Summary
Full Decision
ARBITRAL DECISION
CAAD: Tax Arbitration
Case No. 350/2014-T
Subject Matter: IUC – subjective incidence; legal presumption.
I. - REPORT
A - PARTIES
Company A, LDA, legal entity no. …, with registered office at T…,…, …, …, hereinafter referred to as the "Claimant", filed a request for the constitution of an arbitral tribunal, pursuant to the provisions of paragraph a) of article 2, paragraph 1, and articles 10 et seq. of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in order to address the following dispute between the Claimant and the Tax and Customs Authority (which succeeded, among others, the General Directorate of Taxes) hereinafter referred to as "Respondent" or "AT".
B - CLAIM
1 - The request for constitution of the arbitral tribunal was accepted by the President of CAAD on 24 April 2014 and notified to the AT on 29 April 2014.
2 - The Claimant failed to appoint an arbitrator, and therefore, pursuant to article 6, paragraph 1 of the RJAT, the undersigned was designated on 16-06-2014 by the Deontological Council of the Administrative Arbitration Center as arbitrator of a Single Arbitral Tribunal, and accepted in accordance with legal provisions.
3 - The parties were duly notified of such designation on 16-06-2014 and manifested no intention to refuse it, in accordance with the combined provisions of paragraphs a) and b) of article 11, paragraph 1, and articles 6 and 7 of the Deontological Code.
4 - Under these circumstances, in accordance with the provisions of paragraph c) of article 11, paragraph 1, of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was regularly constituted on 01/07/2014.
5 - On 12 December 2014, the Arbitral Tribunal, pursuant to article 16, paragraph c) of the RJAT, issued an order dispensing with the hearing provided for in article 18 of the same legal instrument, taking into account both the fact that the subject matter of the dispute concerned essentially a matter of law, the absence of exceptions to be heard and decided, and the understanding established between the parties, given that neither party requested any independent evidence proceedings, the relevant documents being in the case file and the administrative process having been made available to the record.
6 - The now Claimant requests that the present Arbitral Tribunal:
◆ Declare the illegality and consequent annulment of the assessment acts relating to both the Single Vehicle Tax (hereinafter referred to as IUC) for the years 2009, 2010, 2011 and 2012, and the compensatory interest thereto associated, recorded in the assessment notifications referenced in the case file, relating to vehicles, numbering five, identified in the record, which are hereby considered fully reproduced, the total value of which amounts to € 2,401.80.
C - LEGAL BASIS
7 - The Claimant, in supporting its request for an arbitral decision, states, in summary, as follows:
8 - That the assessments in question, relating to IUC and compensatory interest, carried out by the Tax Administration, distort the truth of the tax facts, since the taxable person violated no legal provision, nor failed to comply with any tax duty or obligation, as proven when presenting a request for administrative review.
9 - That the AT chose to deny the administrative review request based on the understanding that article 3, paragraph 1 of the CIUC indicates registration as the defining element of the personal incidence of the tax, despite having knowledge, given the documents attached to the aforesaid administrative review request, that ownership of the said vehicles had been transferred on a date preceding the date on which the tax became due, thus persisting in the intention to tax the Claimant despite ownership of the vehicles no longer belonging to it.
10 - That the vehicles at issue in the request for arbitral decision, with registration numbers …1; …2; …3; …4 and …5, were sold on dates considerably earlier than those corresponding to the obligation to assess the respective taxes, such sales having occurred, respectively, on 2 April 2007; 18 November 2005; 2 April 2007; 17 March 2006 and 21 November 2005.
11 - That one can never burden "someone" with the payment of IUC in years prior to the sale of the vehicles that were their property and registered in their name, because whoever acquired their ownership and the rights arising therefrom did not register them in their name.
12 - That, consequently, on the dates to which the tax facts giving rise to the IUC assessments in question relate, ownership of the vehicles belonged to other persons, as identified in the record, the Claimant thus not being the taxable person to whom the IUC was assessed, although the transfer of said vehicles was not properly registered at the Motor Vehicle Registration Office.
13 - That, under these circumstances, the fundamental prerequisite of subjective incidence does not exist for the Tax Administration to impute to the Claimant the obligation to pay IUC, and the taxable status for the said tax should be imputed to the actual owners of the vehicles.
14 - That what is established in article 3, paragraph 1 of the CIUC enshrines a rebuttable presumption, given that when, in said rule, the legislator adds the expression "such being understood to mean the natural or legal persons, of public or private law, in whose name the same are registered", the legislator only intended to introduce an enunciative element of who holds ownership.
15 - That the taxation of the Claimant in IUC, and the non-taxation in that tax of the actual owners of the vehicles, would violate the primary objective of the taxation effected by IUC, which is to burden taxpayers in accordance with the environmental and road costs they cause.
16 - That the contract for the purchase and sale of a motor vehicle constitutes a contract with real efficacy or real contract, because the transfer of ownership occurs by virtue of such contract, thus effecting the transmission of ownership of an automobile even without registration.
17 - That the sales invoices presented are documents proving the sale of the vehicles on dates prior to the IUC tax obligations, and embody appropriate means of proof with sufficient force to rebut the presumption based on registration, as enshrined in article 3, paragraph 1 of the CIUC.
D - RESPONSE OF THE RESPONDENT
18 - The Respondent, the Tax and Customs Authority (hereinafter referred to as AT), filed its Response, as well as a copy of the Tax Administrative Process, on 22-09-2014, and on the same date also attached to the record the Arbitral Decisions issued in Case Nos. 150/2014-T and 220/2014-T.
19 - In said Response, the AT considers that the Claimant's allegations cannot possibly proceed, inasmuch as they constitute an interpretation and application of the applicable legal rules that is notoriously erroneous, in that they translate an understanding that incurs not only in a biased reading of the letter of the law, but also in an interpretation that fails to consider the systematic element, violating the unity of the regime enshrined throughout the IUC and, more broadly in the entire tax-legal system, further resulting from an interpretation that ignores the ratio of the regime enshrined in article 3, paragraph 1 of the CIUC. (See articles 7 and 8 of the Response)
21 - It states that the tax legislator, in establishing in article 3, paragraph 1, who the taxable persons of IUC are, expressly and intentionally established that these are the owners (or in the situations provided for in paragraph 2 the persons mentioned therein), such being understood to mean the persons in whose name the same are registered. (See article 13 of the Response)
22 - It emphasizes that the legislator did not use the expression "it is presumed" as it could have done, for example, in the following terms: "the taxable persons of the tax are the owners of the vehicles, such being presumed to be the natural or legal persons, of public or private law, in whose name the same are registered". (See article 14 of the Response)
23 - It considers that the wording of article 3 of the CIUC corresponds to a clear legislative policy choice adopted by the legislator, so that understanding that a presumption is enshrined therein would unquestionably constitute an interpretation contrary to law. (See articles 23 and 24 of the Response)
24 - It states that the aforementioned understanding has already been adopted by the jurisprudence of our courts, transcribing for that purpose part of the judgment of the Administrative and Tax Court of Penafiel, issued in Case No. ….OBEPNF. (See articles 26 and 27 of the Response)
25 - On the systematic element of interpretation, it considers that the solution advocated by the Claimant is intolerable, finding the understanding espoused by the latter no legal support whatsoever. (See article 35 of the Response)
26 - On the neglect of the "ratio" of the regime, the AT considers that, in light of a teleological interpretation of the regime enshrined in the entire IUC Code, the interpretation advocated by the Claimant, to the effect that the taxable person of IUC is the actual owner regardless of not appearing in the motor vehicle registry as holding that status, is manifestly erroneous, in that it is the very ratio of the regime enshrined in the CIUC that constitutes clear proof that what the fiscal legislator intended was to create a tax based on taxation of the owner of the vehicle as it appears in the motor vehicle registry. (See articles 58 and 59 of the Response)
27 - It adds that the CIUC carried out a reform of the vehicle taxation regime in Portugal, substantially altering the vehicle taxation regime, the taxable persons of the tax becoming the owners appearing in the property registry, regardless of the circulation of the vehicles on the public roadway. (See article 61 of the Response)
28 - In this sense, it states that this is the understanding inscribed, in particular, in Recommendation No. 6-B/2012 of 22-06-2012, from the Ombudsman directed to the State Secretary for Public Works, Transport and Communications.
29 - The interpretation conveyed by the Claimant also shows itself, beyond what has already been mentioned, to be contrary to the Constitution, specifically because, among others, it violates the principle of efficiency of the tax system, which has constitutional dignity, a violation that would result in an obstruction and increased cost of the competences attributed to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent are part. (See articles 71 and 74 of the Response)
30 - It adds that invoices, as documents unilaterally issued by the Claimant, do not clearly constitute sufficient proof to "shake the (alleged) presumption established in article 3 of the CIUC". (See articles 82 and 83 of the Response)
31 - It further states, with respect to said invoices and the cash sales presented by the Claimant, that they are not reflected in accounting records and that as it appears from the tax inspection report made of the Claimant it is quite evident that "(…) the greater part of the billing relating to scrap, issued by X…, Lda, Z… Lda and W…, Lda, constitutes fictitious or gratuitous billing (…)". (See articles 94 and 95 of the Response)
32 - Finally, it states that it was not the Respondent who occasioned the request for arbitral decision, but rather the Claimant, the Claimant should consequently be condemned to pay the arbitral costs "in accordance with article 527, paragraph 1 of the New Code of Civil Procedure ex vi of article 29, paragraph 1-e) of the RJAT", also emphasizing that the legal prerequisites are not met to consider illegal the assessment of compensatory interest, whose claim was formulated by the Claimant.
33 - It concludes by considering that, in view of all the arguments it has raised, the request for arbitral decision underlying the present case should be judged unfounded, with the tax assessment acts impugned remaining in the legal order, and the Respondent entity should accordingly be absolved.
E - ISSUES TO BE DECIDED
34 - It is accordingly necessary to hear and decide.
35 - In light of the foregoing, relative to the positions of the parties and the arguments presented, the main issues to be decided are whether:
a) The rule on subjective incidence contained in article 3, paragraph 1 of the CIUC establishes or does not establish a presumption.
b) What is the legal value of motor vehicle registration in the economy of the CIUC, particularly for purposes of the subjective incidence of this tax.
c) If, on the date of the occurrence of the taxable event, the vehicle had previously been alienated, although the property right therein continues to be registered in the name of its former owner, for purposes of article 3, paragraph 1 of the CIUC, the taxable person of IUC is the former owner or the new owner.
F - PROCEDURAL PREREQUISITES
36 - The Arbitral Tribunal is regularly constituted and is substantively competent, in accordance with paragraph a) of article 2, paragraph 1 of Decree-Law No. 10/2011, of 20 January.
37 - The parties possess legal personality and capacity, are legitimated and are legally represented (see article 4 and article 10, paragraph 2 of Decree-Law No. 10/2011 and article 1 of Ordinance No. 112/2011, of 22 March).
38 - The case does not suffer from defects that would invalidate it.
39 - Taking into account the tax administrative process, a copy of which was sent by the AT, and the documentary evidence attached to the record, it is now necessary to present the factual matter relevant to understanding the decision, which is established in the following terms.
II - REASONING
G - FACTUAL REASONING
40 - Regarding the relevant facts, this tribunal considers the following facts to be established:
41 - The Claimant was notified of twenty IUC assessments and the compensatory interest thereto associated, relating to the years 2009, 2010, 2011 and 2012, regarding five vehicles, identified in the request for arbitral decision by their respective registration numbers.
42 - The Claimant filed an administrative review request of the mentioned assessments, having then invoked that on a date considerably prior to the obligation for the respective taxes, it had already proceeded with the sale of the vehicles in question, a request which by order of 04-April-2014 from the Head of the Finance Service of …, was denied.
43 - The Tax Inspection carried out on the Claimant, cited by the AT, in light of what is mentioned in the corresponding Report, reveals that the exhaustive analysis of the information conducted in that context, focusing particularly on the cross-referencing of invoicing issued by the various suppliers of the Claimant, made it possible to identify the existence of irregularities relating to improper VAT remittances and deductions with respect to diesel and scrap acquired by the Claimant.
44 - The elements expressly recorded in said Report, intended for the clarification of the infractions identified within the scope of said inspection, precisely explain such irregularities as being embodied in irregular VAT remittances and deductions and the issuance of fictitious invoicing relating to scrap acquisitions.
45 - The vehicles, identified in the request for arbitral decision, numbering five, were all sold on dates prior to those on which the tax became due, that is, on the date (month/year) of the corresponding registrations, having at that time exited its legal sphere, as attested by the documents attached to the record.
46 - As proof of the mentioned sales, the Claimant attached copies of invoices and cash sales relating to the sales of the five vehicles, in which the essential elements for the identification of the corresponding transactions appear, namely the amount of VAT charged.
47 - On the dates (month/year) to which the tax facts giving rise to the IUC assessments now in question relate, ownership of the vehicles in question belonged to other persons, as identified in the record.
REASONING OF PROVEN FACTS
48 - The facts held as proven are based on the documents mentioned, with respect to each of them, insofar as their correspondence to reality was not questioned.
FACTS NOT PROVEN
49 - There are no facts held as not proven, given that all facts considered relevant to the assessment of the claim were proven.
H - LEGAL REASONING
50 - The factual matter being established, it is now necessary to proceed to its legal subsumption and determine the law applicable to the underlying facts, in accordance with the issues to be decided set forth in paragraph 35.
51 - The essential and decisive question in the present case, regarding which there are absolutely opposing understandings between the Claimant and the AT, is translated into whether the rule on subjective incidence contained in article 3, paragraph 1 of the CIUC establishes or does not establish a rebuttable presumption.
52 - The positions of the parties are known. Indeed, for the Claimant, what is established in article 3, paragraph 1 of the CIUC enshrines a rebuttable presumption, allowing the person entered in the registry as the owner of the vehicle to present evidence intended to demonstrate that such ownership is inscribed in the legal sphere of another person, to whom such ownership was transferred.
53 - The Respondent, for its part, considers that the interpretation defended by the Claimant is manifestly erroneous, in that it is the very ratio of the regime enshrined in the CIUC that constitutes clear proof that what the fiscal legislator intended was to create a tax based on taxation of the owner of the vehicle as it appears in the motor vehicle registry.
I - INTERPRETATION OF THE RULE ON SUBJECTIVE INCIDENCE CONTAINED IN ARTICLE 3, PARAGRAPH 1 OF THE CIUC
54 - It should first be noted that it is well-established in doctrine that the interpretation of tax laws is governed in full by the general principles of interpretation. This is an understanding that indeed finds support in article 11 of the General Tax Law.
55 - It is commonly accepted that, with a view to grasping the meaning of the law, interpretation avails itself of various means, it being important, first and foremost, to reconstruct the legislative intent through the words of the law, which means seeking, above all, its literal meaning. The said meaning, as is also well-established, corresponds to the lowest degree of interpretive activity, it being important, therefore, to assess and measure it in light of other criteria, intervening for that purpose the so-called elements of a logical nature, whether of rational (or teleological) sense, of a systematic character or of a historical order.
56 - With respect to the interpretation of tax law, it should be recalled, as jurisprudence has indeed highlighted, particularly in Decisions of the Supreme Administrative Court of 05/09/2012 and 06/02/2013, Case Nos. 0314/12 and 01000/12, respectively, available at: www.dgsi.pt, the importance of the provision in article 9 of the Civil Code (CC), as a fundamental precept of legal hermeneutics, which in this context cannot fail to be considered.
57 - Interpretive activity is thus unavoidable in resolving the doubts raised by the application of the legal rules in question.
58 - In the view of FRANCESCO FERRARA, in Interpretation and Application of Laws, translation by MANUEL DE ANDRADE, (2nd ed.), Arménio Amado, Editor, Successor - Coimbra, 1963, p. 131, said interpretive activity "[…] is unique [and] complex, of a logical and practical nature, consisting in deducing from certain circumstances the legislative will", adding, ibidem, p. 130, that "Regarding the practical application of law, legal interpretation is by its nature essentially teleological".
59 - The purpose of interpretation, the said author also tells us, ibidem, pp. 134/135, is "[…] to determine the objective meaning of the law […]". The law, being the expression of the will of the State, is a "[…] will that persists autonomously, detached from the complex of thoughts and tendencies that animated the persons who contributed to its emanation". Hence the activity of the interpreter must be to "[…] seek not what the legislator wanted, but what appears objectively intended in the law: the mens legis and not the mens legislatoris".
60 - For MANUEL DE ANDRADE, citing FERRARA, in Essay on the Theory of Interpretation of Laws, p. 16 (2nd ed.), Arménio Amado, Editor, Successor - Coimbra, 1963, "Interpretation seeks the voluntas legis, not the voluntas legislatoris […], and seeks the actual will of the law, not its will at the moment of application: it is not, therefore, a will of the past, but a will ever present so long as the law remains in force. This is to say that the law, once formed, detaches itself from the legislator, gaining autonomous consistency; and, more than that, it becomes a living entity, not merely an inanimate body […]".
OF THE LITERAL ELEMENT
61 - It is within this framework that it is important to find an answer to the issues to be decided, particularly the one aimed at determining whether article 3, paragraph 1 of the CIUC establishes or does not establish a presumption, beginning, immediately, with the literal element.
62 - Being the literal element the first that it is important to use in seeking the legislative intent, it is necessarily there that one must begin, seeking to reach the meaning of the expression "such being understood to mean the persons registered in the aforesaid article 3, paragraph 1 of the CIUC".
63 - Article 3, paragraph 1 of the said CIUC provides that "The taxable persons of the tax are the owners of the vehicles, such being understood to mean the natural or legal persons, of public or private law, in whose name the same are registered." (emphasis added)
64 - The formulation used in the said article, it should be noted, above all, resorts to the expression "such being understood to mean", which raises the question of whether such expression can be attributed a presumptive meaning, thus equating it with the expression "it is presumed". These are expressions frequently used with equivalent meanings, as is evident in various situations of the Portuguese legal system.
65 - In fact, there are numerous rules that establish presumptions, conjugating for that purpose the verb "to consider" in various forms. It is thus not difficult to identify situations in various areas of law in which the expression "such being understood to mean" or "is understood to mean" is used with a meaning equivalent to the expression "it is presumed" or "presume", expressions to which, whether at the level of absolute presumptions or in the context of rebuttable presumptions, an equivalent meaning is frequently conferred.
66 - Not considering it pertinent to recount examples revealing such situations, given that such examples are abundantly enumerated in some of the decisions of tax arbitral tribunals, of which those issued in Case Nos. 14/2013 - T, 27/2013 - T and 73/2013 - T are examples, we consider them hereby fully reproduced.
67 - Under these circumstances, the mentioned expressions being recurrently used with an equivalent purpose and meaning, it can be concluded that it is not only the use of the verb "to presume" that places us before a presumption, but also the use of other terms can serve as a basis for presumptions, as, in particular, occurs with the expression "such being understood to mean", which, in our view, is precisely what occurs in article 3, paragraph 1 of the CIUC.
This is, thus, an understanding which, not appearing to correspond to a biased reading of the letter of the law, as the AT considers, reveals itself in harmony with the provision in article 9, paragraph 2 of the CC, insofar as it ensures, to the legislative intent, the minimum of verbal correspondence required therein.
68 - In the literal perspective, in light of what is hereby set forth, there is no doubt that the interpretation which considers a rebuttable presumption established in article 3, paragraph 1 has full support in the formulation enshrined therein, in light of the mentioned equivalence between the expression "such being understood to mean as" and the expression "it is presumed as".
The linguistic element, as mentioned above, being the first that must be used in seeking the legislative intent, must, however, in order to find the true meaning of the rule, be submitted to the control of other elements of interpretation of a logical nature (whether such elements are of rational (or teleological) sense, of a systematic character or of a historical order).
69 - Indeed, as emerges from the work of MANUEL DE ANDRADE, cited above, p. 28, "[…] purely linguistic analysis of a legal text is only the beginning […], the first degree […] or the first act of interpretation. In other words, it only provides us with the probable legislative thought and will […] or, better, the grammatical delimitation of the possible consistency of the law […], the framework within which its true content resides".
70 - Thus, let us then consider the rational (or teleological) element.
OF THE HISTORICAL AND RATIONAL (OR TELEOLOGICAL) ELEMENT
71 - Taking into account elements of interpretation of a historical bent, it is, first and foremost, important to recall what is expressly set forth in the statement of reasons of Bill No. 118/X of 07/03/2007, underlying Law No. 22-A/2007 of 29/06, when it states that the reform of vehicle taxation is implemented by way of the displacement of part of the tax burden from the moment of vehicle acquisition to the circulation phase and aims to "form a coherent whole" which, although intended to raise public revenue, intends such revenue to be raised "in accordance with the environmental costs each individual causes the community", adding, with respect to the tax in question and the different types and categories of vehicles, that "as a structuring and unifying element […] the principle of equivalence is enshrined, thus making clear that the tax, as a whole, is subordinated to the idea that taxpayers should be burdened in accordance with the cost they cause to the environment and road network, this being the raison d'être of this tax figure".
72 - Within this framework, it seems clear that the logic and rationality of the new vehicle taxation system can only coexist with a taxable person, on the assumption that this one, and not another, is the real and actual person responsible for causing road and environmental damage, as follows from the principle of equivalence inscribed in article 1 of the CIUC.
73 - The said principle of equivalence, which informs the current Single Vehicle Tax, has, at least insofar as it specifically relates to the environment, underlying the polluter-pays principle, and implements the idea inscribed therein that whoever pollutes must, therefore, pay. The said principle has, moreover, in some way, constitutional basis, insofar as it represents a corollary of the provision in paragraph h) of article 66, paragraph 2 of the Constitution.
74 - What it is sought to achieve by way of the said principle is to internalize negative environmental externalities, which, after all, in the case at hand, amounts to nothing more than making the damages that arise for the community, resulting from the use of motor vehicles, be assumed by their owners, as "economic-user" subjects, as costs that only they should bear.
75 - Returning to the mentioned principle of equivalence, it will be said that it has, in the economy of the CIUC, an absolutely structuring role, the normative edifice of the Code in question being founded thereupon. The said principle cannot, therefore, fail to constitute a purpose that is legally intended to be pursued, embodying, in that measure, a light of remarkable radiance that, constantly and continuously, cannot fail to illuminate the path of the interpreter.
76 - With respect to the said principle, it is important to note what Sérgio Vasques tells us, when, in Special Consumption Taxes, Almedina, Coimbra, 2001, p. 122, with respect to the technical implementation of that principle considers that "In obedience to the principle of equivalence, the tax should correspond to the benefit the taxpayer derives from public activity; or the cost the taxpayer imputes to the community through their own activity".
77 - Specifically addressing IUC, the said author adds, op. cit., that "Thus, a tax on automobiles based on a rule of equivalence will be equal only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different wear and environmental cost pay different tax also", adding that the implementation of the said principle "[…] dictates other requirements still with respect to the subjective incidence of the tax […]".
78 - In light of what has just been mentioned, it is clear that the taxation of the actual and real polluters corresponds to an important purpose pursued by the law, in this case by the CIUC, a purpose which, in the words of Francesco Ferrara, in Interpretation and Application of Laws, 2nd Edition, Arménio Amado, Editor, Successor, Coimbra, 1963, p. 130, must always be before the eyes of the jurist, given that, as the said author states therein, "[…] legal interpretation is by its nature essentially teleological".
79 - Thus, it should be noted that, whether in light of the said historical elements, or in light of elements of a rational or teleological character of interpretation that are hereby referenced, it is equally necessary to conclude that article 3, paragraph 1 of the CIUC can only establish a rebuttable presumption.
80 - It remains to consider the systematic element of interpretation.
OF THE SYSTEMATIC ELEMENT
81 - On the systematic element, BAPTISTA MACHADO tells us, in Introduction to Law and Legal Reasoning, p. 183, that "this element comprises the consideration of the other provisions forming the normative complex of the institute in which the rule to be interpreted is integrated, that is, that regulate the same subject matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that corresponds to the rule to be interpreted in the overall legal system, as well as its consonance with the spirit or intrinsic unity of the entire legal system".
82 - It is known that a legal principle, in this case the principle of equivalence, does not exist in isolation, but is linked by an intimate nexus with other principles that integrate, at the more global level, the respective legal system, in this case with the other principles embodied in the IUC system. In that sense, each article of a given legal instrument, in this case the CIUC, will only be understandable if we situate it before the other articles that follow or precede it.
83 - With respect to the systematization of the CIUC, environmental concerns were decisive in the said principle of equivalence being inscribed from the outset in the first article of the said Code, which necessarily leads to the subsequent articles, insofar as they are based on such principle, being influenced by it. This occurred, in particular, with the taxable base, which became constituted by various elements, particularly those relating to pollution levels, and with the rates of the tax, established in articles 9 to 15, which were influenced by the environmental component, and, naturally, also with the proper subjective incidence, provided for in article 3 of the CIUC, which cannot escape the mentioned influence.
84 - The systematic element of interpretation and the interaction between the various articles and principles that integrate the system inscribed in the CIUC also call for the understanding that what is established in article 3, paragraph 1 of the CIUC cannot fail to constitute a presumption.
85 - Article 9, paragraph 1 of the CC provides that the search for legislative intent should "[…] above all take into account […] the unity of the legal system, the circumstances under which the law was elaborated and the specific conditions of the time in which it is applied", circumstances and conditions that, today more than ever, are of sensitivity toward the environment and respect for issues related to it.
In this context, the considerations formulated on the mentioned elements of interpretation, whether of a literal character or of a historical bent, whether of a rational or systematic nature, point in the direction that article 3, paragraph 1 of the CIUC establishes a presumption, that is, the ratio legis of that rule, as the reason or purpose that should reasonably be attributed to it, cannot fail to view the expression "such being understood to mean as", used in the said article, as revelatory of the establishment of a presumption, which means that the taxable persons of IUC, being in principle the owners of the vehicles, such being understood to mean the persons in whose name the same are registered, may, ultimately, be others.
It will be said, moreover, that the establishment of a presumption in the mentioned rule will correspond to the interpretation most compatible, particularly with the principle of equivalence mentioned above. Indeed,
86 - The non-consideration of a legal presumption in article 3, paragraph 1 of the CIUC would constitute an understanding with which the principle of equivalence, as a fundamental and structuring principle of the said Code, could not coexist, specifically because a presumption were not enshrined, as it is, in the mentioned article and the door would be left open to achieve the dismissal of the meaning and scope of the mentioned principle of equivalence to which the law objectively conferred an essential value and function in the economy of the Code in question.
87 - Having arrived here, it is important to recall the provision in article 73 of the LGT, when it establishes that "The presumptions enshrined in the rules on tax incidence always admit proof to the contrary", (emphasis added), which means that the legal presumption, which appears to be established in article 3, paragraph 1 of the CIUC, will necessarily be rebuttable.
88 - Within this framework, the taxable persons of the tax are presumably the persons in whose name the vehicles are registered, that is, the said taxable persons are, in principle and only in principle, the persons in whose name such vehicles are registered.
89 - Indeed, if the owner in whose name the vehicle is registered comes, as occurs in the present case, to indicate and prove who the owners of the vehicles in question were, nothing justifies, in our view, that the former owner be made responsible for payment of the IUC that becomes due.
90 - It is further the case that this interpretation of article 3 of the CIUC is the one that, in our opinion, best adjusts to the principles to which the AT must subordinate its activity, namely the inquisitorial principle, in order to discover material truth.
91 - With respect to the said inquisitorial principle, it is important to allude to the teachings of Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in General Tax Law, Annotated and Commented, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488/489, when, in annotations to the cited article 58, they state that the administration has a dynamic role in collecting elements relevant to the decision, adding that "[…] lack of diligences deemed necessary for the construction of the factual basis of the decision will affect this not only in the hypothesis of being mandatory (violation of the principle of equality), but also if the materiality of the facts considered is not proven or if relevant facts alleged by the interested party are missing from that basis, due to insufficiency of proof that the Administration should have collected […]".
The inquisitorial principle, add the said authors, op. cit, "[…] has to do with the powers (-duties) of the Administration to proceed with the investigations necessary to the knowledge of the facts essential or determinative for the decision […]".
92 - Material truth, embodied in the present case in the circumstance that the vehicles identified in the request for arbitral decision have all been sold by the Claimant at a moment prior to when the tax became due, that is, on the date from which the tax creditor could assert, before the tax debtor, its right to payment of the tax, was, in light of the elements recorded in the administrative process, within the knowledge of the AT.
93 - Let it not be said, as the AT does, that the establishment of a presumption in article 3 of the CIUC and the consequences resulting therefrom would offend the principle of efficiency of the tax system, insofar as they would lead, in particular, to "obstruction of the performance of its services, […]". (See article 74 of the Response)
The efficiency of the Administration in general, or of the AT in particular, in the current sense, will correspond to the capacity/working methodology oriented toward the optimization of the work executed or services provided, which will mean producing the maximum, in quantity and quality, with the minimum of costs, having nothing to do with the observance of legally established principles and respect for the rights of citizens, whether in the capacity of taxpayers or otherwise.
94 - In a technical sense, it will be said that the principle of efficiency of the tax system is commonly held, in the domain of tax procedure, as a corollary of the principle of proportionality, which, as is known, imposes an adequate proportion between legal purposes and the means chosen to achieve those purposes, or, as Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa state, in General Tax Law, Annotated and Commented, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488, in annotations to article 55 of the LGT, it is a principle that obligates "[…] the tax administration to refrain from imposing on taxpayers obligations that are unnecessary to the satisfaction of the purposes it seeks to pursue".
Within this framework, the said principle of efficiency of the tax system will mean the capacity to achieve the legally established objectives with the available means, or better, with the minimum of means, which will also have nothing to do with respect for the rights of citizens, nor with the necessity of observance of the principles to which the tax administration must subordinate its activity, namely the inquisitorial principle and the discovery of material truth, nor obviously can the application of the mentioned principle of efficiency be made to the detriment of the rights of citizens.
J - ON THE ACQUISITION OF OWNERSHIP OF THE VEHICLE AND THE VALUE OF REGISTRATION
95 - First and foremost, it must be added, given what will hereafter be explicitly stated about the value of registration, that the acquirers of vehicles become owners of those same vehicles by way of the celebration of the corresponding contracts for purchase and sale, with registration or without it.
96 - There are three articles of the Civil Code that it is important to take into account with respect to the acquisition of ownership of a motor vehicle. They are, first and foremost, article 874, which establishes the notion of a contract for purchase and sale as being "[…] the contract by which the ownership of a thing or other right is transmitted for a price"; article 879, in whose paragraph a) it is stated as essential effects of the contract for purchase and sale, "the transmission of ownership of the thing or the holding of the right" and article 408, which is titled on contracts with real efficacy, and establishes in its paragraph 1, that "the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, except for the exceptions provided for in the law". (emphasis added)
We are, in effect, in the domain of contracts with real efficacy, which means that their celebration causes the transmission of real rights, in this case motor vehicles, determined by mere effect of the contract, as explicitly follows from the rule previously mentioned.
97 - With respect to the said contracts with real efficacy, it is important to note the teachings of Pires de Lima and Antunes Varela, when in annotations to article 408 of the CC they tell us that "From these contracts called real (quoad effectum), because they have as immediate effect the constitution, modification or extinction of a real right (and not merely the obligations tending to that result) are distinguished the so-called real contracts (quoad constitutionem), which require the delivery of the thing as an element of their formation (see articles 1129, 1142 and 1185)".
We are thus before contracts in which the ownership of the thing sold is transferred without more from the seller to the buyer, having as a cause the contract itself.
98 - Also from jurisprudence, in particular from the Judgment of the Supreme Court of Justice No. 03B4369 of 19/02/2004, available at: www.dgsi.pt, it follows that, in light of the provision in article 408, paragraph 1, of the Civil Code, "the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, except for the exceptions provided for in the law". This is the case of the contract for purchase and sale of a motor vehicle (articles 874° and 879 al. a) of the Civil Code), which does not depend on any special formality, being valid even when celebrated in verbal form - see Judgment of the Supreme Court of Justice of 3-3-98, in CJSTJ, 1998, year VI, Volume I, page 117". (emphasis added)
99 - The contract for purchase and sale having, in light of what is hereby stated, a real nature with the mentioned consequences, it is necessary to consider also the legal value of the motor vehicle registration which is the object of that contract, insofar as the transaction of the said asset is subject to public registration.
100 - It is established, in effect, in article 1, paragraph 1 of D.L. No. 54/75, of 12 February, relating to the registration of motor vehicles, (amended various times, the last of which by Law No. 39/2008, of 11/08), that "The registration of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and respective trailers, with a view to the security of legal commerce". (emphasis added)
101 - It becoming clear, in light of the said rule, what is the purpose of registration, there is, however, no clarity within the scope of the said Decree-law as to the legal value of that registration, it being important to consider article 29 of the mentioned legal instrument, relating to the registration of motor vehicle ownership, when it provides that "The provisions relating to immovable property registration are applicable, with the necessary adaptations, to the registration of automobiles […]". (emphasis added)
102 - Within this framework, in order that we may reach the sought knowledge of the legal value of motor vehicle ownership registration, it is important to take into account what is established in the Motor Vehicle Registration Code, approved by Decree-Law No. 224/84, of 06 July, when it provides in its article 7 that "the permanent registration constitutes a presumption that the right exists and belongs to the titled party registered in the precise terms in which the registration defines it". (emphasis added)
103 - The combination of the provisions previously mentioned, particularly what is established in article 1, paragraph 1 of D.L. No. 54/75, of 12 February and in article 7 of the Motor Vehicle Registration Code, allows one to consider, on the one hand, that the fundamental function of registration is to give publicity to the legal situation of vehicles, allowing on the other hand to presume that the right exists and that such right belongs to the titled party, for whom the same is registered, in the precise terms in which it is defined in the registration.
104 - Thus, permanent registration constitutes nothing more than the presumption that the right exists and belongs to the titled party registered in the exact terms of the registration, but a rebuttable presumption, admitting therefore contrary proof, as follows from the law and jurisprudence has been indicating, and may in this respect see, among others, the Judgments of the Supreme Court of Justice Nos. 03B4369 and 07B4528, respectively of 19/02/2004 and 29/01/2008, available at: www.dgsi.pt.
105 - The function legally reserved to registration is thus, on the one hand, to publicize the legal situation of assets, in this case vehicles and, on the other hand, to allow us to presume that the right exists over those vehicles and that the same belongs to the titled party as such inscribed in the registration, which means that registration does not have a constitutive nature of the property right, but only a declarative one, hence registration does not constitute a condition of validity of the transmission of the vehicle from the seller to the buyer.
106 - Thus, if the buyers of vehicles, as "new" owners thereof, do not promptly promote the adequate registration of their right, it is presumed, for purposes of article 3, paragraph 1 of the CIUC and in accordance with the provision in article 7 of the Motor Vehicle Registration Code, that the vehicle continues to be the property of the person who sold it and who in the registration remains its owner, it being certain however that such presumption is rebuttable, whether by force of what is established in article 350, paragraph 2 of the CC, or in light of the provision in article 73 of the LGT. Hence, from the moment the said presumption is overcome by proof of the respective sale, the AT cannot persist in considering as the taxable person of IUC the seller of the vehicle, who in the registration continues to be listed as its owner.
L - ON THE MEANS OF PROOF PRESENTED
107 - Being it not legally required that the contract for purchase and sale of motor vehicles be in written form, proof of the corresponding sale may be made by any means, namely by documentary means, this including in particular invoices relating to the sales of vehicles.
108 - As a means of proof that it proceeded with the sale of the five vehicles identified in the present case, on a date prior to when the tax became due, the Claimant attached not only copies of two invoices relating to the sale of two of the said vehicles with registration numbers …2 and …5, but also copies of two other documents materializing "Cash Sales" relating to the three remaining vehicles.
109 - On the documents presented by the Claimant as proof of sale of the vehicles in question, the AT, beyond having attached to the record 2 Arbitral Decisions issued in Case No. 150/2014-T and Case No. 220/2014-T where such matter is addressed, considers that such documents, as documents unilaterally issued by the Claimant do not clearly constitute sufficient proof to "shake the (alleged) presumption established in article 3 of the CIUC". (See articles 82 and 83 of the Response)
110 - With respect to the said invoices and the cash sales presented by the Claimant, the AT further considers that they are not reflected in accounting records and that as it appears from the tax inspection report made of the Claimant it is quite evident that "(…) the greater part of the billing relating to scrap issued by …, constitutes fictitious or gratuitous billing (…)". (See articles 94 and 95 of the Response)
111 - In sum, the AT understands that, both the invoices and the cash sales do not have the probative value that the Claimant attributed to them to rebut the "registration presumption", but, with all due respect, it is not correct.
Let us see,
112 - The Tax Inspection mentioned by the AT, as is expressed in the corresponding Report, after carrying out an exhaustive cross-analysis of the available information, particularly that which respects and focuses on the accounting and commercial documentation both of the Claimant and of its suppliers, succeeded in identifying the existence of irregularities relating to improper VAT remittances and deductions with respect to diesel and scrap acquired by the Claimant.
113 - The information expressly recorded in said Report, in particular that relating to the clarification of infractions identified within the scope of said inspection, proceeds precisely with the description of such irregularities, as being embodied and circumscribed in the following three types of infractions: irregular VAT remittances; irregular VAT deductions and the issuance of fictitious invoicing relating to scrap acquisitions.
114 - The mentioned irregularities do not affect the truth of the sales of the vehicles in question in the case, nothing indicating that such sales were simulated nor that the documents presented as support and proof of such sales are false. There are thus no elements in the record that reveal and demonstrate the non-realization, concrete and actual, of the sale of the vehicles in question.
115 - As to the invoices and their probative value, it is important to consider that they embody a "document written in which the things sold and delivered are set forth with their quality, quantity and price, and the delivery of which the seller cannot refuse to the buyer, if the purchase and sale is commercial". (Legal Dictionary by Ana Prata, Almedina - Coimbra, 1990, 3rd Edition)
116 - The invoice, as is referred to in the annotations to article 476 of the Commercial Code, Abílio Neto, Ediforum - Lisbon, 1991, 10th Edition, is the "document in which the seller makes the complete description of the merchandise sold to the buyer and in which indicates the expenses it has incurred, as well as the advantages it grants in prices and the conditions of delivery and payment".
117 - Prior to the amendments introduced in the VAT Code by Decree-Law No. 197/2012, of 24 August, invoices or equivalent documents could be issued within the framework of the transmission of assets or the provision of services, provided that these observed the legally required requirements for invoices.
118 - From the provision in paragraph b) of article 29, paragraph 1, in paragraph 5 of article 36 and in paragraphs 1 and 2 of article 40, all of the CIVA, as amended by Decree-Law No. 197/2012, of 24 August, it follows that only the invoice, the invoice-receipt and the simplified invoice constitute documents recognized for purposes of transmission of assets or the provision of services.
119 - It will be said, thus, in light of the doctrine and what is legally established, that the invoice is the document in which, besides the mention of the names of the suppliers and acquirers of the things or services subject of a given legal transaction, should in particular be discriminated those things or services, their quality and quantity, as well as their respective price and other elements included in the taxable value, as well as the applicable VAT rates and the amount of tax owed, elements that, it should be noted, are observed by the two invoices presented by the Claimant, issued, one on 18-November-2005 for the vehicle with registration number …2, the other on 21-November-2005 for the vehicle with registration number …5.
120 - The two documents materialized in the "Cash Sales" issued, one on 17-March-2006 for the vehicles with registration numbers …1 and …3 and the other on 02-April-2007 for the vehicle with registration number …4, contain similarly the aforementioned elements, as ought to be those contained in invoices.
121 - The entry into force on 1 January 2013 of the diploma previously mentioned, that is, Decree-Law No. 197/2012, of 24 August, and the association of the sales or provision of services to an invoice that then came into effect, withdrew in this sense relevance to the mentioned "Cash Sales", which did not occur on the dates on which the documents of that type attached to the record were issued by the Claimant.
122 - Within this framework, nothing allows one to consider that the elements recorded in the documents in question - invoices and cash sales - are nonconforming with the reality that contractually occurred, which means that such documents do not appear as embodying any simulated contract, rather reproducing the real and true sale of the vehicles to the persons indicated therein. Furthermore,
123 - The documents in question, having unquestionable commercial relevance are also accounting essential with relevant implications in the tax domain, it being important to note that in the case at hand, the Claimant having, as it does, an activity of a business nature, the said documents are subject to rigorous legal rules, whether of a commercial order, whether of an accounting and tax order.
124 - The documents in question in the record, being naturally inscribed within the framework of commercial relations between two entities, in this case between the Claimant and the acquirers of the vehicles, aim, on the other hand and in this case, to demonstrate, before the Tax Administration, the existence of the transactions in question, which confers upon them a dimension and qualitatively different value, given that, once certain conditions are verified, the tax legislation understood to consider them as true.
125 - As has already been emphasized, tax legislation, in particular that previously mentioned, recognizes to the documents in question probative credibility, it being important to emphasize - because it is not a minor issue, but on the contrary a fundamental question - that, having such documents been issued in accordance with commercial and tax legislation and not having in any concrete way been subjected to any analysis or examination, nor substantively questioned within the framework of the Tax Inspection to which the AT alludes, the law, in this case article 75, paragraph 1 of the LGT, attributes to them a presumption of truthfulness.
126 - Thus, in light of the presumption of truthfulness conferred, in the domain of tax-legal relations, to the facts recorded in the mentioned documents and the transmission of the vehicles to their acquirers being held as true, it would fall to the AT, in light of the provision in article 75, paragraph 2 of the LGT, within the scope of the substantiated and objective reasons it had, to demonstrate that such sales in reality did not occur, it not being sufficient to assert, as it does, that in accordance with the tax inspection report made of the Claimant it is quite evident that "(…) the greater part of the billing relating to scrap issued by X…, Lda, Z… Lda and W…, Lda constitutes fictitious or gratuitous billing (…)". (emphasis added)
127 - The presumption established in the previously mentioned article 75, paragraph 1 of the LGT when it states that the said documents enjoy a presumption of truthfulness, implies in effect that if it is not demonstrated by the AT the absence of correspondence between the content of such documents and reality, as it was not - and could have been had the Tax Inspection mentioned in the record had a different scope and temporal scope - its content should be considered true.
128 - The documents presented by the Claimant, as means intended to make proof of the transactions of the vehicles in question, enjoying thus the mentioned presumption of truthfulness, appear with sufficient suitability in order to demonstrate the said transactions, constituting in our view an appropriate and capable means of proof to rebut the presumption established in article 3, paragraph 1 of the CIUC.
129 - In light of what has just been stated and taking into account both the presumption established in article 3, paragraph 1 of the CIUC and the transfer of ownership of the vehicles in question by mere effect of the contract prior to the date when the tax became due and the legal value of motor vehicle registration in the economy of the CIUC, the tax acts under challenge cannot merit our agreement, whether because an appropriate interpretation and application of the legal rules on subjective incidence was not taken into account, which constitutes an error as to the legal prerequisites, whether because the said acts were based on a matter of fact clearly divergent from the actual reality, which constitutes an error as to the factual prerequisites.
130 - Under these circumstances, taking into account on the one hand that the presumption established in article 3, paragraph 1 of the CIUC was rebutted and that on the other the vehicles in question in the present case were sold on a date prior to when the tax became due that is to the moment when the Administration can demand the tax obligation, one cannot fail to consider that at the moment when the tax became due in light of the provision in article 6, paragraph 3, combined with article 4, paragraph 2, both of the CIUC, the Claimant was not the taxable person of the tax in question.
131 - The AT when it understands that the taxable persons of IUC are definitively the persons in whose name the motor vehicles are registered without considering that article 3, paragraph 1 of the CIUC constitutes a presumption nor taking into account the probative elements presented to it as results from the administrative process is proceeding with the illegal assessment of IUC based on the erroneous interpretation and application of the rules on subjective incidence of the Single Vehicle Tax contained in the said article 3 of the CIUC whether at the level of the incidence or the determination which configures the practice of a tax act lacking in legality due to error as to the factual and legal prerequisites which determines the annulment of the corresponding tax acts by violation of law.
M - ARBITRAL COSTS
132 - With respect to arbitral costs more specifically regarding responsibility for their payment which the AT in the measure that it did not occasion the request for arbitral decision considers owed by the Claimant "in accordance with article 527, paragraph 1 of the New Code of Civil Procedure ex vi of article 29, paragraph 1-e) of the RJAT" it is only important to note that in light of the provisions in paragraph 2 of the said article 527 of the CPC the losing party bears "[…] the costs of the case in the proportion in which it is defeated" and thus what will be applied in the case at hand.
CONCLUSION
133 - Within the circumstances that have been referred to the AT when practicing the assessment acts at issue in the present case founded on the idea that article 3 paragraph 1 of the CIUC does not establish a rebuttable presumption makes an erroneous interpretation and application of this rule committing an error as to the legal prerequisites which constitutes violation of law.
134 - On the other hand because the AT on the date of the occurrence of the tax facts considered the Claimant owner of the vehicles referenced in the present case considering it as such taxable person of the tax when such ownership with respect to the vehicles in question no longer was inscribed in its legal sphere basing itself thus on a matter of fact divergent from the actual reality commits an error as to the factual prerequisites and therefore violation of law.
III - DECISION
135 - Thus in view of all the foregoing this Arbitral Tribunal decides:
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To declare founded by proved evidence based on grounds of violation of law the request for arbitral decision insofar as it concerns the annulment of the IUC assessment acts and compensatory interest to which the Claimant's request refers relating to the years 2009 to 2012 as identified in the record relating to the vehicles identified in the case;
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To annul consequently both the IUC assessment acts and the assessment acts of the compensatory interest thereto associated relating to the years 2009 to 2012 relating to the vehicles as previously mentioned;
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To condemn the AT to pay the costs of the present case.
VALUE OF THE CASE
In accordance with the provisions in articles 306, paragraph 2 of the CPC (former 315, paragraph 2) and 97-A, paragraph 1 of the CPPT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings the case is fixed at the value of € 2,401.80.
COSTS
In accordance with the provision in article 12, paragraph 2 at the end in article 22, paragraph 4 both of the RJAT and article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I which is appended thereto the amount of total costs is fixed at € 612.00.
Let it be notified.
Lisbon, 07 January 2015
The Arbitrator
António Correia Valente
(The text of the present decision was prepared by computer in accordance with article 131, paragraph 5 of the Code of Civil Procedure (former 138, paragraph 5), being applicable by referral of article 29, paragraph 1 subparagraph e) of Decree-Law No. 10/2011, of 20 January (RJAT), its drafting being governed by the spelling prior to the Orthographic Agreement of 1990.)
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