diligently seek to determine the seizure of the vehicle, nor did it address the competent authorities requesting the cancellation of the vehicle's licence plate, which it considers itself wrongly owner, nor much less, requesting the cancellation of the registration of the property in its name.

• As for the payment of arbitral costs, it alleges that, the Claimant not having taken care to update the vehicle registration, as it could and was obliged [article 5, no. 1-a) of Decree-Law 54/75, of 12 February, and article 118, no. 4 of the Road Code], and not having had the vehicle's licence plate timely cancelled or requested its seizure, it is necessary to conclude that the Claimant did not proceed with the care that was required of it, inevitably leading the Respondent to limit itself to giving effect to the legal obligations to which it is bound and, in parallel, to follow the registration information that was provided to it by the proper authority.

• Thus being the case, and given that it was the Claimant that gave rise to the deduction of the request for arbitral opinion, the Claimant should be condemned to pay the arbitral costs of this case, in accordance with art. 527, no. 1 of the Code of Civil Procedure.

G. – ISSUES TO BE DECIDED

Faced with the positions assumed by the Parties in accordance with the arguments presented, the following are the issues that it falls to be appreciated and decided:

1 – Main Issue – Interpretation of no. 1 of art. 3 of the Single Circulation Tax Code, so as to determine whether the norm of subjective incidence inscribed therein enshrines, or not, a legal presumption of tax incidence, susceptible to rebuttal, that is, admits, or not, that the taxpayer, in whose name the vehicle is registered in the Vehicle Registration Bureau, may demonstrate, through means of proof permitted in Law, that it is not, during the period to which the tax pertains, its owner, thus eliminating the presumption of subjective tax status that falls upon it.

2 – Indemnity Interest – Existence, or not, of the right to indemnity interest, under art. 43 of the General Tax Law, in the event that the assessments are annulled and the reimbursement of the amount petitioned is determined, which would have been unduly paid.

H. – PROCEDURAL PREREQUISITES

1. The Arbitral Tribunal is regularly constituted and has material competence, in accordance with the provisions of paragraph a), of no. 1, of art. 2 of the RJAT (Decree-Law no. 10/2011, of 20 January).

2. The Parties enjoy legal personality and capacity, are legitimate and are regularly represented, in accordance with arts. 4 and 10, no. 2 of the RJAT and art. 1 of Ordinance no. 112/2011, of 22 March.

3. Considering the identity of the taxable fact, of the tribunal competent to decide and of the grounds of fact and law invoked, the Tribunal admits the cumulation of requests for declaration of illegality of the tax acts that are the object of this case, since the requirements established in art. 3, no. 1 of the RJAT are met.

4. The case does not suffer from defects that affect its validity.

I. – FACTUAL MATTER
I.1 – PROVEN FACTS

With relevance to the appreciation of the issues raised, the Tribunal finds the following facts to be proven:

1 - The Claimant was the owner of the heavy vehicle, of brand ..., with licence plate ...-...-... until the year 2004.

2 – In 2004, the Claimant handed over the said vehicle to Company B, in the context of a dation in payment.

3 – This dation in payment came to be recognized by a judgment delivered by the Judicial Court of …, within Proceeding no. …, dated ….

4 – The Claimant transferred to the said Company B, the ownership of the vehicle in question on a date prior to the dates to which the official assessments of Single Circulation Tax pertain, relating to the years 2009, 2010, 2011 and 2012.

5 – On 31 May 2013, the Claimant was notified to render an opinion, in the context of a prior hearing, on the official assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, relating to the vehicle with licence plate ...-...-....

6 – In the years 2009, 2010, 2011 and 2012, years to which these assessments pertain, the Claimant was no longer the owner of the vehicle.

7 – On the dates of these Single Circulation Tax assessments, the annotation of the registration of ownership of the said vehicle ...-...-..., acquired by dation in payment, in favor of the new owner B, had not yet been completed.

8 – The Claimant presented, on 21 June 2013, a request in exercise of its right of hearing, faced with the provision of article 60 of the General Tax Law, in terms of which it alleged, in summary, that having the ownership of the aforementioned vehicle been transferred in 2004, the responsibility for payment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012 would have to be imputed to B.

9 – The Claimant was notified by Office no. ..., dated 09/07/2013, of the maintenance of the act of official assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, relating to the vehicle with licence plate ...-...-..., since "By consultation of the computer elements available at this Finance Service, it appears that the vehicle with the above-mentioned licence plate is registered in your name since 1993/02/15. There is no annotation whatsoever for cancellation of this licence plate (…). Therefore, the tax is due by the owner who is registered on the date of the anniversary of the vehicle's licence plate."

10 – The Claimant, on 4 November 2013, presented a Gracious Complaint against the decision maintaining the official assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, regarding the said vehicle.

11 - The Claimant proceeded to payment of the tax assessments for the years 2009, 2010, 2011 and 2012 on 5 November 2013, under the principle of solve et repete.

12 – And it did so, adhering to the Exceptional Regime for the Regularization of Tax and Social Security Debts, approved by Decree-Law no. 151-A/2013, of 31 October and in effect until 31 December 2013, paying the tax allegedly due (in the total amount of € 1,721.00), being relieved ope legis from the payment of compensatory interest.

13 – The Tax Administration rejected the Gracious Complaint presented on 4 November 2013.

14 - On 18 March 2014, the Claimant presented the Request for Arbitral Opinion that gave rise to the present proceedings.

I.2 – RATIONALE FOR THE PROVEN FACTS

The facts found to be proven are based on the documents indicated with respect to each of them, and on the factual elements brought into the case by the Parties, insofar as their adherence to reality was not contested.

I.3 – UNPROVEN FACTS

There are no facts found to be unproven, since all facts deemed relevant for the appreciation of the claim were proven.

J. – LEGAL MATTER

With the factual matter established, we proceed, below, to its legal subsumption and to the determination of the Law to be applied, taking into account the issues to be decided that were enunciated.

In the Request for Arbitral Opinion, the Claimant alleges that it was not the owner of the vehicle at issue on the date on which the taxable facts occurred that gave rise to the Single Circulation Tax assessments, and, consequently, was not the person liable for the tax that was assessed against it.

The Respondent Tax Authority assumes an opposite position regarding this issue of subjective incidence of the Single Circulation Tax, defending that, in accordance with art. 3, no. 1 of the Single Circulation Tax Code, the person liable for Single Circulation Tax is the person in whose name the vehicle is registered in the Vehicle Registration Bureau, a fact that occurred with the Claimant in the period in question.

Article 3, no. 1 of the Single Circulation Tax Code provides regarding this disputed matter, as follows:

"Art. 3 – Subjective Incidence

1. The persons liable for the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered."

From the positions assumed by the Parties in the present case, it is clear that fundamentally the issue comes down to whether the norm of subjective incidence above transcribed, contained in no. 1 of art. 3 of the Single Circulation Tax Code, establishes a legal presumption, susceptible to rebuttal, as the Claimant contends, or, expressly and intentionally, considers the persons in whose names the vehicles are registered as owners for purposes of subjective incidence of the Single Circulation Tax, as the Respondent understands.

The orientations assumed by the Claimant and the Respondent regarding this matter and its rationale are set forth in summary, or with partial transcription, in E. and F. of the Report of this Decision.

It thus falls to be decided:

A preliminary point for appreciating the issue of the legal value of vehicle registration.

No. 1 of art. 1 of Decree-Law no. 54/75, of 12 February, which regulates the registration of motor vehicles, provides that the registration of vehicles "has essentially for its purpose to give publicity to the legal situation of vehicles… with a view to the security of legal commerce."

For its part, article 7 of the Code of Real Property Registration, applicable to vehicle registration by virtue of the provision of art. 29 of the said Decree-Law no. 54/75, establishes that "The definitive registration constitutes a presumption that the right exists and belongs to the registered holder in the precise terms in which the registration defines it."

It thus appears that definitive registration is merely a presumption of the existence of the right, which admits proof to the contrary, thus constituting a rebuttable presumption, as, moreover, has been recognized in jurisprudence.

Given that there is no provision in this Code that requires registration as a condition for the validity of contracts, it is concluded that, to acquire the quality of owner of a vehicle, it is sufficient to appear as buyer in a contract of purchase and sale, or such results from a similar title.

With respect to the tenor of the norm in question – art. 3, no. 1 of the Single Circulation Tax Code – it must be said that, as is unanimously recognized and is enshrined in art. 11 of the General Tax Law, tax laws should be interpreted in accordance with general principles of interpretation, thus standing out, for this purpose, the fundamental rule of interpretation which is art. 9 of the Civil Code, which provides the rules and elements for the interpretation of norms.

This means that the traditional instruments of legal hermeneutics should be used, with a view to determining the legislative intent, in accordance with the provision of art. 9 of the Civil Code.

In this conformity, let us begin the interpretation of art. 3, no. 1 of the Single Circulation Tax Code, by the literal element, that in which one seeks to detect the legislative intent that is embodied in the norm, to verify whether the same contemplates a presumption, or whether it determines, definitively, that the person liable for the tax is the owner appearing in the registration.

The question that arises is whether the expression "being considered as" used by the legislator in the Single Circulation Tax Code, instead of the expression "being presumed", which was that which appeared in the diplomas that preceded the Single Circulation Tax Code, will have removed the nature of presumption from the legal provision in question.

In our view, the answer must necessarily be negative, since from the analysis of our legal order it is clearly established that the two expressions have been used by the legislator with equivalent meaning, whether at the level of rebuttable presumptions, whether within the framework of irrebuttable presumptions, whereby nothing enables the extraction of the conclusion intended by the Tax Authority based on a mere semantic reason.

In truth, thus it happens in varied legal norms that enshrine presumptions using the verb to consider, of which the following are indicated, merely by way of example:

In the sphere of civil law – no. 3 of art. 243 of the Civil Code, when it establishes that "it is always considered in bad faith the third party who acquired the right after the registration of the action for simulation, when such registration has occurred";

also in the sphere of industrial property law the same occurs, when art. 59, no. 1 of the Code of Industrial Property provides that "Inventions whose patent has been applied for during the year following the date on which the inventor left the company are considered made during the execution of the employment contract";

and also, in the sphere of tax law, when nos. 3 and 4 of art. 89-A of the General Tax Law provide that it falls to the taxpayer the burden of proof that the income declared corresponds to reality and that, not being such proof made, it is presumed ("is considered" in the letter of the Law) that the income is that which results from the table that appears in no. 4 of the said article;

This conclusion of there being complete equivalence of meanings between the two expressions, which the legislator uses indifferently, satisfies the condition established in art. 9, no. 2 of the Civil Code, since there is ensured the minimum correspondence of wording for purposes of determining the legislative intent.

It is important, next, to submit the norm in question to the other elements of logical interpretation, namely, the historical element, the rational or teleological element and the element of systematic order.

Through the analysis of the historical element, the conclusion is drawn that, from the entry into force of Decree-Law 59/72, of 30 December, the first to regulate this matter, until Decree-Law no. 116/94, of 3 May, the last to precede the Single Circulation Tax Code, the presumption was enshrined that the persons liable for Single Circulation Tax were the persons in whose names the vehicles were registered on the date of their assessment.

It thus appears that tax law has, since the beginning, had the objective of taxing the true and effective owner and user of the vehicle, it being indifferent the use of one or another expression which, as we have seen, have in our legal order a coincident meaning.

The same is to be said when we resort to the elements of interpretation of a rational or teleological nature.

In effect, the current and new framework for vehicle taxation enshrines principles that aim to subject the owners of vehicles to bear the costs of damage caused by roads and the environment caused by these, as is understood from the tenor of art. 1 of the Single Circulation Tax Code.

Now, the consideration of these principles, in particular the principle of equivalence, which merit constitutional protection and enshrinement in community law, and are also recognized in other branches of the legal order, determines that the aforementioned costs be borne by the real owners, the causers of the said damage, which completely rules out an interpretation that sought to prevent the presumed owners from proving that they are no longer owners because ownership is in the legal sphere of another.

This interpretation has its foundation in the provision of no. 1, of art. 9 of the Civil Code, which provides that the search for legislative intent should pay particular attention to "the unity of the legal system and the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied."

Thus, also, from the interpretation made in light of the elements of a rational and teleological nature, given what the rationality of the system guarantees and the ends aimed at by the new Single Circulation Tax Code, it is clear that no. 1 of art. 3 of the Single Circulation Tax Code enshrines a rebuttable legal presumption.

In light of the above, it is important to conclude that the ratio legis of the tax points toward the taxation of the effective owner-users of vehicles, whereby the expression "being considered as" is used in the provision in question in a sense similar to "being presumed", reason for which there is no doubt that a legal presumption is enshrined.

Now, article 73 of the General Tax Law provides that "The presumptions enshrined in tax incidence norms always admit proof to the contrary, whereby they are rebuttable."

Thus being the case, enshrining art. 3, no. 1 of the Single Circulation Tax Code a rebuttable presumption, therefore, capable of being rebutted, the person who is inscribed in the registration as owner of the vehicle and who, for that reason was considered by the Tax Authority as the person liable for the tax, may present elements of proof aimed at demonstrating that the holder of ownership is another person, to whom ownership was transferred.

Analyzed the elements brought into the case by the Claimant, the conclusion is drawn that it was not the owner of the vehicle to which the assessments in question pertain, having, in the meantime, already transferred its ownership in accordance with the civil law.

These elements, constituted by the dation in payment of the vehicle ...-...-..., made in 2004, in favor of Company B, and recognized by judgment delivered by the Judicial Court of Ourique, within Proceeding no. 71/05.3TBORQ, dated 25/07/2008, enjoy the presumption of truthfulness conferred upon them by art. 75, no. 1 of the General Tax Law, thus having the suitability and sufficient force to rebut the presumption that supported the assessments made.

This transfer of ownership is opposable to the Respondent Tax Authority, since, although the facts subject to registration only produce effects against third parties when registered, in light of the provision of art. 5, no. 1 of the Code of Real Property Registration, the Tax Authority is not a third party for purposes of registration, since it is not in the situation provided for in no. 2 of the said art. 5 of the Code of Real Property Registration, that is, it did not acquire from a common author rights incompatible with one another.

Under these circumstances, the mentioned assessments should be annulled and, consequently, the tax that was unduly collected should be reimbursed to the Claimant by the Tax Authority.

As to indemnity interest, this matter is regulated in art. 24 of the RJAT, which expressly determines in its no. 1, paragraph b) that arbitral decisions bind the tax administration, in the cases provided for there, to "Restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose", and further provides, in its no. 5, that "It is due the payment of interest, regardless of its nature, in accordance with the terms provided for in general tax law and in the Code of Tax Procedure and Process."

Also, art. 100 of the General Tax Law, whose application is authorized by the provision of art. 29, no. 1, paragraph a) of the RJAT, provides in the same manner, toward the immediate restoration of legality, comprising the same the payment of indemnity interest, if applicable.

For its part, art. 43, no. 1 of the General Tax Law conditions the right to indemnity interest to the cases in which "there was error attributable to the services from which results payment of tax debt in amount greater than the legally due amount."

In this conformity, the question is raised of, given the tenor of the provision of art. 3, no. 1 of the Single Circulation Tax Code, whether one can consider that there was, or not, an error attributable to the services in the situation at hand.

The situation having been analyzed, it is verified that the Tax Authority, in assessing the Single Circulation Tax in the manner in which it did, complied with the legal dictate established in the said norm, since this attributes the quality of owner, for the said purposes, to the taxpayer in whose name the vehicle is registered in the Vehicle Registration Bureau, without the need for any proof.

Only after the recognition by this Tribunal that the provision in question has the nature of a rebuttable legal presumption is the Claimant in a position to rebut the said presumption, which it came to do and prove in these proceedings, ceasing from now on to be the person liable for the tax obligation under analysis and, consequently, should be reimbursed for the tax paid.

Reason for which it is concluded by the non-existence of error attributable to the services, for the Tax Authority has the right to assess the tax in the manner in which it did, despite the norm in question establishing a legal presumption, since it does not fall to it to inquire and demonstrate who is the owner, falling to it, by virtue of the legal provision in question, to assess and demand the Single Circulation Tax from the person who, at the time, appears in the registration as owner.

As to the responsibility for arbitral costs, the Respondent alleges that it is not responsible for their payment, given that it made the assessments of the tax with the elements at its disposal, and cannot be held responsible for what it calls "lack of care" on the part of the Claimant, since it did not update the vehicle registration, not having had, in a timely manner, the vehicle's licence plate cancelled, or requested its seizure.

This argument cannot proceed, however, since the law is explicit in the imputation of the responsibility for the payment of costs to the party that is condemned, in light of the provision of nos. 1 and 2, of art. 527 of the Code of Civil Procedure, applicable by virtue of art. 29, no. 1, paragraph e) of the RJAT.

Thus being the case, the responsibility for the payment of arbitral costs falls to the Respondent.

L. – DECISION

Given the above, the present Arbitral Tribunal decides:

a) To declare well-founded, on the grounds of a defect of violation of law, the claim for declaration of illegality of the assessment of Single Circulation Tax for the years 2009, 2010, 2011 and 2012, relating to the vehicle with licence plate ...-...-..., and, consequently

b) To annul the corresponding tax acts of assessment.

c) To declare not well-founded the claim for recognition of the right to indemnity interest in favor of the Claimant.

d) To condemn the Tax and Customs Authority to pay the costs of the present case (art. 527, no. 2 of the Code of Civil Procedure, ex vi art. 29, no. 1, paragraph e) of the RJAT).

Process Value: In accordance with the provisions of articles 306, no. 2 of the Code of Civil Procedure (ex. 315, no. 2) and 97-A, no. 1 of the Code of Tax Procedure and Process and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the process is fixed at the value of 1,721.00 euros.

Costs: In accordance with no. 4 of art. 22 of the RJAT, the amount of costs is fixed at 306.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Notice be given.

Lisbon, 22 September 2014

The Arbitrator

José Nunes Barata

(Drafted according to old spelling)