IUC Tax on Leased Vehicles: Who Pays - Leasing Company or User? CAAD 372/2015-T

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 372/2015-T

Subject: IUC, financial leasing, subjective incidence

CLAIMANT: A…, SA

RESPONDENT: TAX AND CUSTOMS AUTHORITY

I – REPORT

A) The Parties and Constitution of the Arbitral Tribunal

1. A…, SA, Legal Person No. …, with registered address at Rua …, No. …, …, Lisbon, hereinafter referred to as "Claimant", requested the constitution of a singular Arbitral Tribunal, in accordance with article 2, No. 1, paragraph a) and article 10, Nos. 1 and 2 of Decree-Law No. 10/2011, of 20 January, hereinafter referred to as "RJAT", and Ordinance No. 112-A/2011, of 22 March, seeking a declaration of illegality of the 21 assessments of Single Vehicle Circulation Tax (IUC) described in Annex I attached to the present arbitral request, all relating to the taxation periods of 2013 to 2014, described in the Table attached to the arbitral request, which are contained in the Administrative Procedure filed with the dossier by the ATA, and which are hereby deemed to be fully reproduced for all due legal purposes, in the total amount payable of €2,882.23.

The request for constitution of the Arbitral Tribunal was submitted by the Claimant on 09-06-2015, was accepted by the esteemed President of CAAD on 11-06-2015 and notified to the Tax and Customs Authority on 25-06-2015.

The Claimant opted not to designate an arbitrator, wherefore, in accordance with the provisions of No. 1 of article 6 of RJAT, the present signatory was appointed as sole arbitrator on 07-08-2015 by the Deontological Council of the Administrative Arbitration Centre. The appointment was accepted and the parties were notified of the arbitrator's designation, having expressed no intention to refuse the appointment.

1. Thus, in compliance with the provisions of paragraph c), No. 1 of article 11, of Decree-Law No. 10/2011, of 20 January, as amended by article 228 of Law No. 66-B/2012, of 31 December (RJAT), the Singular Arbitral Tribunal was constituted on 26-08-2015. The TA was notified on the same date to submit a response within the legal deadline, in the terms and for the purposes of the provisions of Nos. 1 and 2 of article 17 of RJAT.

The TA submitted its response on 02-10-2015, which is hereby deemed to be fully reproduced. Given what was requested in the Response by ATA, regarding the waiver of evidence production and holding of the meeting provided for in article 18 RJAT, the Claimant, by request of 05-10-2015, came to waive the production of the witness testimony indicated, and, given that no exceptions were raised by ATA, agreed to the waiver of holding the meeting, as well as the presentation of arguments. Accordingly, an arbitral order was issued on 19-10-2015, dispensing with the holding of the meeting provided for in article 18 of RJAT, as well as the presentation of arguments. A date was fixed to issue the arbitral decision by 26-11-2015, and the Claimant was notified to effect payment of the subsequent arbitration fee by that date.

B) THE CLAIMANT'S REQUEST:

1. The Claimant submits the present request for arbitral pronouncement seeking the illegality, with consequent annulment, of the 21 IUC assessments, relating to the periods of 2013 and 2014, itemized in the Annex to the Arbitral Request, in the total amount of €2,882.23.

All of these assessments are duly identified and itemized in the table attached to the arbitral request, with identification of the vehicle registration of which they relate and the legal situation in which they are found, wherefore the content of said attached table is hereby deemed to be fully reproduced.

1. In summary, it alleges that it is a credit institution subject to supervision by the Bank of Portugal, which pursues its activity in the branch of automotive financing, namely under the modality of granting loans for the acquisition of vehicles or the conclusion of financial leasing contracts, as is the case with all vehicles identified in the present dossier, to which the disputed IUC assessments relate. The Claimant disagrees with all of these assessments, inasmuch as it is not a taxable person of IUC regarding the vehicles and the periods in question.

In all cases covered by the present arbitral request, the Claimant is not a taxable person, to the extent that all vehicles were subject to a bareboat leasing arrangement, concluded with the subjects identified in Annex I, who used them and enjoyed the prerogatives arising from the contracts in force. Thus, there occurs a ground for exclusion from the subjective incidence of tax. It further invokes the illegitimacy of the lessors to pay the IUC, whereby the impugned acts are affected by an error as to the assumptions of the tax fact, which constitutes a defect of violation of law. It attaches two opinions as Annexes B and C, in support of its thesis, as well as numerous arbitral jurisprudence.

It concludes by petitioning for the annulment of the IUC assessments, in the total amount of €2,882.23, the reimbursement of this amount fully paid by the Claimant, as well as the payment of compensatory interest for the deprivation of said amount, in accordance with article 43 of the General Tax Law.

C – THE RESPONDENT'S RESPONSE

1. The Respondent ATA, duly notified for this purpose, timely submitted its response in which, by way of challenge, it alleged, in summary, the following:

a) It questions the value of the arbitral jurisprudence as well as the Opinions attached by the Claimant;

b) It further alleges that the Claimant's position is not well-founded, whose position is based on a clearly erroneous interpretation and application of the legal norms applicable to the case sub judice. Article 3 of CIUC does not entail any legal presumption, whereby the taxable person of the tax is the owner of the vehicle, as results from the databases that serve as the basis for ATA to proceed with the assessment, namely: Institute for Land Transport Mobility (IMTT) and Institute of Registration and Notary/Automobile Registry Office (IRN).

c) The understanding defended by the claimant incurs a biased reading of the letter of the law, corresponds to an interpretation that does not heed the systematic element, violating the unity of the regime consecrated throughout the CIUC and, more broadly, throughout the entire tax-legal system and further derives from an interpretation that ignores the ratio of the regime consecrated in the article at issue, and likewise throughout the CIUC;

d) It concludes, therefore, that the legislator established expressly and intentionally that those persons in whose names such vehicles are registered are to be considered as such, inasmuch as this is the interpretation that preserves the unity of the tax-legal system and any other interpretation would be to ignore the teleological element of interpretation of the law: the ratio of the regime consecrated in the article at issue, and likewise throughout the CIUC; it reinforces this allegation by invoking that this is the understanding followed by the jurisprudence of our courts expressed in the judgment handed down by the Administrative and Tax Court of Penafiel, in the scope of Case No. 210/13.0BEPNF;

e) It seeks the complete dismissal of the arbitral request, whereby the TA should not be held responsible for payment of procedural costs, as the emission of the assessments is entirely attributable to the Claimant.

II - PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is regularly constituted. It is materially competent, in accordance with article 2, No. 1, paragraph a) of Decree-Law No. 10/2011, of 20 January.

2. The Parties enjoy legal capacity and standing, are legitimate and are legally represented (Cf. article 4 and article 10, No. 2 of DL No. 10/2011 and article 1 of Ordinance No. 112/2011, of 22 March).

3. As regards the cumulation of claims, seeking the joint consideration of the legality of 131 IUC assessments, relating to the years 2013 to 2014, although they constitute autonomous acts, relating to differentiated situations, the requirements provided for in No. 1 of article 3 of RJAT and article 104 of CPPT are satisfied, cumulation is to be admitted. Thus, in the same arbitral request, the cumulation of claims for declaration of illegality of all tax assessment acts of IUC and respective compensatory interest associated therewith is accepted, given the identity of the tax and the consideration of the tax acts in question depending on the consideration of the same factual circumstances and the application of the same legal rules. This is the case in the present arbitral request. The legal requirements permitting the cumulation of claims are thus fulfilled, in accordance with the provisions of articles 104 of CPPT and article 3, No. 1 of RJAT, considering the identity of the tax and the jurisdiction of the tribunal, which is accepted by this Tribunal.

4. The process does not suffer from defects that would invalidate it.

III - FACTUAL GROUNDS

1. Taking into account the documentary evidence submitted to the dossier, it is now necessary to present the factual matter relevant to the understanding of the decision, which is established as follows.

A) Established Facts

1. As relevant factual matter, this tribunal finds the following facts established:

a) The Claimant is a credit institution whose substantial activity consists of automotive financing, through the conclusion, among others, of financial leasing contracts and long-term rental (ALD) agreements of vehicles without drivers, intended for the acquisition, by companies and individuals, of motor vehicles;

b) The Claimant was notified to proceed with payment of the 21 IUC assessments here disputed, relating to the years 2013 and 2014 and respective compensatory interest, relating to vehicles with the registrations identified in the IUC assessments attached to the dossier as documents Nos. 1 to 21 attached to the arbitral request;

c) The disputed assessments correspond to vehicles identified with registration, month of registration, tax amount, compensatory interest amount, all duly itemized in the table attached to the Arbitral Request Annex I, which is hereby deemed to be fully reproduced, as follows:

1-Vehicle with registration … - IUC assessment No. 2013…;

2-Vehicle with registration … - IUC assessment No. 2013…;

3-Vehicle with registration … - IUC assessment No. 2013…;

4-Vehicle with registration … - IUC assessment No. 2013…;

5-Vehicle with registration … - IUC assessment No. 2013…;

6-Vehicle with registration … - IUC assessment No. 2013…;

7-Vehicle with registration … - IUC assessment No. 2013…;

8-Vehicle with registration … - IUC assessment No. 2013…;

9- Vehicle with registration … - IUC assessment No. 2013…;

10-Vehicle with registration … - IUC assessment No. 2013…;

11-Vehicle with registration … - IUC assessment No. 2013…;

12-Vehicle with registration … - IUC assessment No. 2014…;

13-Vehicle with registration … - IUC assessment No. 2014…;

14-Vehicle with registration … - IUC assessment No. 2014…;

15-Vehicle with registration … - IUC assessment No. 2013…;

16-Vehicle with registration … - IUC assessment No. 2013…;

17-Vehicle with registration … - IUC assessment No. 2013…;

18-Vehicle with registration … - IUC assessment No. 2013…;

19-Vehicle with registration … - IUC assessment No. 2013…;

20-Vehicle with registration … - IUC assessment No. 2013…;

21-Vehicle with registration … – IUC assessment No. 2013….

d) For each of these vehicles, at the date of the tax facts, a financial leasing contract and respective PCV contract were in effect, as mentioned in the aforementioned Annex A, and evidenced by documents Nos. 22 to 42 attached to the arbitral request, in which all lessees, natural and legal persons, are duly identified with names, respective Tax Identification Numbers and addresses;

e) With reference to the vehicles identified in c) and in the same order indicated therein, were lessees, at the date of the tax facts, respectively, (1) B…, (2) C…, (3) D…, (4) E…LDA, (5) F… LDA, (6) G… LDA, (7) H…, (8) G… LDA, (9) I…, (10) J…, (11) K…, (12) L…, (13) M…, (14) N…, (15) O…, (16) P…, (17) Q… LDA, (18) R…, (19) S…, (20) T…LDA, (21) U… UNIPESSOAL LDA. - Cf. Docs. Nos. 22 to 42 attached to the dossier by the claimant.

f) From the analysis of the financial leasing contracts attached to the dossier by the Claimant, it results that in the month of registration relating to each of the vehicles identified, the respective leasing contract was in effect;

g) All amounts contained in the disputed IUC assessments (IUC and compensatory interest) were paid, as results from documents Nos. 1 to 21 attached to the dossier, in the total amount of €2,882.23;

h) At the date of the tax facts, the motor vehicles referenced in the disputed IUC assessments were registered in the automobile registry in the ownership of the now Claimant, in the capacity of owner and of the respective lessees, in that same capacity;

i) At the date of the tax facts of assessment, the TA had the information elements contained in the databases of the Property Registry Office and IMTT;

j) At no time did the Claimant have the enjoyment of the vehicles, with exclusive use borne by the respective lessees.

B) GROUNDS FOR THE ESTABLISHED FACTS

1. The decision on the factual matter as described above is based on the documentary evidence submitted by the Claimant and which forms part of the present dossier. The Tribunal particularly considered the corporate purpose of the Claimant and the specific nature of its economic activity, relevant to the factual reality underlying the commercial situations relating to the various contracts having as their object the vehicles identified above, evidenced by the documents attached to the arbitral request.

C) UNPROVEN FACTS

1. There are no other facts regarded as unproven, since all facts relevant to the consideration of the request were regarded as proven.

IV – LEGAL GROUNDS

1. The factual matter having been established, it is important to address the legal issues relevant to the decision, corresponding, in summary, to the illegality raised by the Claimant in the present arbitral request, which is reduced to the question of the subjective incidence of IUC, namely during the validity of the financial leasing contracts and, by force thereof, the determination of the effects of automobile registration and the existence or otherwise of a rebuttable presumption.

2. It is important to verify whether the Claimant should be qualified as a taxable person of the Single Vehicle Circulation Tax, assessed in relation to the years 2013 and 2014, with respect to the vehicles identified in the request for arbitral pronouncement.

As the Claimant itself refers to in the arbitral request, the fundamental issue to be decided is whether, during the validity of the financial leasing contracts for the vehicles identified in the table attached as ANNEX A, it should be the Claimant or the lessees who are taxable persons.

First of all, it is necessary to consider the terms of the configuration of the subjective incidence of IUC in light of the provisions of article 3 of the Single Vehicle Circulation Tax Code (CIUC), namely, the question of whether the subjective incidence is strictly based on the registration of vehicle ownership in the Automobile Registry, or whether registration merely operates as a rebuttable presumption of tax incidence, in accordance with the provisions of article 73 of the General Tax Law. On this matter, arbitral jurisprudence is already abundant and fairly definitive, expressed in various decisions that have already pronounced on this same issue. However, it is important to analyze the specific case in its particularity.

1. The fundamental legal framework applicable to this matter is provided for in articles 1 to 6 of CIUC, approved by Law No. 22-A/2007, of 29 June.

Article 1 of CIUC defines the objective incidence of the tax, distinguishing vehicles by specified categories, a norm that appears clear and without difficulty of application. However, the same does not occur with the norm of subjective incidence contained in No. 1 of article 3 of CIUC, which is at the origin of the present dispute and thus constitutes the issue to be decided in the case under consideration.

The analysis of both provisions (articles 1 and 3) allows for the conclusion that in the functioning of IUC, automobile registration has a fundamental role, but what truly matters is to determine the meaning and scope of the norm of subjective incidence contained in article 3, No. 1 of CIUC and the possible existence or otherwise of a rebuttable presumption, connected with the question of the legal effects of automobile registration, raised by the Claimant.

On this issue, the positions of the parties are summarized as follows:

• For the Claimant, it cannot be considered a taxable person of IUC, by force of the leasing contracts in effect and the rule proper contained in No. 2 of article 3 of CIUC which provides, specifically for this case, that responsibility for payment falls on the lessees;

• For the Respondent, article 3, No. 1 of CIUC establishes a norm of tax incidence and not mere rebuttable presumption, and that even in the case where financial leasing contracts are in effect, the lessor does not cease to be the lessor and, by force thereof, is the taxable person.

Let us then see what results from the legal regime in force and its application to the specific case at hand. Article 3 of CIUC provides:

"ARTICLE 3

SUBJECTIVE INCIDENCE

"1 - The taxable persons 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 names the same are registered.

2 - Lessees under financial leasing arrangements, purchasers with reservation of title, as well as other holders of purchase option rights by force of the leasing contract are equated to owners."

In the case of the present dossier, it is important not only to determine the meaning and scope of the norm contained in No. 1, but above all the norm contained in No. 2, especially designed to regulate the specific case of financial lessees, purchasers with reservation of title and other holders of purchase option rights.

The interpretation and application of any legal norm presupposes the performance of an interpretive activity, which must be objective, balanced, and in accordance with the letter and spirit of the law. Any text, and the law is no exception, carries multiple meanings and frequently contains ambiguous or obscure expressions. For that reason, although the letter of the law is "the guiding thread" of the interpreter, it must be interpreted taking into account the underlying objectives, "the ratio" or the motivation of the legislator in establishing the norm under consideration.[1]

In this sense, article 11, No. 1 of the General Tax Law establishes that "in determining the meaning of tax norms and in qualifying the facts to which they apply, the rules and general principles of interpretation and application of laws are observed."

To these elements is added another, according to which the interpretation of the legal norm must respect the "unity of the legal system," its coherence and intrinsic logic. Article 9 of the Civil Code (CC) provides the fundamental rules and elements for the interpretation of the legal norm, which must also be observed in the interpretation of tax law, which begins by stating that interpretation must not be limited to the letter of the law, but must reconstruct from it the "legislative thought."[2]

To these general principles are added those provided for in the General Tax Law, namely in article 73, which establishes that presumptions contained in norms of tax incidence always admit proof to the contrary.

With regard to the issue under consideration, it is important to highlight the contribution of arbitral decisions already handed down in cases Nos. 14/2013-T, of 15 October, 26/2013-T of 19 July, 27/2013-T, of 10 September, 217/2013-T of 28 February and, more recently, in the decisions handed down in cases 286/2013-T, of 2 May 2014 and 293/2013-T, of 9 June 2014, 46/2014-T and 89/2014-T of 5 September, among others, revealing careful reflection on the fundamental issue under consideration, both with regard to the meaning and scope of the provisions of No. 1 and No. 2 of this norm. In all of them, the understanding on this issue is unanimous: we are dealing with a rebuttable presumption.

To the same effect has pronounced, recently, the Supreme Administrative Court (STA), of 19-03-2015, handed down in case No. 08300/14, in which it was decided, in the same sense as the arbitral jurisprudence invoked, that "the aforementioned article 3, No. 1 of CIUC establishes a legal presumption that the holder of automobile registration is its owner, such presumption being rebuttable, by force of article 73 of the General Tax Law."

Wherefore, as to the question of whether, in light of the literal tenor of the provision of No. 1 of article 3 of CIUC, what is the scope of the expression "being considered as such," given that in the current version the legislator did not use the term "presumed" (which was contained in the extinct Vehicle Tax Regulation), this Tribunal understands, in harmony with the arbitral jurisprudence and the STA jurisprudence cited above, that it can only be the following: the legislator presumes (considers) that the owners are the persons in whose names the vehicles are registered. This means that such implicit presumption is naturally rebuttable in accordance with the provisions of article 73 of the General Tax Law.

The presumption established in article 3, No. 1 of the current CIUC was already consecrated in the earlier versions of the codes abolished with the entry into force of CIUC. Already article 3 of the Vehicle Tax Regulation (approved by Decree-Law No. 143/78) established that "the tax is owed by the owners of the vehicles, being presumed as such, until proof to the contrary, the persons in whose names the same are registered or recorded."

Likewise, article 2 of the Regulation of Circulation and Haulage Taxes (approved by Decree-Law No. 116/94) established that "the taxable persons of the circulation tax and haulage tax are the owners of the vehicles, being presumed as such, until proof to the contrary, the natural or legal persons in whose names the same are registered."

In fact, in the current version of the Code only the verb changed, the legislator now opting for the expression "being considered." It is certain that, between the earlier legislative versions and the current one, the General Tax Law entered into force, which expressly consecrated the principle contained in article 73, from which it results that in the matter of tax incidence any presumption always admits proof to the contrary. Therefore, it becomes irrelevant whether an express or implicit presumption is adopted, since one as well as the other are equally rebuttable.

Thus, it is understood that the fact that the legislator, in the current version of CIUC, opted for an implicit presumption (using the expression "being considered") instead of an express presumption (by recourse to the expression "presumed"), as happened previously, does not translate into a substantial change with respect to the subjective incidence of the tax. It is not, therefore, the ownership contained in the automobile register the condition, by itself determining the incidence of taxation in the context of IUC, but rather mere presumption that ownership belongs to the titled holder in the register, a presumption naturally rebuttable.

Furthermore, contrary to what is alleged by the Respondent, we can easily point to various examples, drawn from the tax legal system, in which the legislator opted for the use of the verb "consider," with a presumptive meaning.

Moreover, as already stated above, being a norm of tax incidence, it would never be admissible to consecrate an irrebuttable presumption. As stated by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in the annotation to No. 3 of article 73 of the General Tax Law, "presumptions in the matter of tax incidence may be explicit, revealed by the use of the expression 'presumed' or similar (…). However, presumptions may also be implicit in norms of incidence, namely of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not impractical to ascertain the actual value." And there are many examples of norms in which the verb "consider" is used to establish rebuttable presumptions, such as occurs with the provision of No. 2 of article 21 of CIRC, in article 89-A of the General Tax Law or in article 40, No. 1 of CIRS, among others.

The Respondent alleges, however, in its response presented, that this same word "being considered" is also normally used by the tax legal system to define situations other than presumptions. Now, this seems normal, namely in the case of other tax norms in which the legislator used the formula "is considered" or "are considered," but attributing it another meaning, since these are expressions which, depending on context, can assume a plurality of meanings, without which the conclusion sought by the Respondent can be drawn.

Given that the legal system should form a coherent whole, the examples mentioned above, as well as the doctrine and jurisprudence indicated, allow for the conclusion that it is not only when the verb "presume" is used that we are dealing with a presumption, but also the use of other terms or expressions, such as the term "is considered" can serve as the basis for presumptions.

As stated above, the literal element being the first instrument of interpretation of the legal norm, in search of legislative thought, it is important to confront it with the other elements of interpretation, namely the rational or teleological element, the historical element and the systematic element.

And, also in this line of reflection, this Tribunal cannot follow the argument adduced by the Tax Authority. With regard to the historical element, it must be noted that since the origin of the circulation tax, with the entry into force of Decree-Law No. 599/72 of 30 December, a presumption was expressly consecrated, regarding the taxable persons of the tax as being those in whose names the vehicles were registered or recorded. That version of the law used the literal expression "presumed as such."

However, attending to the purposes of the tax in question, it must be recognized that the use of the expression "is considered," in the current version, contemplates an expression with an effect similar to that, embodying, equally, a presumption. This is also the case in the formulation contained in No. 1 of article 3 of CIUC, in which a presumption was consecrated, revealed by way of the use of the expression "being considered," of similar meaning and equivalent value to the expression "presumed," in use since the creation of the tax in question. The use of the expression "being considered" is justified only by the fact that it appears more in harmony with the reinforcement given to vehicle ownership, which has now become the taxable event, in accordance with the provisions of article 6 of CIUC.

Wherefore, in light of the literal element of interpretation, nothing precludes the understanding that the provision of No. 1 of article 3 of CIUC establishes a rebuttable presumption. An understanding which also finds reception in recent jurisprudence of the STA on this matter.

Thus, as to the subjective incidence of the tax, it is to be concluded that there are no changes relative to the situation previously in effect in the scope of the Municipal Property Tax, Circulation Tax and Haulage Tax, as is widely recognized by doctrine, with a rebuttable presumption continuing to apply in this matter.[3]

1. To all that is left exposed, it is important to add that this understanding is also the only one that appears adequate and in accordance with the principle of material truth and justice, underlying the tax legal relationship. In the specific case, this is evidenced in the letter and the ratio legis of article 3, Nos. 1 and 2 of CIUC, since from both results the clear objective of the legislator to tax the real and effective owner and not one who, by circumstances of a different nature, is sometimes merely an apparent and false owner, by appearing in the automobile register. As is indeed referred to in Arbitral Opinion No. 63-2014-T of 15 September "… if the legislator had, as the Respondent claims, established in law a non-presumptive qualification as to who is the owner of the vehicles (a legal fiction), it would thereby be establishing, through a different formulation, a rule entirely identical to the hypothetical rule referred. It would be basing the subjective incidence of the tax on a legal fiction, in total disconnection from any economic substance as a basis for subjective incidence. (…) But the principle of efficiency of taxation cannot absolutely override the principle of contributive capacity, to the point of eliminating it as a criterion of subjective incidence. And it is also true that the tax legislator would have at its disposal other means of making the vehicle seller responsible, defaulting on its duty to communicate the vehicle sale, for payment of the tax, without being as a direct taxpayer (configuring, e.g., a case of tax liability for the debt of a third party). And if so, it will necessarily also follow that article 3, No. 1 can only establish a presumption of ownership of the vehicle, even with all the negative consequences that such a conclusion will entail, certainly, in terms of efficiency of tax administration."

For it to be so, the person whose name is inscribed in the automobile register must be allowed the possibility of presenting probative elements sufficient for the demonstration that the actual owner is, in fact, a different person from the one shown in the register, and that initially, and in principle, was presumed to be the true owner. Otherwise, one would accept the supremacy of the formal truth of the register over material truth, and it would be to accept the gross violation of the fundamental fiscal principles enunciated and, furthermore, of the principle contained in article 73 of the General Tax Law, according to which there are no irrebuttable presumptions in fiscal incidence matters. The legislator did not feel the need to maintain in the new incidence norm an express and rebuttable presumption, since after the entry into force of the General Tax Law (1999) "presumptions consecrated in norms of incidence always admit proof to the contrary." Therefore, in light of the tenor of article 73 of the General Tax Law, it would be technically incorrect to use the expression "presumed as such, until proof to the contrary," contained in the earlier version in force.

Moreover, it is possible to extract yet another argument from the provisions of article 7 of the Land Registry Code (which constitutes the fundamental legal basis in the matter of property registration), which provides that "definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it." In light of the principle of uniformity and intrinsic coherence of the legal system, no acceptable ground appears for the principle in effect in property registration in general to suffer an inflection or even an unjustified "trampling" in the matter of automobile registration.

1. If any doubt persisted, one would always say that, as to the elements of interpretation of a rational or teleological inclination, the statement of reasons of Bill No. 118/X of 07/03/2007, underlying Law No. 22-A/2007, of 29/06, is quite expressive in clarifying that the reform of automotive taxation is accomplished by way of shifting part of the tax burden from the moment of vehicle acquisition to the circulation phase and aims to "form a coherent whole" that, although intended for the raising of public revenue, intends that the same be raised in "measure of the environmental costs that each individual causes to the community," adding, regarding the tax in question and the different types and categories of vehicles, that "as a structuring and unifying element (…) the principle of equivalence is established, thus making it clear that the tax, as a whole, is subordinate to the idea that taxpayers should be burdened in measure of the cost they cause to the environment and the road network, being this the reason for being of this tax figure," further referring to being "(…) this principle that dictates the burdening of vehicles in function of their respective ownership and until the moment of scrapping (…)."

On this point, the position expressed in the recent Arbitral Decision No. 286/2013-T of 2 May 2014 is quite enlightening in stating that "It is this principle (of equivalence) that dictates the burdening of vehicles in function of their respective ownership and until the moment of scrapping, the common use of a specific taxable base, the revision of the framework of tax benefits in effect and the allocation of a portion of revenue to the municipalities of their respective use.

Now, to claim, as does the Respondent, that the legislator, in article 3, No. 1 of CIUC, established, whatever the technical means underlying it, the subjective incidence of the tax to the persons in whose names the vehicles are registered, with total independence of whether or not, in the relevant tax period, they are holders of the right to use the vehicle, above all of its ownership, would imply disregarding that purpose which presides over the normativity of taxation, well manifested in the objective incidence and in the taxable base associated with the various categories of vehicles (cf. articles 2 and 7 of CIUC). For a registration entry, without correspondence with the underlying title, possesses no value in providing satisfaction and compliance with such purpose, for it is not the persons in whose names the vehicles are inscribed when they are not holders of rights over their use who cause environmental and road costs, but rather such environmental and road costs are caused by the effective users of the vehicles, in accordance with the pertinent substantial legal situations, even if they do not appear, as they should, in the automobile register. The register, in fact, in no way testifies or serves the principle of equivalence established in article 1 of CIUC. Moreover, to assume that the determinative element of the objective subjective incidence is simple and exclusively the automobile register also does not allow one to assert a connection with any manifestation of contributive capacity relevant to, which, as a rule, in taxes not strictly commutative, is essential, since there should exist, without prejudice to praticability requirements, some effective connection between the tax and an economically substantial presupposition capable of founding the tax. The reason for being of the tax figure thus dismisses the idea that its incidence is tied strictly and exclusively to the very registration of vehicle ownership and not to the substantial situations attributive of the right to use the vehicles (article 3, Nos. 1 and 2 of CIUC) to which registration is intended to give publicity (cf. article 1 and article 5 of Decree-Law No. 54/75, of 12 February, with subsequent amendments, which regulates automobile registration)." [4]

Thus, the logic and rationality of the new system of automotive taxation presupposes and aims for a taxable person coinciding with the owner of the vehicle, on the assumption that this, and no other, is the real and effective subject causing environmental damage, as results from the principle of equivalence inscribed in article 1 of CIUC.

This principle of equivalence, which informs the current single vehicle circulation tax, underlies the polluter-pays principle, and realizes the idea, inscribed therein, that whoever pollutes must, therefore, pay. This is, in the end, about addressing the negative environmental externalities that arise from the use of motor vehicles, whether assumed by their owners and/or users, as costs that only they should bear.[5]

Any other understanding would imply accepting the possibility of taxing legal or natural persons without responsibility in the production of any environmental damage, while the real perpetrators of such damage would not be subject to the tax, absolutely defeating the regulatory purposes of the law itself, that is, its true ratio legis.

It is precisely in order to satisfy this objective that No. 2 of article 3 of CIUC equates to owners the lessees and holders of leasing contracts, to whom by force of contract falls the enjoyment and use of the vehicles. For this reason, in these cases, the subjective incidence of IUC falls to the lessees and not to the owners who appear in the register.

Now, it is within the scope of the application of this No. 2 of article 3 of CIUC that we find the solution for the specific case of the disputed assessments. Once the existence of leasing contracts in effect at the date of the tax facts is proven, and the lessees are duly identified, these are the true subjects of the tax.

1. The Respondent alleges, however, that with the Claimant appearing as owner in the automobile register, it is the taxable person of the tax.

This understanding is not accepted, primarily because the effects of registration, as clearly results from the provisions of articles 1 and 7 of the Land Registry Code (CRP), has a dual purpose: to give publicity to the legal situation of the property and to constitute a presumption that the right exists and belongs to the registered holder. These presumptions are, however, rebuttable by way of proof to the contrary, as expressly results from article 350, No. 2 of the Civil Code (CC) and, in tax matters, reinforced by article 73 of the General Tax Law.

It is established for doctrine and the jurisprudence of our superior courts that registration is not a condition of validity of the transactions subject or subject to it.[6]

Returning to the specific case under consideration in the present dossier, the TA recognizes that the registration of ownership of the 21 vehicles that gave rise to the 21 tax assessments are registered as the property of the Claimant, and rightly so, for until the materialization of full payment of the leasing contracts, it is the former that is the owner of the vehicles. But, as the Respondent alleges and rightly so, the leasing contract is also contained in the register, in which the lessee is duly identified, whereby, in light of the provisions of No. 2 of article 3 of CIUC, the taxable person of the tax becomes the lessee, who for this purpose is equated to the owner.

Finally, it should be noted that in the particular case of lessors, it is not true that the ATA does not have access to any information about the existence of contracts concluded by these companies and about their respective users, since the core of their business activity consists, precisely, in the conclusion of these contracts, which are also referenced in the automobile register.

Furthermore, the provision of article 19 of CIUC, which imposes on entities engaging in financial leasing the obligation to provide the TA with data relating to the fiscal identification of users of leased vehicles, is more information, but not the only source. It is intended, precisely, to provide the ATA with complete information about the lessees, but one cannot extract, without more, that the possible non-fulfillment of a communication obligation puts into question all the remaining information to which the ATA can and has access, via automobile register and IMTT databases. Moreover, its possible non-fulfillment, which the ATA alleges but does not demonstrate by understanding that it was up to the Claimant to provide proof of this communication, could never have as a consequence the non-application of the provision of No. 2 of article 3, but rather the application of the fine due.

Now, it does not make sense for the ATA's allegation at this point, for it recognizes that the law provides for the application of a fine for such non-compliance and has done nothing to comply with the law. We are inclined to believe that if the ATA verified this obligation was not fulfilled, it certainly would not fail, in due time, to collect the respective fine. On the other hand, the Respondent does not explicitly state that the obligation of compliance was not fulfilled but only that the Claimant did not provide proof of having done so.

This Tribunal understands that the burden of proof that fell to the Claimant was met, by proving the existence of financial leasing contracts, relating to the vehicles identified in the dossier, which were in effect at the date of the tax facts.

As for the fact alleged by the ATA, regarding the non-compliance by the claimant with the obligation provided for in article 19 of CIUC, it was up to the ATA to demonstrate it, in accordance with the provisions of articles 341, No. 1 of the Civil Code (CC), 74, Nos. 1 and 2 of the General Tax Law. And this demonstration would be easy to make if the Respondent had acted in accordance with the principle of the inquisitorial and legality. If there was no compliance with that obligation, it should have instituted the corresponding misdemeanor proceeding or demonstrating that in the exercise of its duty of prior investigation (inquisitorial principle) it attempted, by legal means, to inquire into what it deemed convenient regarding the legal situation of said vehicles.

It is also important to say that the requirement contained in article 19 of CIUC, once again, leaves no doubt as to whom the legislator intended to place the burden of payment of the tax, equating to the owner the financial lessees, purchasers with reservation of title, as well as other holders of purchase option rights by force of the leasing contract" (article 3, No. 2 of CIUC).

1. The ATA's allegation is not followed regarding the lack of sufficient probative elements to overcome the presumption, should it be understood that we are faced with a presumption established in No. 1 of article 3 of CIUC. For everything already stated above, it is established for this tribunal that article 3, No. 1 of CIUC establishes a rebuttable presumption. In light of the specific case under discussion in the present dossier, note that we are not faced with a situation of transfer of ownership with failure in the registration of the new owner, but rather with a case in which the registration is duly effected and ownership falls, effectively, to the Claimant, but which proves that the enjoyment or use of the vehicles was found, by force of leasing contract, in the availability of the persons, natural and legal, contained in the contracts in effect, copies of which it attached to the arbitral request. In other words, in light of the provision of No. 2 of article 3 of CIUC, it is to these (lessees) that the obligation to pay the tax fell.

The probative elements attached to the dossier are, in the perspective of this Arbitral Tribunal, sufficient proof for concluding the application of the provision of No. 2 of article 3 of CIUC. In this perspective, the burden of proof incumbent upon the Claimant was met and the demonstration of the existence of the leasing contracts attached to the dossier, with reference to each of the 21 vehicles, underlying the 21 disputed assessments and respective lessees, has been achieved.

1. Thus, the Respondent's allegation that the interpretation defended by the Claimant constitutes a biased reading of the law and is based on an interpretation contra legem, if shown to be contrary to the Constitution, does not prevail.

Now, for everything that is left exposed above, it is clear that the arbitral tribunal does not follow the Respondent in this allegation. It will, nonetheless, be important to add to all the arguments already exposed, a final one extracted from the jurisprudence of the Constitutional Court (TC) itself. Thus, it should be noted that, contrary to what is alleged by the Respondent, the consideration that the provision of article 3, No. 1 of CIUC establishes a rebuttable presumption represents the best interpretation and the most in accordance with the Constitution, as results from the decision of the TC with No. 348/97, of 29.4.1997, a position reiterated in decision No. 311/2003, of 28.4.2003, which declare the unconstitutionality of the "establishment by the tax legislator of a presumption 'juris et de jure' since 'it completely prevents taxpayers from the possibility of contradicting the presumed fact, subjecting them to a taxation that may be founded on taxable matter fixed in contravention of the principle of tax equality'." In conformity therewith, the Respondent's allegation is not seen to find acceptance.

1. Indeed, it must be considered that, given that the Claimant has an entrepreneurial nature and a substantial part of the activity forming part of its corporate purpose consists of the conclusion of financial leasing contracts and ALD intended for the acquisition of motor vehicles, the documents (leasing contracts) that were attached to the dossier by the Claimant are subject to strict legal requirements of an accounting and fiscal nature, with implications for the determination of the taxable matter, assessment and collection of other taxes and, consequently, benefit from the presumption of truthfulness, all the more so since they were not contested by the Respondent.

In these terms, it concludes that these means of proof are sufficient, in light of the provision of No. 2 of article 3 of CIUC, to demonstrate that at the date of the tax facts, the taxable persons of the tax were the lessees and not the Claimant.

Consequently, the decision of the TA which led it to the issuance and collection of the 21 tax assessments now disputed suffers from the defect of violation of law due to error as to the assumptions of fact and law underlying it. In light of the provision of No. 2 of article 3 of CIUC and the proof effected by the Claimant of the existence of the financial leasing contracts attached to the dossier, it is necessarily concluded that the claimant cannot be considered as a taxable person of the tax.

Having made this demonstration, the TA cannot persist in considering as the taxable person of IUC the now Claimant (lessor) because it appears in the register as its owner, completely disregarding the provision of No. 2 of the same article 3, which equates lessees to owners, for purposes of incidence, with the obligation to comply with the tax obligation falling to them.

Consequently of all the above exposed, it results that all disputed assessments are illegal, suffer from the defect of violation of law, due to error as to the assumptions of fact and law, whereby they must be subject to annulment, proceeding, consequently, to the reimbursement to the Claimant of the amounts unduly paid.

V - As to the Request for Payment of Compensatory Interest

1. Article 24, No. 1, paragraph b) of RJAT provides that the arbitral decision on the merits of the claim for which there is no remedy or challenge binds the tax administration from the end of the deadline provided for remedy or challenge, and it must — in the exact terms of the success of the arbitral decision in favor of the taxable person and until the end of the deadline provided for spontaneous execution of sentences of tax judicial courts — restore the situation that would have existed if the tax act that is the subject of the arbitral decision had not been done, adopting the necessary acts and operations for this purpose.

This provision is in harmony with the provision of article 100 of the General Tax Law, applicable to the case by force of the provision of paragraph a), No. 1 of article 29 of RJAT, in which it is established that "the tax administration is obligated, in the event of total or partial success of complaints or administrative remedies, or of judicial proceedings in favor of the taxable person, to the immediate and complete restoration of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided for by law."

For its part, article 43, No. 1 of the General Tax Law provides that "compensatory interest is due when it is determined, in an amicable settlement or judicial challenge, that there was an error attributable to the services from which resulted payment of the tax debt in an amount greater than legally due."

1. From the analysis of the probative elements contained in the present dossier, it is possible to infer that, by force of the provision of article 19 of CIUC, which requires lessors to communicate to the TA (precisely, for purposes of the provision of article 3 of said CIUC in respect of the subjective incidence of tax) the data relating to the fiscal identification of entities engaging in financial leasing and users of leased vehicles, it is possible to conclude that the TA had knowledge of factual elements, in essence, sufficient to proceed with the correct assessment of the tax.

But, even if this were not so, it would always be said that the ATA had the possibility of revoking the illegally practiced tax acts, which it could have done within the deadline for responding to the present request for arbitral pronouncement.

The error for which it is obligated to indemnify derives, therefore, from the erroneous application of the law in effect, whereby the tribunal cannot support the Respondent's allegation according to which it merely limited itself to applying the law, from which no error attributable to the services would result.

1. Thus being, in light of the provision of article 61 of CPPT and considering that the requirements of the right to compensatory interest are met, that is, verified the existence of an error attributable to the services from which resulted payment of the tax debt in an amount greater than legally due, as provided for in No. 1 of article 43 of the General Tax Law, the Claimant has the right to compensatory interest at the legal rate, calculated on the amount of €2,882.23, from the date on which payment was made until its complete reimbursement.

VI – As to what the ATA Alleges Regarding Arbitration Costs

1. Nor does the ATA have reason, in this matter as well, when it alleges that the transfer of ownership is not susceptible to being controlled by the Respondent (…) and that, not having the Claimant exercised due care in updating the automobile register (…), it is necessarily concluded that the Claimant did not act with due diligence.

Now, for everything that has been exposed previously, the issue in the present dossier does not concern the transfer of ownership of the vehicles, but rather the validity of the leasing contracts mentioned above with the consequences already exhaustively set forth. There is in this allegation a clear mistake by the Respondent. It is evident that the transfer of ownership did not occur, nor is this a fact under discussion in the dossier, inasmuch as at the date of the tax facts the leasing contracts attached to the dossier were in effect.

Thus, and without need for further considerations, its allegation on the matter of costs must also fail.

1. It does not appear that there are other relevant issues raised by the parties.

VII - DECISION

In view of the above, this Arbitral Tribunal decides:

A) - To uphold the arbitral request and, consequently, to declare the illegality of the 21 disputed IUC assessments in the present dossier, as they suffer from the defect of violation of law, due to error as to the assumptions of fact and law, annulling, consequently, the corresponding tax acts;

B) To uphold the claim for condemnation of the Tax Administration to reimburse the amount unduly paid, in the amount of €2,882.23, plus compensatory interest at the legal rate, calculated from the day of payment made until the day of its full payment.

C) To condemn the Respondent to the costs of the proceedings.

VALUE OF THE PROCEEDINGS: In accordance with the provision of articles 305, No. 2 of the CPC, article 97-A, No. 1, paragraph a) of CPPT and article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €2,882.23.

COSTS: In accordance with the provision of article 22, No. 4 of RJAT and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €612.00, at the charge of the Respondent.

Let it be registered and notified.

Lisbon, 24 November 2015

The Sole Arbitrator,

(Maria do Rosário Anjos)

[1] In this sense, cf. BAPTISTA MACHADO, Introduction to Legitimizing Discourse, p. 175 et seq.

[2] In this sense, see, among others, the Decisions of the STA of 05/09/2012 and 06/02/2013, respectively handed down in cases Nos. 0314/12 and 01000/12, available at www.dgsi.pt.

[3] In this sense, cf. Afonso, A. Brigas and Fernandes, M. (2009) Vehicle Tax and Single Vehicle Circulation Tax, Coimbra Editora, p. 187.

[4] In the same sense, cf. Arbitral Decisions Nos. 14/2013-T, 26/2013-T of 19 July 2013, 27/2013-T, 217-2013-T of 28 February and, more recently, 293/2013-T of 9 June 2014, among others.

[5] In this sense, and regarding the principle of equivalence, see Arbitral Decision No. 286/2013-T of 2 May 2014. In the same sense, see Arbitral Decisions Nos. 14/2013-T, 26/2013-T of 19 July 2013, 27/2013-T, 217-2013-T of 28 February and, more recently, 293/2013-T of 9 June 2014, 46/2014-T and 89/2014-T of 5 September, among others.

[6] In this sense, see, among others, the following Decisions of the STJ: Decision of STJ of 31.05.1966, in Case No. 060727 (Reporter: Counselor Lopes Cardoso), decision specifically concerning automobile registration; Decision of STJ of 5.05.2005 (Reporter: Counselor Araújo Barros) and Decision of STJ of 14.11.2013, in Case No. 74/07.3TCGMR.G1.S1 (Reporter: Counselor Serra Baptista), excellent in asserting the predominance of the principle of substance over form, validating proof, by any suitable means, of who is substantively the holder of the property right, which serves to rebut the presumption of the register.