Summary
Full Decision
ARBITRATION DECISION
I – REPORT
1. A…, LDA., legal entity no.…, with registered office at Rua …, no.…, Lisbon, filed, on 28-06-2017, a request for constitution of the arbitral tribunal, in accordance with the provisions of articles 2nd and 10th of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LRBT), in conjunction with article 102nd of the TCPT, in which the Tax and Customs Authority (hereinafter referred to only as Respondent) is requested.
2. The claimant intends, with its request, the declaration of illegality of the act of assessment of Single Circulation Tax (IUC), relating to the year 2016, subject of assessment no. 2016 … and compensatory interest no.…, with the consequent reimbursement of the tax paid, as well as the recognition of the right to indemnatory interest.
3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 30-06-2017.
3.1. The claimant did not proceed to appoint an arbitrator, wherefore, under the provisions of subparagraph a) of no. 2 of article 6th and subparagraph b) of no. 1 of article 11th of the LRBT, the President of the Deontological Council appointed the undersigned as arbitrator of the arbitral tribunal, who communicated acceptance of the appointment within the legal deadline.
3.2. On 14-08-2017 the parties were notified of the appointment of the arbitrator, and no impediment was raised.
3.3. In accordance with the provisions of subparagraph c) of no. 1 of art. 11th of the LRBT, the arbitral tribunal was constituted on 31-08-2017.
3.4. In these terms, the Arbitral Tribunal is properly constituted to examine and decide on the object of the proceedings.
3.5. Duly notified, the AT submitted its response within the legal deadline, defending itself by way of exception and impugnation, attaching a copy of the administrative file.
4. By order of 13-11-2017 the meeting provided for in art. 18th of the LRBT was dispensed with and, with the consent of the parties, the submission of arguments.
5. To substantiate the request for arbitral pronouncement, the claimant alleges, in summary, the following:
She was notified of the disputed assessment which relates to the vehicle with registration …-…-…, which was first registered in the Netherlands on 30-06-1968 and in Portugal on 09-11-2007.
Such assessment results from the fact that that vehicle was classified in category B of IUC, instead of being in category A, since the registration is prior to the year 1981.
In accordance with the provisions of article 3rd, no. 1 and 6th, no. 1 of CIUC, there can occur negative discrimination of used vehicles from other Member States in relation to similar national vehicles, which conflicts with Community law, more specifically art. 110th of the EU Treaty.
It thus understands that there has been an erroneous classification of the vehicle, for purposes of IUC, by the respondent, since it is not subject to IUC.
It concludes by requesting the annulment of the assessment and the restitution of the tax paid increased by indemnatory interest.
6. The Tax and Customs Authority submitted a response, having sustained, in summary:
Its lack of passive standing in the proceedings, given the existence of a pressing interest to act on the part of the Institute of Mobility and Transport, since only this entity may have knowledge of the facts relating to the classification of vehicles in different categories, thus demonstrating the necessary passive standing of that institute to intervene in the action.
From the reading of the initial request and attached documents, it is concluded that the request in question amounts to a request for an arbitral decision that determines the classification of the motor vehicle in category A. Since the object of the dispute cannot be qualified as an act of determination of the taxable matter that gives rise to the assessment of a tax for purposes of subparagraph b) of no. 1 of article 2nd of the LRBT, there is absolute incompetence of the arbitral forum ratione materiae.
Contrary to what is alleged by the claimant, it understands that the disputed assessment does not constitute any violation of the principle of equality, with no discrimination existing in the taxation of the motor vehicle in relation to vehicles from other Member States.
Both in terms of objective and subjective incidence, the motor vehicle …-…-…, property of the claimant, met the prerequisites for taxation under IUC.
The respondent concludes, petitioning for the dismissal of the action, also maintaining the legality of the assessment act contested by the claimant, which should thus be maintained.
II – Sanation
7.1. The tribunal is competent and properly constituted.
7.2. The parties have legal personality and capacity, show themselves to be legitimate and are properly represented (articles 4th and 10th, no. 2, of the LRBT and article 1st of Ordinance No. 112-A/2011, of 22 March).
7.3. The proceedings do not suffer from nullities.
7.5. The Respondent raised the exception of lack of passive standing of the AT and the incompetence of the tribunal ratione materiae.
Examining such exceptions:
The respondent sustains that, having been formulated a claim for condemnation of the AT in the annulment of the IUC assessment, based on the fact that the motor vehicle in question was erroneously classified in category B, given that the registration in Portugal was assigned on 09-11-2007, there is a pressing interest to act on the part of the IMT, IP, from which results the necessary passive standing of that entity, which will lead to the dismissal of the action.
In the same way, in view of that same claim - declaration of illegality of the IUC assessment, by virtue of the motor vehicle having been classified in category B – it alleges that this amounts to a request for an arbitral decision that determines the classification of the motor vehicle in category A, which will be excluded from the scope of tax arbitral jurisdiction, taking into account what is established in no. 1 of art. 2nd of the LRBT, from which would result the incompetence of the arbitral tribunal ratione materiae.
This latter exception will be addressed first, since, if it proceeds, it will prejudice the examination of the other issues raised.
It must be said, with all due respect, that the issue raised by the respondent is not understood, given the correct abstract legal framework that it previously makes.
In fact, as it correctly refers in art. 5th and 6th of the response, which are therefore transcribed:
- "the notion of claim is enshrined in article 581st, no. 3 of the CPC and corresponds to the legal effect that the plaintiff intends to derive from the action brought, translating into the relief that the Plaintiff requests from the court, being the cause of action, pursuant to no. 4 of the same article, the source of the law invoked, the act or legal fact on which the Plaintiff bases its claim and from which, in its view, the law proceeds".
- "Thus, the procedural subject matter of the present arbitral pronouncement proceedings is delimited by the respective claim and cause of action, as outlined in the request for arbitral pronouncement".
Now, as the respondent correctly states, it is precisely the claim that determines the effect intended by the Plaintiff and which thus delimits the type and scope of the legal action.
Having also properly identified the claim formulated by the claimant – cf. art. 7th of the response – which only intends to see annulled the IUC assessment and compensatory interest.
From the analysis of the claimant's submissions it results that the cause of action that substantiates the claim formulated resides in a deficient classification, carried out by the AT, in category B, thus subjecting the motor vehicle to IUC when, otherwise, it would not be. That is, what is at issue, in the version of the claimant, is an erroneous application of a norm of the actual or objective incidence of the tax.
It is not clear in what measure the intervention of the IMT could be called upon for the application of the norms of incidence of IUC, for whose administration the AT is exclusively competent, whereby that entity could never be a party to the action, starting precisely because from the possible success of the claim no prejudice would result for it (art. 30th, no. 2 of the CPC).
It is therefore manifest that there is no situation of lack of passive standing of the AT, nor of necessary joinder that would presuppose the intervention in the proceedings of the IMT, IP (art. 33rd of the CPC), the exception raised by the respondent being unfounded.
And the same reasoning will apply to provide a response to the invoked incompetence of the tribunal ratione materiae.
In fact, as has already been said, the claimant's claim amounts only to the annulment of the IUC assessment and compensatory interest, by considering that the respective act is affected by illegality.
Now, the arbitral tribunal is competent to examine claims relating to the declaration of illegality of acts of assessment of taxes whose administration is entrusted to the AT [subparagraph a) of no. 1 of art. 2nd of the LRBT and art. 2nd and no. 1 of art. 3rd of Ordinance No. 112-A/2011, of 22 March].
Moreover, in the arbitral claim - by analogy with the judicial impugnation proceedings – defects are examined that affect the validity of the questioned act, being admissible as a ground "any illegality" and specifically the erroneous classification of the tax act [art. 99th of the TCPT by virtue of art. 29th, no. 1 a) of the TCPT].
As the initial request is formulated, there is no doubt that the claimant bases its claim on the illegality of the assessment act embodied in a deficient application of a norm of incidence of the CIUC, which, incontestably, integrates the material competence of the arbitral tribunal.
The exceptions raised by the respondent are therefore unfounded.
III – MATTERS OF FACT AND LAW
III.1. Matters of Fact
8. Matters of Fact
8.1. Taking into account the positions assumed by the parties and the documentary evidence attached to the proceedings, the following facts are considered proven, with relevance for the examination and decision of the issues raised:
The claimant was notified of the assessment of Single Circulation Tax (IUC), relating to the year 2016, subject of assessment no. 2016-… and compensatory interest no.…, having as payment deadline 20-04-2017.
From the referred assessment it appears "registration …-…-…", "category B" and "year of registration 2007".
On 23-06-2008 a customs vehicle declaration (DAV) was completed, from which it appears:
- Used Vehicle
- Country of Origin: NL Netherlands
- Date of first registration: 1968-06-30
- Previous registration: …
- Date of end of previous registration: 2007-06-12
- Date of transmission: 16-01-2007
- Special regime for ISV – Antique Automobiles
- Registration …-…-… – Date: 2007-11-09
The claimant proceeded to pay the tax.
8.2. There are no other facts with relevance for the examination of the merits of the case that have not been proven.
8.3. Justification of the matters of fact:
The matters of fact given as proven are based on the critical examination of the documentary evidence, not disputed.
III.2. Matters of Law
The claimant intends that the illegality of the assessment act on the motor vehicle with registration …-…-…, relating to the year 2016, be declared, by considering that, by virtue of it having had its first registration on 30-06-1968 – that is, prior to 1981 - should be classified in category A and, as such, is not subject to IUC.
The respondent, in turn, defends the legality of the assessment which is the result of the application of the norms of the CIUC, equally to all vehicles registered in Portugal.
Law 22-A/2007 of 29 June, which carried out the reform of motor vehicle taxation, approving the CIUC, provides in art. 2nd, no. 1, that "the single circulation tax applies to vehicles of the following categories, registered in Portugal".
Establishing no. 1 of art. 6th that "the taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration in national territory".
In turn, it establishes no. 1 of art. 3rd that "the passive subjects 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".
Thus, from the reading of the norms of actual real incidence pointed out, it results that the determining element for tax subjection is the registration in national territory. That is, the date that is relevant for the determination of subjection, or not, to the single motor vehicle circulation tax is the date of registration in Portugal. That is, it will be irrelevant the date of registration in the country of origin or, even, the date of manufacture.
The problem of application of IUC arises, however, in relation to motor vehicles which, in the abstract, would not be subject to IUC, but would already be if one were to attend exclusively to the date of assignment of registration in Portugal.
This is because no. 2 of art. 14th of the CIUC determines that this is applicable:
"- from 01-07-2007 to vehicles of category B registered from that date;
- from 01-01-2008, to the remaining vehicles".
Defining no. 1 of art. 2nd the different categories of vehicles for purposes of IUC:
"Category A: Light passenger motor vehicles and light utility motor vehicles with a gross weight not exceeding 2,500 kg registered from 1981 to the date of entry into force of this code;
Category B: Motor vehicles referred to in subparagraphs a) and d) of no. 1 of article 2nd of the Motor Vehicle Tax Code and light utility motor vehicles with gross weight not exceeding 2,500kg, registered on a date after the date of entry into force of this code".
The vehicle subject to the present proceedings had its first registration assigned on 30-06-2008 in the Netherlands, and was subject to registration in Portugal in the year 2007.
From this factuality it results that if one were to attend to the date of assignment of the first registration, the vehicle would be integrated in category A, whereby it would not be subject to IUC, whereas if we take into account the date of registration in Portugal, it would already integrate category A being, therefore, subject to IUC.
The claimant alleges that the application of IUC to the vehicle in question, whose registration was assigned prior to 2007 in a member state, constitutes a negative discrimination of used vehicles from other Member States in relation to similar national vehicles, which conflicts with Community law.
In turn, the respondent sustains that no such negative discrimination is verified, since the option made by the national legislator is legitimate, since the mechanism for obtaining revenue incorporated in the CIUC would only be censurable, in light of the principle of proportionality, if it resulted manifestly indefensible, which is not the case since such measure is applied indistinctly to all owners of vehicles in the same conditions.
We do not believe that the respondent is right.
In fact, we understand that the norms of objective incidence of the CIUC are not compatible with the law of the European Union, given the differentiated treatment based on the nationality of the original registration of the vehicle.
Such option effectively constitutes a negative discrimination of used vehicles from other Member States in relation to national vehicles in similar conditions. Which conflicts with art. 110th of the Treaty of the European Union when it provides that "no Member State shall impose, directly or indirectly, on the products of other Member States internal duties of any kind, higher than those imposed, directly or indirectly, on similar national products. Moreover, no Member State shall impose on the products of other Member States internal duties in such a way as to indirectly protect other production".
Regarding the pollution tax - with manifest parallelism with the situation in question - the Court of Justice of the European Union decided, in the Judgment of 7-04-2011, Case C-402/2009 (Tatu Case), that article 110 of the TFEU must be interpreted to the effect that it opposes a Member State creating a pollution tax that applies to motor vehicles at the time of their first registration in that Member State, if this fiscal measure is structured in such a way as to discourage the putting into circulation, in that Member State, of used vehicles acquired in other Member States, without, on the other hand, discouraging the purchase of used vehicles of the same age and with the same wear in the national market.
It is manifest that the norms of objective incidence in question constitute a clear disincentive to the purchase of vehicles originating from other Member States, as opposed to the purchase of vehicles with national registration in the same conditions.
Now, no. 4 of art. 8th of the CRP establishes the primacy of Community law, when it determines that the provisions of the treaties governing the European Union prevail over the norms of ordinary national law, in the terms defined by the organs of European Union law, provided that the fundamental principles of the Community rule of law are respected.
Hence, when the norms of ordinary internal law are not compatible with Community law, the Tribunal cannot apply them, suspending their binding force in the concrete case. "The national judge, charged with applying, within the scope of his competence, the provisions of Community law, has the obligation to ensure the full effect of those norms, leaving, if necessary, inapplied, by his own authority, any provision contrary to national legislation, even if subsequent, without having to request or await its prior elimination by legislative means or any other constitutional process" (Judgment of 09-03-1978 of the Court of Justice of the European Union, in Case 106/77 - Ac. Simmenthal).
It follows from the above that the application by the respondent of the norms of incidence of IUC to the claimant is contrary to the law of the European Union, whereby it cannot be accepted, the assessment in question not being able to remain in the legal order, its annulment being imperative.
INDEMNATORY INTEREST
In addition to the reimbursement of the tax, the claimant intends that the right to payment of indemnatory interest be declared.
Such right is enshrined in article 43rd of the LGT, which has as a prerequisite that it be determined, in gracious reclamation or judicial impugnation - or in tax arbitration – that there was error attributable to the services from which results the payment of the tax debt in an amount higher than legally due.
The recognition of the right to indemnatory interest in the arbitral proceedings results from the provisions of article 24th, no. 5 of the LRBT, when it stipulates that "payment of interest is due, regardless of its nature, in the terms provided in the general tax law and in the Code of Tax Procedure and Process".
It happens that, in the case in question, the requirements for the award of indemnatory interest are not met.
It is true that the respondent carried out an act which the arbitral tribunal now decides to be illegal.
But, for the Tax Administration to be condemned to the payment of indemnatory interest, it is necessary, as mentioned, that "it be determined […] that there was error attributable to the services from which results the payment of the tax debt in an amount higher than legally due" (no. 1 of article 43rd of the LGT).
In this case, the AT did nothing more than act in accordance with the legal determination arising from the CIUC. And it could not have acted otherwise, considering its binding to the law and the impossibility of disapplying it on the basis of a judgment of supremacy of Community law in relation to internal law, which is not its role to make. In short, it did not incur in error from which resulted the payment of undue tax, and cannot, in the absence of such error, be condemned to the payment of indemnatory interest.
Therefore, the claim for condemnation of the respondent to the payment of indemnatory interest is doomed to fail.
IV. DECISION
In these terms, this Arbitral Tribunal decides:
To judge the arbitral claim founded and, in consequence, to declare the illegality of the IUC assessment no. 2016… and of compensatory interest no. … and its consequent annulment.
To judge unfounded the claim for payment of indemnatory interest, absolving the respondent thereof.
To condemn both parties to the payment of the costs of the proceedings, in the proportion of 96% by the respondent and 4% by the claimant.
V. VALUE OF THE PROCEEDINGS
The value of the proceedings is fixed at 421.56 €, in accordance with article 97th-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by force of subparagraphs a) and b) of no. 1 of article 29th of the Legal Framework for Tax Arbitration and no. 2 of article 3rd of the Regulation of Costs in Tax Arbitration Proceedings.
VI. COSTS
The arbitration fee is fixed at 306.00 €, in accordance with Table I of the Regulation of Costs of Tax Arbitration Proceedings, in accordance with articles 12th, no. 2, and 22nd, no. 4, both of the Legal Framework for Tax Arbitration, and article 4th, no. 4, of the cited Regulation.
Let notification be made.
Lisbon, 16 February 2018
The Arbitrator
(António Alberto Franco)
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