IUC Tax on Leased Vehicles: Illegal Cumulation of Claims and Subjective Incidence in Arbitration 335/2016-T

ARBITRAL DECISION

I – REPORT

1. A... – Credit Finance Institution S.A., holder of Tax Identification Number..., with registered office at... no.... – ..., ..., ...-... Porto, hereinafter the Claimant, filed on 16 June 2016 a request for the constitution of an arbitral tribunal and for an arbitral decision, pursuant to the provisions of Article 3, No. 1, and Article 10, No. 2 of Decree-Law No. 10/2011, of 20 January, which approved the Legal Framework for Arbitration in Tax Matters, hereinafter "LFTM", as well as Articles 1 and 2 of Order No. 112-A/2011, of 22 March.

In the said arbitral decision, the Claimant seeks to have annulled the assessment acts for the Single Motor Vehicle Tax (IUC) for the year 2015 relating to a set of vehicles which it identifies.

1. Pursuant to Articles 6, No. 1 and 11, No. 1, paragraph a), of the LFTM, the Ethics Board of the Administrative Arbitration Centre (CAAD) appointed the undersigned as sole arbitrator, having the latter communicated acceptance of this appointment.

The Parties were notified of this appointment, in accordance with the combined provisions of Article 11, No. 1, paragraph b) of the LFTM, with Articles 6 and 7 of the Code of Ethics of the CAAD, and neither party expressed an intention to refuse the appointment of the arbitrator.

In these circumstances, in accordance with the provisions of Article 11, No. 1, paragraph c) of the LFTM, the sole arbitral tribunal was constituted on 9 September 2016.

3.1 Pursuant to Article 17, Nos 1 and 2 of the LFTM, the Tax Authority was notified, as defendant party, to present a response within 30 days and, should it so wish, to request the production of additional evidence, with a copy of the administrative file to be remitted within the same period, having submitted a response on 11 October 2016, with the respective administrative file.

3.2 In that response, the Defendant contested the challenge, having prepared a response in which, on the one hand, it invoked the exception of cumulation of illegal claims and, as a mere precaution, defended the legality of the assessments carried out by it, concluding that the request for an arbitral decision should be judged without merit, with the consequent maintenance in the legal order of the taxation acts impugned, and that it be absolved of the respective claim.

3.3 Upon the Claimant being heard regarding the invoked exception, it refuted such understanding.

3.4 The Claimant initially indicated witnesses to testify at the meeting referred to in Article 18, No. 1 of the LFTM, but subsequently withdrew, whereby it proceeded directly to written final arguments. The Claimant made its presentation on 17.11.2016, and the Defendant on 30.11.2016, with both Parties reaffirming their initial positions.

II - PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is regularly constituted, is materially competent, and the Parties possess legal personality and capacity, being legitimate, in light of Articles 4 and 10, No. 2 of the LFTM and Article 1 of Order No. 112-A/2011, of 22 March.

The proceedings do not suffer from defects that would invalidate them and, save for the exception, there are no incidents that require resolution nor prior questions on which the Arbitral Tribunal must pronounce itself.

III - GROUNDS

5.1 The Claimant, in the initial petition, to support the claim, essentially alleged the following:

a) It has as its corporate purpose the financing of purchases on credit of consumer goods and equipment (financial leasing and credit) as well as financing in the activity of long-term rental of motor vehicles without driver, motorcycles and boats;

b) In the scope of this activity, it enters into long-term rental contracts, financial leasing contracts, at the end of which the vehicle is transferred to the lessee, as a rule at a residual value, and also loan contracts for the acquisition of motor vehicles in which a clause reserving ownership in its favour is established, such contracts being subject to compulsory registration, by virtue of Article 5 of the Motor Vehicle Property Registration Code (RPA);

c) In the months of November and December 2015, the Claimant proceeded to pay 21 IUC assessments, corresponding to as many motor vehicles in which the respective beneficiaries of the contracts did not subject to registration their status as lessees, purchasers with reservation or even owners;

d) These are assessments in which, in some cases, the taxable event occurred at a moment when the Claimant had already proceeded to the sale of the vehicle, as a rule at the end of the financial leasing contract, and in others in which the vehicles subject to financial leasing and long-term rental are in contentious proceedings, having not been recovered by the Claimant to date;

e) Article 1 of the SCMT established the principle of equivalence as a principle of taxation, whereby taxpayers should be burdened in the measure of the environmental and road cost that their vehicles cause, in a user-pays logic, whereby it is in this "rationale" that the standard on subjective incidence of the IUC should be interpreted;

f) The taxpayer of the IUC is the owner of the vehicle only in those cases in which the purchaser is not burdened with a clause reserving ownership or there are no other holders of the right of option to purchase by virtue of the leasing contract;

g) Thus, with respect to IUC assessments on vehicles already alienated at the moment of verification of the tax, the scope of the final part of No. 1 of Article 3 enshrines a true presumption in the matter of tax incidence, which the arbitral decision issued in case No. 27/2013 - T clarifies, by identifying an equivalent meaning to the word "being considered" contained in the law with the word "presumed", citing to this effect various legal texts where such equivalence stands out, and by citing the understanding of some doctrine on the matter of presumptions;

h) It further states that there is a consensus at the level of understanding of CAAD in cases materially identical to those of the present case, regarding the presumptive character of the standard, and that the same is rebuttable by proof to the contrary, in accordance with arbitral tax decisions Nos. 26/2013, 27/2013, 14/2013, 170/2013, 256/2013, 286/2013, 289/2013, 566/2015, 230/2014 and 45/2015, as well as in the doctrine defended by Agostinho Cardoso Guedes;

i) The Claimant is in a position to demonstrate, within the terms and for the purposes of Article 73 of the General Tax Law (LGT), that it was not the owner of the vehicles, since according to Article 874 of the Civil Code (CC) purchase and sale is the contract by which ownership of a thing or another right is transferred by means of a price, whereby in obedience to the principle "consensus parit proprietatem" inherent in Article 408, No. 1 of the CC "the constitution or transfer of a real right over a determined thing is given by mere effect of the contract, except for the exceptions provided by law"; there being no specific legal form regarding the transfer of ownership of vehicles, the respective contract being able to be verbal and the respective declarations of will being valid in accordance with Article 219 of the CC, even though for tax purposes the obligation to issue an invoice must be complied with, which in this case occurred;

j) The fact that paragraph a) of Article 5 of Decree-Law No. 54/75 subjects to public registration the transmission of the right of ownership over motor vehicles does not constitute any exception to the rule that ownership is transferred by mere effect of the contract, since the purpose of registration is to give publicity to the legal situation of the goods in question, and the definitive entries in the register have the value of mere presumptions, whether as to the nature of the registered right or as to its ownership, in accordance with Article 7 of the Property Registration Code, from the referral of Article 29 of the MVRC;

l) Thus, since the Claimant is not the taxpayer of the assessments in question, the same suffer from the defect of violation of law, and should be annulled;

m) Specifically regarding the IUC assessments which fell on a set of vehicles that were subject to financial leasing and long-term rental and entered into default, with proceedings in contention and not having been recovered to date, despite the efforts of the Claimant, it is stated that, at the date when the IUC became due, the taxpayer was the lessee, since, as already referred to, the obligation to pay the IUC falls directly on the financial lessee and not on the lessor, having regard to the characteristics of its legal position;

n) The meaning of the equivalence referred to in No. 2 of Article 3 of the SCMT is not to constitute any type of joint, subsidiary or guarantee liability between the owners and users of the vehicles subject to the said financing contracts, through the cumulation of the incidence of the tax on both, but rather to except the standard regime provided for in No. 1), whereby only it can be concluded that the conditions of subjective incidence of the taxable event are verified only in the sphere of the lessees and only in relation to these, the respective assessment acts should thus be annulled;

Concludes that, since the assessments are affected by illegality, the said acts should be annulled and the Defendant should proceed to reimburse the amount unduly paid to this effect, which, resulting from error attributable to the services, should, in accordance with Articles 43 and 100 of the LGT, be increased by the corresponding indemnatory interest.

5.2 The Defendant came to contest, having prepared a response in which, on the one hand, it invoked the exception of cumulation of illegal claims, and on the other, proceeded to its contestation.

A - Cumulation of Illegal Claims

a) Taking into account the provision of Article 3, No. 1 of the LFTM, it rejects that the requirement of coincidence as to the circumstances of fact is met.

In fact, although it can be suggested that the factual procedures may be transversal to all assessments, there are disparate factual situations embodied in: (i) different vehicles; (ii) different transmission dates; (iii) different transmission grounds; (iv) different taxation grounds; and (v) different owners, corroborating this understanding with what was decided within the scope of arbitral case No. 691/2014-T.

Consequently, it understands that the cumulation carried out by the Claimant is illegal, and should not be admitted by the Arbitral Tribunal, and insofar as it constitutes a dilatory exception provided for in Article 89, paragraph g) of the Code of Administrative Court Procedure (CPTA), applicable ex vi of Article 29, No. 1, paragraph c) of the LFTM, which prevents the knowledge of the merits of the case (Article 576, No. 2 of the Code of Civil Procedure, applicable ex vi of Article 29, No. 1, paragraph e) of the LFTM), should lead to the absolution of the Defendant from the instance.

B - Contestation

b) On the matter of contestation, it argues that there is an equivocation underlying the interpretation defended by the Claimant, based on a skewed reading of the wording of the law, since the tax legislator, when establishing in Article 3, No. 1 of the SCMT who are the taxpayers of the IUC, established expressly and intentionally that these are the owners (or in the situations provided for in No. 2, the persons therein mentioned), being considered as such the persons in whose name the same are registered, in similar fashion to what occurs in multiple provisions of the tax normative.

c) The tax legislator, within its freedom of legislative conformation, expressly and intentionally, enshrines what must be considered legally, for purposes of incidence, of income, of exemption, etc., whereby to understand that in this case it enshrined a presumption would unequivocally be to effect an interpretation contra legem, an understanding already adopted by the jurisprudence of our courts, being cited the judgment issued in case No. 210/13.0BEPNF, in which the Administrative and Tax Court of Penafiel accepted the position supported by the Defendant, having decided in favour of the lack of merit of the appeal filed by the taxpayer.

d) The systematic element of legal interpretation demonstrates that the solution advocated by the Claimant is intolerable, finding no support in the law, because it results not only from the aforesaid No. 1 of Article 3 of the SCMT, but also from other standards enshrined in the said code, such as Article 6, Nos 1 and 3, under the heading "Taxable Event and Exigibility", in which "The taxable event of the tax is constituted by ownership of the vehicle, as certified by the registration or registration in national territory" and "the tax is deemed due on the first day of the taxation period referred to in No. 2 of Article 4", that is, the moment from which the tax obligation is constituted presents a direct relationship with the issuance of the certificate of registration, in which the facts subject to registration must appear.

In the same sense, the legislative solution adopted in No. 2 of Article 3 of the SCMT operates, by making the equivalences enshrined therein coincide with the situations in which motor vehicle registration requires the respective registration.

Such position is also evident in the circumstance that the motor vehicle registration to which the Tax Authority has or may have access contains all the elements destined for the determination of the taxpayer, without need of access to contracts of a private nature which confer such rights, enumerated by the SCMT as constitutive of the legal situation of taxpayer of this tax. In the absence of such registration, naturally, the owner will be notified to comply with the corresponding tax obligation, since the Tax Authority, taking into account the current configuration of the legal system, will not need to proceed with the assessment of the tax based on elements that do not appear in registers and public and, as such, authentic documents, the non-updating of the register being, in accordance with the provision of Article 42 of the MVR, attributable in the legal sphere of the taxpayer of the IUC and not in that of the State, as the active subject of this tax.

e) To ignore the obligation of motor vehicle registration in the controversial cases in the present proceedings would throw the Tax Authority into the most absolute uncertainty, a situation that was manifestly not desired by the legislator, since once the taxpayer of IUC is determined, as a function of the persons in whose name the vehicle in question is registered with the Motor Vehicle Registration Conservatory (CRA), the Tax Authority proceeds with the assessment of the IUC relative to these.

In fact, if after assessing the IUC, the taxpayer were to invoke the celebration of a purchase and sale contract, which could even be of a merely verbal nature, that it is no longer the owner of the vehicle or that it gave the vehicle, but did not proceed with registration and that the taxpayer is another, the Tax Authority would have to proceed with the assessment of IUC relative to that "other" identified by the person appearing in the motor vehicle registration to whom it had first assessed the IUC, and after that assessment if that "other" also alleged and proved that, in the meantime, it had already celebrated a purchase and sale contract, financial leasing, long-term rental, etc., with another, but did not register, or dismantled the vehicle, but did not communicate it, and thus successively and indefinitely, there would be absolute uncertainty, liable even to compromise the period of limitation of the tax.

f) Even if it is admitted that, from the point of view of the rules of civil law and property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effect, in accordance with what is established in the SCMT (which in the case at hand constitutes special law, which, in accordance with general principles of law, derogates the general norm), the tax legislator intentionally and expressly wished that those considered as owners, lessees, purchasers with reservation of ownership or holders of the right of option to purchase in long-term rental should be the persons in whose name [the vehicles] are registered.

g) In light of a teleological interpretation of the SCMT, the interpretation defended by the Claimant that the taxpayer of the IUC is the effective owner, regardless of whether it appears in that capacity in the motor vehicle registration, is manifestly wrong, in that it is the very rationale of the regime enshrined in the SCMT that constitutes clear proof that what the tax legislator intended was to create an IUC based on the taxation of the owner of the vehicle as it appears in the motor vehicle registration (to this regard, note that, from the outset, the cases exhaustively typified in Article 3 of the SCMT, both in its No. 1 and in its No. 2, correspond exactly to the cases of compulsory motor vehicle registration, in accordance with the MVR.

h) The SCMT carried out a reform of the regime of taxation of vehicles in Portugal, substantially altering the regime of motor vehicle taxation, with the taxpayers of the tax becoming the owners appearing in the property register, regardless of the circulation of the vehicles on the public road, that is, the IUC became due by the persons appearing in the register as owners of the vehicles, a situation evidenced in the parliamentary debates that preceded the approval of DL 20/2008, of 31 January, and also recognized in Recommendation No. 6-B/2012 of the Ombudsman, dated 2012-0622, addressed to the State Secretary for Public Works, Transport and Communications.

i) In terms of doctrine, counsel cites RUI RIBEIRO PEREIRA who wrote that "In the new model of motor vehicle taxation, (...) the assessment and payment of the tax, carried out during the month of registration of the vehicle, became required of those appearing as owners of it with the CRA. The legislative alteration just described transformed the previous circulation tax into a true tax on the ownership of automobiles. That is, the emphasis of taxation no longer rests on circulation but centres on mere ownership."

j) Even if it were not understood thus, it would be necessary to assess the documents submitted by the Claimant and their probative value with a view to their rebuttal, an assessment which constitutes the analysis of a question of fact, contesting Articles 29 to 60 of the initial petition, in the scope of the assessments relating to vehicles alienated on the date of the taxable event, but also the documents submitted with the initial petition for the following reasons:

1. The documents submitted with the petition relate to contractual relationships established between the commercial companies B... – Credit Finance Institution, S.A. and C..., S.A. and its customers;

2. They do not relate to financial leasing contracts, but rather, in the case of the commercial company B... – Credit Finance Institution, S.A., to "rental contracts", and in the case of the commercial company C..., S.A., to "vehicle rental contracts without driver", as results from the respective headings.

Regarding the vehicles subject to rental, the taxpayer is not the lessee, but rather the owner of the vehicle, in accordance with Article 3, No. 1 of the SCMT, since from the content of these contracts there emerge no rights of option to purchase (see decision issued in case 244/2014-T), whereby the reasoning advocated by the Claimant is affected by error, it not being possible to rebut the legal presumption established;

1. The second copies of invoices in which the documents submitted with the petition are embodied are not sufficient to shake the (supposed) legal presumption established in Article 3 of the SCMT, which raises the question of whether or not invoices are sufficient proof to shake the (supposed) legal presumption established in Article 3 of the SCMT, which it rejects, whereby it contests for all legal purposes the documents, consisting of invoices and invoices – 2nd copy, submitted with the petition.

l) The invoices are not capable of proving the celebration of a synallagmatic contract such as purchase and sale, since such documents do not by themselves reveal an essential and unequivocal declaration of will (i.e., acceptance) on the part of the purported purchasers.

In this same sense, it refers that recent jurisprudence emanating from CAAD has come to lean towards this understanding (cases No. 63/2014-T, 130/2014-T, 150/2014-T, 220/2014-T, 339/2014-T, among others), the Defendant citing the pronouncement by the Collective Arbitral Tribunal constituted within case No. 63/2014-T, from which it transcribes lengthy excerpts. Specifically, it discourses on the means of proof referred to in Articles 342 et seq. of the CC, and makes reference to the Judgment of the Court of Appeal of Lisbon (TRL), of 4 February 2010, Case No. 224338/08.7YIPRT.L1-8, on the value, as proof, of invoices not signed by the purchaser and copies of client account accounting statements, which are solely private documents of a commercial character and unilateral, i.e., for the issuance of which there was no intervention of the purchaser", to the Judgment of the Supreme Court of Justice of 18 October 2007, Case No. 06B3818 on the value of commercial invoicing and commercial accounting records in the context of relationships between merchants as to facts of their commerce, which do not constitute full proof, from the judgment of the TRL, of 26 November 2011, Case No. 29158/03.5YXLSB.L1-2" that in the context of relationships with third parties who are not merchants, the probative force of the private document is limited to the declarations of its signatory, and from the judgment of the TRL of 5 June 2008, Case 1586/2008-8, which refers precisely to the value of the commercial invoice as proof of the existence of a contract with a determined person, "the requirement of payment by invoice is not sufficient to prove that the contract to which the payment relates was celebrated with the invoiced entity".

From the said arbitral decision (63/2014-T) it concluded "... what the Claimant would have to prove, in order to rebut the presumption that flows from either Article 3, No. 1 of the SCMT or from the Motor Vehicle Register itself, is that it, the Claimant, was not the owner of the vehicles in question in the period to which the impugned assessments relate, since it is this fact that results from the register presumption", "...what would imply, in the concrete case, proving who was the current owner..."

m) The Defendant argues that the rules of motor vehicle registration have (still) not reached the point where mere invoices unilaterally issued by the Claimant can replace the requirement of motor vehicle registration, a document approved by official form given that they do not constitute purchase and sale contracts, the unequivocal declaration of will of the purported purchasers being able to be evidenced by means of the submission of a copy of the said official form for registration of motor vehicle ownership, as it is a document signed by the intervening parties.

n) The proof could have been reinforced by the demonstration of the means of payment/receipt of the respective prices or with accounting statements that revealed the receipt of the respective amounts in the account of the companies in question, it being equally necessary that all purchasers be duly identified, which did not occur, transcribing from arbitral decision No. 130/2014-T that "In the case of the present proceedings the Claimants are companies of a notable dimension in the market and with good accounting and tax advisory, whereby it was justifiable if not even required that the sales of used vehicles or their disposal be duly documented and even immediately submitted to motor vehicle registration avoiding future occurrences generating possible losses and liabilities for the companies, all the more so as these alienations fall on assets of the company's assets and not on inventory or goods inherent to its normal activity. (...) It was incumbent on the Claimants, inasmuch as the burden of proof lay on them, to present other proof documents from which it was possible to conclude the alienations of the vehicles in favour of specific purchasers, duly identified."

o) In sum, the Defendant, making use of the arbitral decision issued within case No. 63/2014-T, transcribes "In summary, the proof presented by the Claimant consists exclusively of private documents, unilateral and internal, with insufficient value to, in light of material probative law, deny the validity of facts – the ownership of vehicles – as to which there exists legal proof – a legal presumption – which exempts the Defendant from any probative burden, and which is not rebuttable through mere counterproof that casts doubt on the facts proved by the presumption."

p) Another aspect, already evidenced and decided in recent arbitral jurisprudence, - Arbitral Decision 79/2015-T, concerns the actual validity and sufficiency of the 2nd copy of the invoices of alienation of the vehicles, invoking in its favour various reasons:

All the alleged second copies of invoice contain the mention of: "-Valid after due collection", the Claimant not having come to prove or even to allege that such collection occurred, whereby, even if they could have been validly replaced by the second copies, from their content, unaccompanied by the allegation and proof of such collection, would not result the proof of the facts in question", being necessary to know where are the contracts, the bank statements, the financial transfers, the accounting documents, etc., which would allow to establish the realization of payment and what is referred to in the internal documents invoices, which will purely and simply not exist.

q) Confirming the understanding and position that the Defendant adopts and defends ab initio is the judgment of the TCA SOUTH issued on 19-03-2015, within case No. 08300/14, which, in summary, provides that since the IUC is legally configured to function in integration with motor vehicle registration, "it is not enough for the opposing party to present mere counterproof whereby – which is destined to cast doubt on the facts (in accordance with Article 346 of the C. Civil) which makes the presumed facts doubtful. On the contrary, it must show that the presumed fact is not true, and in a manner such that there remains no uncertainty that the facts resulting from the presumption are not real."

r) As for the assessments relating to objects of financial leasing in the face of default/contention, in which the Claimant alleges the illegality of the IUC assessments (for violation of Article 3/2 of the SCMT) relating to the vehicles in schedule 4 (in accordance with Article 3 of the petition) insofar as the same were subject to financial leasing contracts, it being certain, however, that such contracts were subsequently the subject of default by the respective lessees and are in the contentious phase, the Defendant considers that it is not right, whereby it contests Articles 61 to 69 of the initial petition, as well as the documents submitted, with the following justifications:

i) The documents relate to contractual relationships established between the commercial companies B... – Credit Finance Institution, S.A. and C..., S.A. and its customers.

ii) The documents do not relate to financial leasing contracts, but rather: in the case of the commercial company B... – Credit Finance Institution, S.A., to "rental contracts", as results from its heading, and in the case of the commercial company C..., S.A., to "vehicle rental contracts without driver", as results from its heading.

iii) Even if it were to conclude that there were financial leasing contracts, it would be incumbent on the Claimant to demonstrate having complied with the ancillary obligation imposed by Article 19 of the SCMT, since Article 3 of the SCMT must be construed together with the provision of Article 19 of the same code, in which it is established that "for purposes of Article 3 of this code (...), entities that proceed to financial leasing, operational leasing or long-term rental of vehicles are obliged to provide to the Directorate General of Taxes data relating to the identification of users of leased vehicles."

Following the Claimant's thesis that Article 3 of the SCMT enshrines a rebuttable presumption, it must be concluded that the application of that article equally depends on compliance with what is provided in Article 19 of the SCMT, as can be derived from its literal element ("for purposes of Article 3 of this code (...)"), and for purposes of the rebuttal of Article 3 of the SCMT, it would be necessary that the financial lessors (as the Claimant) had complied with that obligation to relieve themselves of the obligation to pay the tax, no proof having been made in that sense, whereby the conclusion is that it is the same that is the taxpayer of the tax.

s) To the extent the interpretation of the Claimant is accepted, the same is contrary to the Constitution, insofar as it translates into the violation of the principles of trust, legal certainty, efficiency of the tax system and proportionality.

i) An interpretation that devalues the register reality to the detriment of an informal reality and insusceptible to minimal control by the Defendant is offensive of the basic principle of trust and legal certainty that must inform any legal relationship, including here the tax relationship, as can be seen from the presentation text of Bill No. 118/X, respecting the proposal for comprehensive reform of motor vehicle taxation, when it refers that a comprehensive and coherent reform of taxes linked to the acquisition and ownership of motor vehicles is undertaken for the first time, and in mentioning that motor vehicle taxation now forms a coherent whole, in which it is important to eliminate administrative and compliance costs, betting on the prevention and control of situations of abuse and non-compliance.

ii) Offensive of the principle of efficiency of the tax system, insofar as it translates into an obstruction and increasing of the competences attributed to the Defendant, with obvious prejudice to the interests of the Portuguese State, insofar as, by claiming to disregard the register reality, generates for the Defendant, and ultimately for the Portuguese State, additional administrative costs, absence of control of the IUC and uselessness of the register information systems.

iii) Offensive of the principle of proportionality, insofar as it disregards it completely when confronted with the principle of tax capacity when the Claimant has at its disposal the necessary and appropriate legal mechanisms to safeguard that its capacity (e.g., motor vehicle registration, request for seizure of documents and request for cancellation of registrations), without, however, having exercised them in due time.

t) Even if the Arbitral Tribunal were to conclude in favour of the merit of the request for an arbitral decision, it is important to point out that the IUC seeks to tax the owner of the automobile, with ownership being revealed through its registration, with the competence for the respective motor vehicle registration not being within the sphere of the Defendant, which is incumbent on the Institute of Records and Notaries (IRN) to which it falls to transmit to the Defendant the changes that may occur as to the ownership of motor vehicles.

The registration of ownership constitutes an essential element in the system of information between the Defendant and other public entities, as can be seen from Article 5 of Law 22-A/2007, of 29 June, via the celebration of protocols, and the transmission of ownership of motor vehicles is not susceptible of being controlled by the Defendant, since there is no ancillary obligation declarative as to this matter.

The IUC is assessed in accordance with the register information timely transmitted by the IRN, whereby, not having the Claimant been careful about updating the motor vehicle register, as indeed it could and was incumbent on it [Article 5, No. 1-a) of Decree-Law 54/75, of 12 February, and Article 118, No. 4 of the Highway Code], and not having ordered the cancellation of the registrations of the vehicles here in question, it is necessary to conclude that the Claimant did not proceed with the care that was required of it, whereby it inexorably led the Defendant to limit itself to complying with the legal obligations to which it is bound and, in parallel, to follow the register information that was provided to it by the appropriate party, citing, in support, the sense of decision issued by the Arbitral Tribunal in case No. 26/2013-T.

u) It was not the Defendant that gave rise to the filing of the request for an arbitral decision, but the Claimant itself, whereby the same should be condemned in the payment of the arbitral costs resulting from this request for an arbitral decision, in accordance with Article 527/1 of the CPC ex vi of Article 29/1-e) of the LFTM, in line, moreover, with a similar question decided within the scope of case bearing No. 72/2013-T, which was heard in the CAAD.

v) Such reasoning is extensive to the claim made by the Claimant for reimbursement and condemnation in the payment of indemnatory interest, which should be disregarded, since, by everything that has been set forth, the impugned tax acts are valid and legal, being in conformity with the legal regime in force at the date of the tax facts, there having occurred no error attributable to the services.

POSITION OF THE CLAIMANT REGARDING THE EXCEPTION

1. Regarding the exception invoked by the Defendant, of cumulation of illegal claims, being called upon to pronounce itself, the Claimant came to say that although there are different causes of action, the merit of the same depends on the normal exercise of the activity of the Claimant and the interpretation of the standards of tax subjection provided for in the SCMT, in particular in Articles 1 and 3.

Although the grounds of the transmission are, in fact, different, they are not the same impediments to cumulation, citing in its support the opinion of Jorge de Sousa expressed in annotation to the said Article 3 in the "Commentary to the Legal Framework for Tax Arbitration."

Resorting to the jurisprudence that has been settling on this matter within the scope of CAAD, it invokes arbitral case No. 3/2015, of contours similar to those under consideration, as well as also cases 647/2014-T, 45/2015-T, 566/2015-T and 158/2016-T, also in all respects identical and in which it was understood that cumulation was possible, having the respective cumulation claims been accepted.

It also pronounced on an alleged lack of legitimacy with which it would be affected, such lack of legitimacy which would be concealed within the scope of the defence by contestation and not as the rules of procedure and the principles of cooperation and good faith require, in a separate manner and expressly in the seat of defence by exception, which led it to request that the Defendant be condemned for litigation in bad faith and in the payment of indemnification of an amount not less than 5 €, in accordance with No. 1 of Article 104 of the CPPT and No. 1 of Article 542 of the CPC, applicable ex-vi of paragraphs a) and e) of No. 1 of Article 29 of the LFTM.

IV - MATTER OF FACT AND GROUNDS OF FACTS FOUND

1. In the matter of fact, relevant for the decision to be issued, this Arbitral Tribunal considers as proven, in light of the elements in the record, the following facts:

a) The Claimant is a company that has as its corporate purpose the financing of purchases on credit of consumer goods and equipment as well as the financing of the activity of long-term rental of motor vehicles without driver;

b) In the scope of this activity, it enters into long-term rental contracts and financial leasing contracts, at the end of which the vehicle is transferred to the lessee, and also loan contracts for the acquisition of motor vehicles in which a clause reserving ownership in its favour is established;

c) B... – Credit Finance Institution SA, by deed of 07.12.2005 incorporated by merger C..., SA, having assumed the contractual position of the contracts and legal relationships generating rights and obligations, general or specific guarantees, resulting or not from the exercise of activities pursued by it, in accordance with documents submitted to the case, having later assumed the denomination of the Claimant.

d) The Claimant, in the months of November and December 2015, proceeded to pay the IUC and compensatory interest on the following vehicles that at the date of the respective assessments were registered in its name, a summary of the procedural situation of each one being aligned:

1. Vehicle with registration... –…–…, was paid 32.39 €, being 32.00 of IUC and 0.39 € of interest, by account of assessment No.....

Subject to a rental contract celebrated by B..., with a duration of 49 months, starting on 27.11.09. In a letter of 30.09.2013, the Claimant announced to the lessee that the rental contract ended on 27.11.2013, whereby should it wish to acquire the vehicle the price to be paid would be x. In the event of not proceeding to the payment of that amount, it would consider that it did not wish to acquire ownership of the vehicle whereby it would be obliged to deliver it by the said date.

There is in the case a 2nd copy of an invoice issued 31.12.2013, in which it states that "The present document serves as receipt for the amount received after the respective due collection".

1. Vehicle with registration... –…–…, was paid 32.39 €, being 32.00 € of IUC and 0.39 € of interest, by account of assessment No. ....

Subject to a rental contract by B..., with a duration of 49 months, starting on 31.12.2009. In a letter of 11.11.2013, the Claimant announced to the lessee that the rental contract ended on 05.01.2014, whereby should it wish to acquire the vehicle the price to be paid would be x. In the event of not proceeding to the payment of that amount, it would consider that it did not wish to acquire ownership of the vehicle whereby it would be obliged to deliver it by the said date.

There is in the case a 2nd copy of an invoice issued on 07.07.2014, in which it states that "The present document serves as receipt for the amount received after the respective due collection".

1. Vehicle with registration... –…–…, was paid 52.43 €, being 52.00 € of IUC and 0.43 of interest, by account of assessment ....

Subject to a rental contract for a vehicle without driver by C..., with a duration of 48 months, starting on 01.04.2003. In a letter of 13.12.2007, the Claimant announced to the lessee that the rental contract ended on 27.12.2007, whereby should it wish to acquire the vehicle the price to be paid would be x. In the event of not proceeding to the payment of that amount, it would consider that it did not wish to acquire ownership of the vehicle whereby it would be obliged to deliver it by the said date.

There is in the case a 2nd copy of an invoice issued on 18.12.2007, in which it states that "The present document serves as receipt for the amount received after the respective due collection".

1. Vehicle with registration... –…–…, was paid 57.08 €, being 56.40 € of IUC and 0.68 of interest, by account of assessment No.….

Subject to a rental contract for a vehicle without driver by B..., for 60 months, starting on 23.11.2006. In addition to the resolution of the contract due to default in payment of the monthly payments, the Court of Family and Minors of the District of Portimão, on 09.01.2009, judged a precautionary measure as meritorious and determined the seizure and delivery of the vehicle to the Claimant.

1. Vehicle with registration …– …–…, was paid 123.95 €, being 122.47 € of IUC and 1.48 € of interest, by account of assessment No. ....

Subject to a rental contract by B..., in 73 monthly instalments, starting on 06.11.2008. The Claimant, by letter dated 24.01.2013, resolved the contract due to default in payment of the instalments.

1. Vehicle with registration … –…–…, was paid 32.48 €, being 32.00 € of IUC and 0.48 € of interest, by account of assessment No. ....

Subject to a financial leasing contract by B..., for 73 rentals, which commenced on 27.10.2006. The Claimant, by letter dated 17.10.2012, informed the lessee that the contract ended on 05.12.2012, and should it wish to acquire the vehicle, the price to be paid would be x, plus a certain amount in arrears.

1. Vehicle with registration … –…–…, was paid 21.03, being 20.78 € of IUC and 0.25 € of interest, by account of assessment No. ....

Subject to a financial leasing contract by B..., for 73 rentals, commencing on 03.03.05. The Claimant, by letter dated 27.03.2012, informed the lessee of the resolution of the contract, as a result of default in payment of the rentals.

1. Vehicle with registration … –…–…, was paid 154.97 €, being 153.12 € of IUC and 1.85 € of interest, by account of assessment No. ....

Subject to a financial leasing contract by B..., for 84 instalments, starting on 27.11.07. The Claimant, by letter dated 07.06.2011, informed the lessee of the resolution of the contract, as a result of default in payment of the instalments.

1. Vehicle with registration … – … –…, was paid 42.13 €, being 41.72 € of IUC and 0.41 € of interest, by account of assessment No. ....

Subject to a rental contract for a vehicle without driver, by C..., for 60 instalments, starting on 13.11.2001. By the Civil Courts of the Judicial Court of Porto, a judgment was issued on 22.03.2005, determining, among others, the return of the vehicle to the Claimant.

1. Vehicle with registration … –…–…, was paid 20.98 €, being 20.78 € of IUC and 0.20 € of interest, by account of assessment No. ....

Subject to a rental contract for vehicles without driver, by C..., for 60 instalments, starting on 19.01.2003. By letter dated 16.01.2008 the contract was resolved, with the Judicial Court of Paços de Ferreira having archived a precautionary measure in which seizure of the vehicle had been requested.

1. Vehicle with registration … –…–…, was paid 124.20 €, being 123.00 € of IUC and 1.20 of interest, by account of assessment No. ....

Subject to a rental contract for a vehicle without driver, by C..., for 48 instalments, starting on 28.11.2003. The Claimant, in a letter dated 13.11.2007, announced to the lessee that the rental contract ended on 27.11.2007 whereby, should it wish to acquire the vehicle the price to be paid would be x, increased by the payment of certain instalments.

1. Vehicle with registration … –…–…, was paid 32.26 €, being 32.00 € of IUC and 0.26 € of interest, by account of assessment No. ....

Subject to a rental contract by B..., for 72 instalments, with monthly periodicity, starting on 29.12.05. The contract was resolved by letter dated 10 July 2008, due to default in payment of the instalments. A judicial judgment from the Judicial Court of Guimarães, of 19.01.2009, recognized, in a summary proceeding, the Claimant as legitimate possessor of the vehicle and condemned the lessee in the payment of the debts.

1. Vehicle with registration … –…–…, was paid 32.26, being 32.00 € of IUC and 0.26 € of interest, by account of assessment No. ....

Subject to a rental contract by B..., for 72 months, with monthly periodicity, starting on 29.12.05. The contract was resolved due to default in payment of the monthly payments, by letter sent to the lessee dated 20.12.2008.

1. Vehicle with registration …– …–…, was paid 221.36 €, being 219.00 of IUC and 1.80 of interest, by account of assessment No. ....

Subject to a financial leasing contract by B..., for 84 months, starting on 05.12.07. The contract was resolved due to default, in accordance with letter dated 12 August 2008. Filed a precautionary measure in the Civil Courts of Porto without the result being made known.

1. Vehicle with registration … –…–…, was paid 20.95 €, being 20.78 of IUC and 0.17 of interest, by account of assessment No. ....

Subject to a rental contract for vehicles without driver, by C..., on 13.12.2005, for 59 instalments, with monthly periodicity. The contract was resolved due to default, in accordance with letter sent to the lessee, dated 01 February 2010.

1. Vehicle with registration … –…–…, was paid 42.06 of IUC, being 35.41 € of IUC, 6.31 of surcharge and 0.34 € of interest, by account of assessment No. ....

Subject to a financial leasing contract, by B..., of 61 instalments commencing on 23.02.2007. By letter dated 21.04.2008 the contract was resolved due to default, having obtained a decision in the Civil Courts of Porto recognizing that the Claimant is legitimate possessor of the vehicle.

1. Vehicle with registration …– …–…, was paid 96.01 €, being 95.23 € of IUC and 0.78 € of interest, by account of assessment No. ....

Subject to a rental contract, by B..., of 60 instalments, commencing on 20 January 2009. The insolvency of the lessee was decreed, with the insolvency administrator choosing not to comply with the contract. In accordance with letter of 17.01.2014, the contract was resolved due to default in payment obligations.

1. Vehicle with registration … –…–…, was paid 32.36 €, being 32.00 € of IUC and 0.36 € of interest, by account of assessment No. ....

Subject to a rental contract for vehicles without driver by C..., of 60 instalments, commencing on 11.01.05. The contract was declared resolved by letter dated 04.09.2005, due to default in payment obligations.

1. Vehicle with registration … –…–…, was paid 52.43, being 52.00 € of IUC and 0.43 € of interest, by account of assessment No. ....

Subject to a rental contract for vehicles without driver by C..., of 61 instalments, commencing on 19.01.2001. On 27.11.2014 the lessees were called upon by the Claimant to pay x, under pain of judicial collection.

1. Vehicle with registration … –…–…, was paid 32.36, being 32.00 € of IUC and 0.36 € of interest, by account of assessment No. ....

Subject to a rental contract without driver by C..., for 48 instalments, starting on 17.01.2001. The contract was resolved by letter dated 28.02.2005. A precautionary measure was filed in the Civil Courts of Porto on 10.05.2006.

1. Vehicle with registration … –…–…, was paid 457.79 €, being 454.06 € of IUC and 3.73 € of interest, by account of assessment No. ....

Subject to a rental contract for a vehicle without driver by C..., of 48 instalments, celebrated on 14.12.2000. The contract was resolved by letter dated 15.05.2003. A precautionary measure not specified was filed in the Civil Courts of Porto on 15.09.2003. The lessee was declared insolvent on 20.07.2007. A judicial judgment, of 26.09.2007, from the Judicial Circuit of Aveiro, condemned to the return of the vehicle.

e) The Claimant made a report to the Police, on 04.08.2015, informing that for more than six months it has no legal knowledge of the whereabouts of the vehicles mentioned in 4), 5), 8), 9), 10), 12), 13), 14), 15), 16), 17), 18) 19) and 20), and on 04.09.2015, of the vehicles mentioned in 6) and 7), intending to proceed with the National Institute of Transport in the direction of their seizure and cancellation of the registrations.

1. There are no facts given as not proven with relevance for the making of the decision.

2. The facts were given as proven taking into consideration the documents brought to the case by the Claimant, embodied in the initial petition, in the annexes accompanying it and in the response and exception, as well as also in the administrative file sent by the Defendant.

V – PRIOR QUESTION – CUMULATION OF ILLEGAL CLAIMS

1. The Defendant in its response to the initial petition raises the question of cumulation of illegal claims, which, constituting an exception, it is important to assess from the outset, since it is susceptible of compromising the knowledge of the claim and leading to the absolution from the instance or the claim.

Assessing, Article 3, No. 1 of the LFTM provides that "The cumulation of claims, even if relating to different acts and the joinder of parties are admissible when the merit of the claims depends essentially on the assessment of the same circumstances of fact and on the interpretation and application of the same principles or rules of law."

In turn, Article 104 of the CPPT provides that the admission of claims is admissible in case of identity of the nature of the taxes, of the grounds of fact and law invoked and of the court competent for the decision.

In the Defendant's understanding, very much although in both claims there is at issue the interpretative sense and the application of the same principles or rules of law, such does not occur with respect to the circumstances of fact, whereby the requirement of coincidence is not met.

In the context of the contradiction, the Claimant came to argue that the legal requirements on which the cumulation of claims depends are met, having emphasized that it has been understood by doctrine that such identity of fact will not have to be absolute, that is, it is not required that they be exactly the same factual situations, but rather that the legal-tax question be essentially identical, and that the facts also be identical in the part relevant to what is relevant for the decision.

"The facts will be essentially the same when the pretensions of the author are common (...) in such a way that it can be concluded that, if the alleged facts are proved in relation to one act, there will be total or partially necessary factual support for the merit of the pretensions of all claims", opinion of Jorge Lopes de Sousa in "Commentary to the Legal Framework for Tax Arbitration" in Guide to Tax Arbitration 2013, Almedina,

Assessing, the Arbitral Tribunal recognizes that the circumstances of fact are not exactly the same, since intrinsically at issue are vehicles of different brands, with different technical characteristics in terms of the elements usable for the assessments, and years of antiquity reported to the first registration equally different.

The assessments also point to vehicles introduced into consumption, both at a moment when the IUC was not yet in force, some dating from 2000 and 2001, and after its entry into force, some contractually characterized as long-term rentals, others of financial leasing, some having been the subject of contentious procedures without practical consequences, the generality subject to contractual resolution without the vehicles having been recovered after that resolution, existence of different lessees, and also different grounds of transmission or of exoneration from the status of taxpayer.

However, the Arbitral Tribunal subscribes to what was decided in arbitral case 45/2015-T in which, taking into account the principle of simplification and procedural economy, considers the cumulation of claims to be admissible, since their merit depends on the assessment of the same circumstances of fact and on the interpretation of the same principles and rules of law, this being no obstacle the fact that the assessment acts relate to different vehicles, different dates and grounds of transmission, since the circumstances of fact are essentially identical, relating to the transmission of the ownership of vehicles without the corresponding entry in the motor vehicle register.

In fact, in all the situations invoked by the Claimant, the tax at issue is the IUC. There is no sign that there is any serious inconvenience that would prevent the assessment of the cumulation of claims, and transcribing the citation from arbitral case No. 3/2015 – T, "as the STA says, in the STA Judgment of 06-03-2013 – case 327/12 with respect to the joinder of claims in judicial challenge are requirements of rationality of means, of celerity of decision and even to avoid contradictory decisions, all of which also points towards the assessments in question being analyzed in the same action, the article 104 of the CPPT being interpreted in light of the pro actione principle, corollary of the right to judicial protection".

Moreover, in the abstract, there is a reinforcement of this judicial protection, since there may be granted to the Parties faculties of jurisdictional appeal which, under conditions of isolated assessment, could be unworkable, given the often trivial amounts of each assessment.

On the other hand, without being a legal requirement, procedural economy also induces access to justice under more favourable financial conditions, via the payment of a lower court fee than if it were assessed case by case.

Whereby it is to be concluded in favour of the verification of the requirements on which the law makes the possibility of initial cumulation of claims depend.

VI - GROUNDS OF LAW

1. Based on what is set forth above, the Arbitral Tribunal understands that answers must be found for the following controversial legal questions:

a) – Whether Article 3, No. 1 of the SCMT enshrines or not a presumption and, in the event the answer to this question is affirmative, to ascertain whether this can be rebutted and applied to the present case

b) – Meaning and scope of Article 3, No. 2 of the SCMT with respect to vehicle rental contracts without driver and financial leasing contracts;

c) - To the extent the interpretation of the Claimant is accepted, to what extent such interpretation translates into the violation of constitutional principles, namely the principle of trust, legal certainty, efficiency of the tax system and the principle of proportionality.

d) - Since the IUC debt has already been paid, in the event of the merit of an arbitral decision favourable to the Claimant, is it or is it not due the payment of indemnatory interest, likewise with respect to the responsibility for the payment of procedural costs.

a) MEANING AND SCOPE OF ARTICLE 3, NO. 1 OF THE SCMT

12.1 To ascertain the meaning and scope of Article 3, No. 1 of the SCMT, it is important to take into account the provision of Article 9 of the Civil Code (CC) which, for purposes of legal interpretation, provides that the interpreter must not restrict itself to the letter of the law, but reconstruct from the texts the legislative thought, taking especially into account the unity of the legal system, the circumstances in which the law was prepared and the specific conditions of the time in which it is applied.

It further requires that the legislative thought that does not have in the law a minimum of verbal correspondence, albeit imperfectly expressed, cannot be considered by the interpreter, and in fixing the meaning and scope of the law it should be presumed that the legislator enshrined the most appropriate solutions and knew how to express his thought in adequate terms.

12.2 The recourse to this Article 9 of the CC is a specific requirement of Article 11, No. 1 of the LGT itself, according to which, in determining the meaning of tax standards and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed.

12.3 Thus, taking into account the wording of Article 3, No. 1 of the SCMT, according to which, "The taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered", it is important to ascertain the scope of the substitution made by the legislator of the word "presumed" which appeared in previous legislation, for "being considered", and what meaning to attribute to the elimination of the expression "except proof to the contrary" which also appeared in previous legislation.

13.1 Analyzing the historical background, it can be verified that with the publication of Law No. 22-A/2007, of 29 June, the Decrees-Law Nos. 143/78, of 12 June, which had instituted a "Regulation of Tax on Vehicles" [i], applicable to light passenger automobiles and motorcycles, and 116/94, of 3 May, which approved the "Regulation of Circulation and Haulage Taxes", applicable to vehicles engaged in the transport of goods by road, either private or on their own account or public road transport or on account of others, were simultaneously revoked.

Article 3 of the aforementioned Decree-Law No. 143/78 provided that "The tax is due by the owners of the vehicles, being presumed as such, except proof to the contrary, the persons in whose name the same are registered or recorded."

This wording was precisely the same as had previously appeared in Decree-Law No. 599/72, of 30 December, legislation that had instituted a so-called "Tax on Vehicles", having equally transited to the legislation that followed it, Decree-Law No. 782/74, of 31 December, and Decree-Law No. 81/76, of 28 January.

In turn, Decree-Law No. 116/94 had a similar provision in Article 2, according to which are "The taxpayers of the Circulation Tax and Haulage Tax are the owners of the vehicles, being presumed as such, except proof to the contrary, the natural or legal persons in whose name the same are registered".

13.2 This expression of "being presumed as such, except proof to the contrary" should also be assessed in light of the standards on motor vehicle registration.

Article 1 of Decree-Law No. 47 952, of 22 September 1967, considered that "The registration of automobiles has essentially as its purpose to individualize the respective owners and, in general, to give publicity to the rights inherent to motor vehicles", a provision reaffirmed in the precise terms by Decree-Law No. 54/75, of 12 February. In this legislation Article 5, No. 1, paragraph a), established that the right of ownership and usufruct of automobiles are subject to registration, being the registration of such fact compulsory.

13.3 For legal standards in the matter of incidence that remained untouched for more than thirty years, there must have been some purpose of the legislator in not maintaining the same terminology.

In using the word "presumed", the interpreter had perfect knowledge that Article 349 of the CC granted him the faculty of drawing a conclusion from the fact that the vehicles were registered or recorded in the name of a certain person, that is to say that they would be the owners, however, subject to being able to be rebutted by proof to the contrary, as Article 350, No. 2 of the CC imposed on him, and as the tax standards themselves reaffirmed.

The expression "except proof to the contrary" left, moreover, no other interpretative path, since it reinforced the presumptive nature "juris tantum" of the standard.

With the use of the word "being considered" the door was opened to a different interpretation from that which had always prevailed, more reinforced by the fact that the expression "except proof to the contrary" was eliminated, an expression that had always prevailed.

1. However, in the understanding of the Arbitral Tribunal, it does not seem that from this legislative alteration it is legally possible an interpretation in the sense advocated by the Defendant.

In fact, already with the present arbitral case ongoing, the standard which is now being interpreted underwent an alteration in the precise sense defended by the Defendant, as results from the new wording given by Decree-Law No. 41/2016, of 1 August, to Article 3, No. 1 of the SCMT of which "The taxpayers of the tax are the natural or legal persons, of public or private law, in whose name the ownership of the vehicles is registered", which, however, does not have retroactive effect, whereby it is important to continue its analysis in the present case.

15.1 There being the obligation of the interpreter to presume that the legislator enshrined the most appropriate solutions and knew how to express his legislative thought in adequate terms, if the legislator intended to eliminate the said presumption and, as the Defendant argues, intentionally and expressly wished that those considered as taxpayers of the tax be the owners in whose name the vehicles are registered, naturally it would not adopt such an equivocal wording and would restrict itself to indexing the names appearing in the motor vehicle register to the status of taxpayer, without any other considerations.

It would be incomprehensible that to express its legislative thought the legislator should resort to a complex formulation when it could have done so in a clear and simple manner, easily grasped by the generality of the common citizen.

As Francesco Ferrara points out, "One must start from the concept that all words have in discourse their own function and meaning, that in this there is nothing superfluous or contradictory, and, therefore, the literal sense must emerge from the harmonious comprehension of the entire context". [ii]

15.2 In the understanding of the Arbitral Tribunal, apparently nothing would justify that, seeking the interpretative sense defended by the Defendant, the legislator would maintain the expression "being considered as such the natural or legal persons, of public or private law" appearing in No. 1 of Article 3, since it is a matter of an expression based on a classificatory distinction, which adds little or nothing, when it could have been simply affirmative.

The tax legislator was aware of the circumstances in which it was innovating and of its own limitations in the legislative sphere and in the functioning of the tax organization, whereby, in the understanding of the tribunal, to have resorted to a wording that merely intended to reinforce the emphasis on the ownership of the vehicle, as the taxable event of the tax.

15.3 In expressing itself in terms that "...being considered as such...", it transformed the explicit legal presumption into a figure that is equally configured as a presumption, albeit implicitly, within its limits, having gone as far as it was possible in the operationalization and modernization of a tax that had never been a priority in the tax area.

In 2002, a reference author such as Dr. Sérgio Vasques, characterized the Municipal Tax on Vehicles in the following terms: [iii]

"From a formal point of view, the regime of the Municipal Tax on Vehicles and the Circulation and Haulage Tax also appears complex, incoherent, making use of poor and imprecise legislative technique, populated by overlapping and contradictory standards.

In the case of the Municipal Tax on Vehicles, with the Regulation of 1978 approved, the legislator left it slowly to abandonment, with the passing of time and scattered alterations robbing it of the little coherence and sense it had. False referrals, obsolete concepts and terminology, extravagant criminal technique – all are testimony to the legislative fate that generally befalls poor taxes".

15.4 The interpreter cannot consider a legislative thought that does not have in the law a minimum of verbal correspondence, there is, however, the need to ascertain whether, independent of the suppression of the expression "except proof to the contrary", it is possible to find some similarity between the word "presumed" and the word "being considered", so that in both expressions it is possible to find some verbal affinity.

On this question, there is controversy between the Parties, as to the use that the tax system makes of such expressions, but we adhere without reservation to the thesis defended by Diogo Leite de Campos, Benjamim Rodrigues, J. Lopes de Sousa, [iv] who, in commentary to Article 73 of the LGT, refer that presumptions in the matter of tax incidence can be explicit, revealed by the use of the expression "presumed" or similar, citing the examples of Nos 1 to 5 of Article 6, in which presumptions are referred to relating to income of category E of the Personal Income Tax Code, which the Tax Authority itself, through recognition, can rebut.

Also in Nos 3 and 4 of Article 89-A of the LGT, on the requirements for indirect assessment of manifestations of wealth in Personal Income Tax matters, the legislator resorts to the word "being considered" with a meaning similar to "presumed".

In civil law various legal provisions converge in the same sense, as is the case of Article 243, No. 3 of the CC when it provides that "It is always considered in bad faith, the third party who acquired the right subsequent to the registration of the action of simulation when this has place", whereby it seems to us there subsist no doubts as to the possibility of the legislator expressing in a different manner the same legislative intention.

There being receptiveness in doctrine to recognize such affinity, there is equally verified in terms of arbitral decisions issued within the scope of CAAD a broad consensus on the understanding to be conferred to such alteration.

15.5 This understanding is reflected in the judgment of the Administrative and Tax Court of Lisbon, No. 8300/14 CT – 2nd Panel, of 19 March 2015, according to which, "The cited Article 3, No. 1 of the SCMT enshrines a legal presumption that the holder of the motor vehicle register is its owner, such presumption being rebuttable, by virtue of Article 73 of the LGT." - (No. 8, in fine, of the summary of the cited judgment).

The emphasis that the Defendant makes on the judgment of the Administrative and Tax Court of Penafiel does not seem to us, therefore, to be the best interpretation of this legislative alteration.

15.6 Indeed, even before the Judgments of the Constitutional Court Nos 348/97 of 25 July, and 211/2003, of 28 April, had considered that it was not constitutionally forbidden to the legislator the use of presumptions in tax law, provided that there is the possibility of rebutting them, and on the same question, although in a much more conclusive form, doctrinally, also A. Brigas Afonso and Manuel Teixeira Fernandes in annotation to the article had pronounced themselves in the sense that "no alterations are registered regarding the situation that prevailed within the scope of the extinct Municipal Tax on Vehicles, Circulation Tax and Haulage Tax. [v]

1. In the matter of preparatory works, everything suggests that the legislator, although intending to make the architecture of the tax correct, would not have in its thought the adoption of an alteration of this nature, at least, such would not be its initial purpose when it gave an impulse to the reform of motor vehicle taxation and created a Working Group (WG) for reform of motor vehicle taxation. [vi]

In the guidelines it then defined, there is the adoption of principles of efficiency, effectiveness and simplicity and the recourse, whenever possible, to electronic solutions, which facilitate the compliance with tax obligations and the inspection of the regimes, for which integrated solutions should be sought that allow security and effectiveness in assessments and collections through involvement in processes of electronic data transmission and access to information from entities outside the Ministry of Finance.

With respect specifically to the circulation tax, which would come to be designated as IUC, the guidelines respect questions technical relating to the vehicles and their degree of pollution (objective incidence) and that the new system be applicable only to vehicles that are introduced into consumption within the scope of its validity, but nothing is said specifically regarding the adoption of the legal form of institution of the taxpayers of the tax, this not being a matter of lesser importance, given that incidence, in whatever perspective it is seen, is a matter sensitive, with constitutional dignity.

As Francesco Ferrara states, [vii] the preparatory works of the law can clarify us as to the ideas and the spirit of the proponents of the law and serve as subsidy, when it can be demonstrated that such ideas and principles were incorporated in the law, and should be considered in case otherwise moments alien to the law and without legal influence, and as is verified the WG that prepared the said legislation, acted in accordance with precise instructions of the members of the government directly responsible for these matters, under cover of principles and guidelines, whereby the appearance of these same principles and guidelines in the legislative text has a reinforced interpretative value.

17.1 Viewed from the side of the teleological element, Oliveira Ascensão characterizes it as one of the elements "to be weighed in interpretation, which we can call the social justification of the law. The purpose proposed is taken into account so that the norm resulting from it is adequate to it. All law is purposive. Every source exists to achieve ends or social objectives. For this reason, as long as the "why" of a law is not discovered, one is not in a position to proceed with its interpretation". [viii]

The joint dispatch that created the WG expresses the objective that was intended, that is, "essentially, to counter the excessive burdening of motor vehicles at the moment of their sale and to enhance, in the new model of taxation, environmental protection and the rationalization of energy consumption."

With the "why" of the law being identified, there remains, however, the question of which forms and means are used to achieve that purpose.

The guidance was in the direction of adopting principles of efficiency, effectiveness and simplicity and adopting integrated solutions that allow security and effectiveness in assessments and collections through involvement in processes of electronic data transmission and access to information from entities outside the Ministry of Finance.

Naturally there could not be greater efficiency, effectiveness and simplicity than to resort to an already existing database of vehicle owners instead of the tax administration itself creating its own database.

17.2 However, in implementing a system founded on such principles, the tax legislator could not abstract itself from the circumstances in which it was innovating, since in choosing the database of vehicle owners of the CRA, it was making use of a database that has always had as its principal function the regulation of responsibilities at the level of civil society, whose information was the result of the declaratory activity of owners by virtue of transmissions to which the vehicles were subject, and for which there was no specific coercive sanction regarding defaults, except the payment of an increased fee in the case of presenting to register the transmission outside the respective period.

17.3 At the time of publication of the SCMT there was an enormous gap between the national vehicle fleet in existence and the vehicle registrations appearing in the motor vehicle registration conservatory. According to the information at the time conveyed by the media, the official services themselves estimated there to be at least one million more registrations than the actual vehicle fleet, to which the deputy Helena Pinto, of the Left Bloc, also alluded, in a parliamentary debate session occurring on 13 March 2008, when referring that "There are today more than one and a half million motor vehicles whose registration of ownership does not correspond to their current owner."

For tens of years, it was a common practice to scrap vehicles, by way of dismantling without any control, that is, without any communication to the competent authorities, since the legal framework for the destruction of vehicles at the end of their life, with the intervention of an authorized operator, was only defined at the beginning of this century. [ix]

Similarly, it was a common practice to effect the transmissions of the vehicles, for which it was sufficient, and is sufficient, a verbal contract, without there being sufficient diligence to bring such facts to registration in the conservatory, despite there being an increase in the registration fee for non-compliance with the legal period for such communication. In fact, as is public and notorious, in many cases, despite being signed by the Parties, it was agreed that the filling in of the field corresponding to the date of celebration be left blank, so that it could be filled in later, and thus the buyer would exempt himself from the penalty for the delay in registration.

17.4 In light of this reality that was known to all, it would be an affront to the generic guarantees of taxpayers, which enjoy constitutional protection, that, between the date of publication of the legislation and its entry into force, six months later, that is 1 January 2008, it were sought to regularize the ownership situation of practically a quarter of the vehicles that made up the national vehicle fleet, under pain of the rightful owners, whether or not they were the true owners of the vehicles, being inexorably subject to the payment of the tax. And these difficulties would be not only for taxpayers but also for the tax administration itself which, in such a short space of time, would have had to have operationalized a structure that gave response to so significant a number of pre-contentious situations, with risks of paralyzing its capacity to respond in the area of other taxes.

17.5 Therefore, it was necessary to adopt measures that would make possible a smooth transition to a highly innovative regime.

Those measures were being gradually adopted, such as Decree-Law No. 20/2008 of 31 January, which altered various provisions of the MVR, Decree-Law No. 78/2008, of 6 May, which created an exceptional regime for the regularization of the vehicle database of the Institute of Mobility and Land Transport, and Decree-Law No. 177/2014, of 15 December, which created a special procedure for the registration of ownership of vehicles acquired by verbal contract, making it possible for it to be carried out by the seller of the vehicle, thus relieving them of the charges resulting from the quality of holder, whether in the sphere of civil liability, road liability, or now in the tax sphere itself, in such terms that made possible the adoption finally of a regime based on the exclusivity of official registrations, and according to their rules, as is the case of Decree-Law 41/2016.

1. The reference that the Defendant makes to the Recommendation of the Ombudsman No. 6-B/2012, must be contextualized and illustrates those same difficulties. It is significant that, the regime having been in force since 1 January 2008, and there having been, until 2012, a very significant number of resolution of situations of gap between the registration base and the fleet of vehicles in existence, both by legal means and by voluntary means, still the Ombudsman's Office came to justify such recommendation with the "high number of complaints about the difficulties experienced in the cancellation of registrations and in the regularization of motor vehicles".

2. The teleological element is also underlying in environmental aspects, given that it was the concern of the legislator to adopt a principle that began to assert itself as a cornerstone of the protection of the environment, and which nowadays is already part of the objectives of the European Union, where it has express recognition in the Treaty on the Functioning of the European Union, Article 191, which has to do with the need to make those who cause or contribute to environmental costs pay, in the specific case of automobiles, through the so-called principle of equivalence, in which the users of the vehicles or those who benefit from that use should bear tax impositions, in the strict measure of the harms they produce, that compensate the community in general for such damages.

3. In conclusion, the Arbitral Tribunal understands that the wording of Article 3, No. 1 of the SCMT, at the time of the facts, did not eliminate the presumptive nature of the standard and makes admissible the proof, on the part of the taxpayer, that the owner appearing in the motor vehicle register does not correspond to its person, but corresponds to another, who will have acquired it and will be its owner, such proof resulting from the property records appearing in the CRA being therefore rebuttable.

4. This conclusion can be adopted to assess the first type of situations which the Claimant submitted for assessment to the Arbitral Tribunal.

21.1 In three cases, within the scope of contracts that were established, with the respective end approaching, the Claimant placed before the consideration of the other contracting parties (lessees) the possibility of, with the respective end, they acquiring the vehicles they had used during the period of validity of the rentals. In the letters then sent to those parties it was informed that in the case of them not responding it would be concluded that they did not wish to acquire the vehicle.

From the elements in the initial petition it is verified that although the Claimant made those proposals, there does not exist or there does not appear any letter, fax, mail, or other type of information that reveals that the lessees exercised or intended to exercise that option to purchase at the end of the rental period. Although holders of a potestative right, the lessees were not bound to the obligation of carrying out such acquisition, whereby they did not manifest this interest in the form and terms in which it was proposed to them. The consequences to be drawn should be only those invoked in the said letter.

Therefore, the issuance of invoices by the Claimant, purporting to mean that a transaction occurred with the former lessees and that the vehicles were alienated in accordance with a determined sale price, is contradictory to what it announced in the respective proposals for acquisition, and cannot be accepted as an element of a probative character of the establishment of a strong presumption that the vehicles ceased to be the property of the Claimant and were transmitted to another.

The vehicles were the property of the Claimant while the rental period lasted, and will thus continue to have been, since no contract was appended to the record seeking their transmission.

It is true that, although the lessees said nothing, they also did not comply with the obligation to deposit the vehicles in the location indicated to them by the Claimant, but from this non-compliance with a contractual clause there results no transfer of ownership of the same, nor can such be presumed. On this specific contractual aspect, it would be incumbent on the Claimant to adopt the necessary measures to recover the vehicle, whether through civil means, causing the penalty clauses to act and holding the lessees responsible for all the costs associated with the reappropriation of the vehicles, whether through police or road authority means, requesting the seizure of the vehicles and promoting the cancellation of the registrations, as a way of withdrawing them legally from circulation where they were in violation of the will of its owner, now the Claimant.

It is understandable the little interest the lessor may have in recovering the vehicles since its vocation is not precisely to be interested in used vehicles at the end of contract, often at the end of their life in which destruction and dismantling for parts is the only economic scope, but rather to exercise a business function of credit provider.

However, no presumption can be established in the sense that the failure to deliver the vehicles at the end of the contract by the lessees implies, by virtue of the programmatic principle of equivalence, a derogation of the rules of subjective incidence. The situation is not very different from someone who steals a vehicle and makes use of it and the owner claims that such someone be brought to bear for purposes of IUC payment, since the rules of incidence relate to ownership, effective or presumed and are clearly defined, and here, not being in a criminal sphere, the civil sphere also cannot subvert the rules of subjective incidence.

The principle of equivalence is not, as yet, an absolute principle, whereby the multiplicity of exclusions and exemptions and also, in many cases, the disproportionality of the taxation with respect to the harms caused, due to the absence of in-depth studies on the matter.

21.2 On the other hand, the reference that "The present document serves as receipt for the amount received after the respective due collection" cannot also fail to raise the greatest doubts, since nothing is proved as to the fact that the lessees accepted the negotiating proposal and proceeded with the respective payment, whereby no presumption can be established in the sense that, with the end of the rental contract, the lessee became the new owner of the vehicle.

If such payment had occurred, the minimum required would be the appending to the record of proof of receipt of these amounts or of accounting statements that insofar unmistakably demonstrate such alienation and a corresponding entry of money, which nothing in the record shows.

1. The Arbitral Tribunal does not consider that there are sufficient elements that convince that in the taxation period at issue, the owner of the vehicles for purposes of IUC was not the Claimant, even if, by its incapacity, it did not have them available to use as it pleased, and decides not to call into question the legality of the respective assessments.

b) Meaning and Scope of Article 3, No. 2 of the SCMT with Respect to Vehicle Rental Contracts Without Driver and Financial Leasing Contracts;

23.1 Pursuant to Article 3, No. 2 of the SCMT are deem