IUC Tax Liability in Financial Leasing: Subjective Incidence and Vehicle Registration Presumption (CAAD 417/2014-T)

ARBITRAL DECISION

Case No. 417/2014-T

I. REPORT[1]

1. A… — …, LDA with registered office in … Oeiras, legal entity No. … (hereinafter referred to as the Claimant), filed on 09.06.2014, pursuant to Articles 2, No. 1, sub-paragraph a) and 10 of Decree-Law No. 10/2011 of 20 January, as amended (hereinafter the Legal Regime for Tax Arbitration or LRTA), an application for arbitral award seeking the annulment of decisions dismissing gracious complaints No. ...2014..., No. ...2014..., No. ...2014... and No. ...2014..., with the Tax and Customs Authority (hereinafter, the Defendant or TA) being the respondent.

a) Constitution of the Arbitral Tribunal

1. In accordance with Articles 5, No. 2, sub-paragraph a), 6, No. 1 and 11, No. 1, sub-paragraph a) of the LRTA, the Deontological Board of this Centre for Administrative Arbitration (CAAD) appointed the undersigned as sole arbitrator, who accepted the appointment.

2. In accordance with the provisions of sub-paragraph c) of No. 1 and No. 8 of Article 11 of the LRTA, as communicated by the President of the Deontological Board of CAAD, the Sole Arbitral Tribunal was constituted on 13.08.2014.

b) Procedural History

1. In the application for arbitral award (hereinafter initial petition or IP), the Claimant petitions for the annulment, insofar as the claims made were not granted, of the decisions on gracious complaints No. ...2014..., No. ...2014..., No. ...2014... and No. ...2014... concerning levies of Unique Circulation Tax (UCT) for the years 2009, 2010, 2011, 2012 and 2013, hereinafter identified.

The Claimant further petitions that "as a consequence of the annulment of the decisions of the Tax Authority and the respective UCT collection documents (...), a decision should be issued ordering the reimbursement of amounts unduly paid by the claimant in respect of UCT, compensatory interest and respective penalties, in the total amount of €59,143.67 (fifty-nine thousand one hundred and forty-three euros and sixty-seven cents), plus the respective indemnificatory interest provided for in Articles 43 of the LGT and Article 61 of the CPPT, as well as penalties unduly paid".

To substantiate the application for arbitral award, the Claimant contends, in essence, that such decisions were based on "erroneous interpretation of the law, namely the provisions of Article 3, No. 1 of the CIUC, since the presumption resulting from this provision admits proof to the contrary, and given the documentation attached in the proper place by the claimant and contained in the respective administrative files, it clearly proves that the ownership of the vehicles at the date of the incidence of Unique Circulation Tax belonged to third parties and consequently the claimant should not be considered a taxpayer of the said tax obligation".

1. The TA filed a response in which it petitions for the dismissal of the claims formulated by the Claimant, arguing the legal conformity of the acts that are the subject of the application for arbitral award.

2. By order of 20.10.2014, the Sole Arbitral Tribunal, pursuant to sub-paragraph c) of Article 16 of the LRTA, decided – which had the express agreement of the Claimant as confirmed by request of 3.11.2014 and was not opposed by the Defendant – that it was not necessary to hold the meeting referred to in Article 18 of the LRTA, as the circumstances provided for in the various sub-paragraphs of No. 1 of this provision were not present. It further decided, in accordance with No. 2 of Article 18 of the LRTA, that oral pleadings were not necessary, as the positions of the parties were perfectly set out in their respective pleadings, and fixed as the date for arbitral decision 3 December 2014.

c) Issue to be Decided

1. The core issue to be resolved on the merits of the case concerns the legal conformity of the tax acts that are the subject of the application for arbitral award regarding the qualification of the Claimant as a taxpayer of Unique Circulation Tax (UCT) relating to the vehicles and taxation periods identified in the IP.

To resolve this issue, in light of the grounds set out in the procedural documents of the parties, it is necessary to address the following matters:

i) to clarify the configuration of the subjective scope of application of the UCT covered by Article 3, No. 1 of the Unique Circulation Tax Code (CIUC), which involves deciding, according to the relevant hermeneutical legal criteria, whether tax liability is based strictly on the registration of the title, in which case the person in whose name the vehicle is registered constitutes the taxpayer of the tax, or whether, differently, the registration operates merely as a presumption of tax incidence, in regard to ownership or another legally relevant situation, which is rebuttable, in accordance with Article 73 of the General Tax Law, by whoever is not the registered owner of the vehicle, even if registered as such, by means of proof to the contrary made using the means of evidence admitted in Law;

ii) assuming that the law established merely a presumption of tax incidence, to verify, in regard to the means of evidence in the file, the legal situation of ownership of the Claimant in relation to the vehicles and taxation periods in question.

It is therefore necessary to examine and decide.

II. PROCEDURAL CLARIFICATION

1. Preliminary to this, it is necessary to resolve the procedural questions that emerge from the file.

In this context, the first issue to address concerns the jurisdiction of this Arbitral Tribunal given that the Claimant, in its IP, requests the condemnation of the TA to reimburse the "penalties unduly paid" (see above No. 4).

A breach of the rules of jurisdiction ratione materiae determines the absolute incompetence of the tribunal, whose recognition is ex officio (Articles 16, Nos. 1 and 2 of the Tax Procedure and Process Code applicable pursuant to Article 29, No. 1, sub-paragraphs a) and c) of the LRTA) and must precede the knowledge of any other matter (Article 13 of the Code of Procedure of the Administrative Courts applicable pursuant to Article 29, No. 1, sub-paragraph c) of the LRTA).

Article 2, No. 1 of the LRTA prescribes that the jurisdiction of arbitral tribunals is limited to the appreciation of the following claims: "a) The declaration of illegality of acts of levy of taxes, self-assessment, withholding at source and payment on account; b) The declaration of illegality of acts of determination of taxable matter when they do not give rise to the levy of any tax, of acts of determination of the tax base and of acts of determination of asset values". In view of this legal delimitation of the jurisdiction of tax arbitral tribunals, it is clear that disputes relating to the application of penalties in the context of tax misdemeanour proceedings are not covered (see Article 101, sub-paragraph c) of the LGT). This is, moreover, a conclusion already duly noted in the doctrine – see thus JORGE LOPES DE SOUSA, Guide to Tax Arbitration, Coimbra, Almedina, 2013, p. 105: "The appreciation of disputes arising (...) in tax misdemeanour proceedings thus remain outside the jurisdiction of these arbitral tribunals".

Thus, this Tribunal declares itself incompetent to rule on the matter relating to the claim formulated by the Claimant for reimbursement of amounts paid as penalties in the total amount of €13,205.82.

1. The accumulation of claims relating to the acts of express dismissal of the gracious complaints indicated above and to the tax acts of levy of Unique Circulation Tax (UCT) and compensatory interest maintained by them that are the subject of the IP proves to be admissible in view of Article 3, No. 1 of the LRTA, given that the success of the claims depends on the appreciation of the same circumstances of fact and the interpretation and application of the same rules of law.

2. Furthermore, the Tribunal was regularly constituted and has jurisdiction to rule on the substantive question indicated above (Article 2, No. 1, sub-paragraph a) of the LRTA), the parties have legal personality and capacity and have legitimacy (Articles 4 and 10, No. 2 of the LRTA and Article 1 of Regulation No. 112-A/2011, of 22 March).

III. DETERMINATION OF FACTS AND JUSTIFICATION THEREOF

1. Having examined the documentary evidence produced and the administrative tax files attached relating to gracious complaints No. ...2014..., No. ...2014..., No. ...2014... and No. ...2014... (hereinafter designated as AF1, AF2, AF3 and AF4), the Tribunal finds proved, with relevance to the decision of the case, the following facts:

I. The Claimant is a private limited liability company whose corporate purpose is the purchase, sale and rental of machines and motor vehicles (as per the permanent certificate with access code …-…-… attached as doc. No. 1 to the IP).

II. The Claimant was subject to official levies of UCT and compensatory interest as per documents shown at pages 27 to 209 of AF1, pages 27 to 189 of AF2, pages 30 to 254 of AF3, pages 29 to 227 of AF4, which are hereby reproduced by reference, concerning the vehicles and the years and in the terms set out in tables 1 to 14 presented in the following pages:

[Tables omitted in this format]

III. All vehicles identified in the tables contained in the previous point are registered in the name of the Claimant in the Motor Vehicle Registry (fact acknowledged in Nos. 15 and 30 of the IP).

IV. The vehicles identified in the tables contained in point No. II were sold to the Claimant's customers and, in three cases (vehicles with license plates …-…-…, …-…-…, …-…-…), totally lost, at a time prior to the month and year of taxation relating to the levied UCT, as per copies of invoices/receipts and documents at pages 210 to 300 of AF1, pages 190 to 290 of AF2, pages 254 to 205 of AF3, pages 228 to 335 of AF4 (which refer to "sale of used vehicle", "sale of salvage" and, in the three cases mentioned, to "compensation for total loss").

V. The Claimant proceeded, between July and October 2013, to pay the tax and compensatory interest resulting from the levies identified in the tables reproduced in point No. II, as per documents shown at pages 27 to 209 of AF1, pages 27 to 189 of AF2, pages 30 to 254 of AF3, and pages 29 to 325 of AF4.

VI. The Claimant filed on 17.12.2013, in relation to the levy acts identified in the tables contained in point No. II, gracious complaints with procedure numbers No. ...2014..., No. ...2014..., No. ...2014... and No. ...2014..., as per requests contained at pages 2 to 20 of AF1, pages 2 to 20 of AF2, pages 2 to 23 of AF3 and pages 2 to 22 of AF4.

VII. The Claimant was notified on 9.4.2014 of the decision for partial granting of gracious complaint No. ...2014..., as per doc. No. 2 attached to the IP, in accordance with which it was considered that it was demonstrated, by certificate of the Motor Vehicle Registry Office, that the Claimant was not the owner of the vehicle with license plate …-…-.., and the requests regarding the other vehicles contained in the gracious complaint were dismissed.

VIII. The Claimant was notified on 14.4.2014 of the decision for partial granting of gracious complaint No. ...2014..., as per doc. No. 3 attached to the IP, in accordance with which it was considered that it was demonstrated, by certificate of the Motor Vehicle Registry Office, that the Claimant was not the owner of the vehicle with license plate …-…-…, and the requests regarding the other vehicles contained in the gracious complaint were dismissed.

IX. The Claimant was notified on 14.4.2014 of the decision dismissing gracious complaint No. ...2014..., as per doc. No. 4 attached to the IP.

X. The Claimant was notified on 14.4.2014 of the decision for partial granting of gracious complaint No. ...2014..., as per doc. No. 5 attached to the IP, in accordance with which it was considered that it was demonstrated, by certificate of the Motor Vehicle Registry Office, that the Claimant was not the owner of the vehicle with license plate …-…-…, and the requests regarding the other vehicles contained in the gracious complaint were dismissed.

XI. The dismissal of the requests that were the subject of the gracious complaints referred to in the previous points was based on the following essential reasoning (point No. 3 of the information contained in docs. No. 2, 3, 4 and 5 attached to the IP):

"UCT is levied on the ownership of vehicles, as attested by registration (see No. 1 of Article 6 of the CIUC), and not on their use or enjoyment.

Furthermore, the tax is due so long as the license plate is not cancelled.

Now, being the cancellation of the license plate the administrative act by which authorization for the vehicle to circulate on public roads is withdrawn (see sub-paragraph b) of Article 2 of DL 128/2006, of 5/7, a contrario), and the IMT the entity with exclusive competence to maintain the national License Plate Register (see the article of the same diploma), so long as that institute does not cancel the license plate, the UCT will be due.

Notwithstanding that it may be admitted that, from the standpoint of civil law rules and property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effect, according to the terms established in the CIUC (which in the matter in question constitutes special law, which, in view of the general terms of law, derogates from the general rule), the tax legislator intentionally and expressly wished that those in whose name the vehicles are registered be considered as owners".

1. There are no facts relevant to the decision of the case found to be unproved.

2. The Tribunal's conviction regarding the facts found proved resulted from the acknowledgment of facts by the Claimant, the documents attached to the file with the IP and the documents contained in the AFs, all as specified in the points of the facts above set out.

It is noted, in particular, that the factuality relating to the sales and total loss of the vehicles to which the impugned levies relate, which was found proved in point No. IV, was based on documents issued by the Claimant that are considered sufficient evidence to form the Tribunal's conviction as to the reality of the verbal contracts of transfer of ownership of the vehicles to which they refer, as well as, in the cases indicated, their total loss. Such documents, by their accounting and tax significance, establish with precision the transactions to which they refer, and are therefore sufficient to establish the factuality indicated in the said point No. IV.

IV. LEGAL ANALYSIS

a) Legal Framework

1. The legal framework immediately relevant to the decision on the merits concerns the provisions contained in Articles 2, No. 1, 3, 4 and 6, No. 1 of the Unique Circulation Tax Code (CIUC), approved by Law No. 22-A/2007, of 29/06, as amended in the relevant respects ratione temporis.

Article 2, No. 1 of the CIUC, headed "Objective Scope", establishes the following:

"Unique Circulation Tax is levied on vehicles of the following categories, registered in Portugal:

a) Category A: Light passenger automobiles and light dual-purpose automobiles with a maximum gross weight of 2500 kg registered from 1981 until the date of entry into force of this Code;

b) Category B: Passenger automobiles referred to in sub-paragraphs a) and d) of No. 1 of Article 2 of the Motor Vehicle Tax Code and light dual-purpose automobiles with a maximum gross weight of 2500 kg, registered after the date of entry into force of this Code;

c) Category C: Freight automobiles and dual-purpose automobiles with a gross weight exceeding 2500 kg, intended for the private transport of goods, own-account transport, or rental without a driver for such purposes;

d) Category D: Freight automobiles and dual-purpose automobiles with a gross weight exceeding 2500 kg, intended for the public transport of goods, transport for account of others, or rental without a driver for such purposes;

e) Category E: Motorcycles, mopeds, tricycles and quadricycles, as defined by the Highway Code, registered since 1992;

f) Category F: Pleasure boats for private use with engine power of 20 kW or more, registered since 1986;

g) Category G: Aircraft for private use".

Then, Article 3 of the CIUC, concerning "Subjective Scope", provides that:

"1 - The taxpayers of the tax are the owners of the vehicles, considering as such the natural or legal persons, of public or private law, in whose name the same are registered.

2 - Financial lessees, acquirers with retention of ownership, as well as other holders of purchase option rights under lease contracts are equated to owners".

For its part, Article 4, concerning "Temporal Scope", states the following:

"1 - Unique Circulation Tax has annual periodicity and is due in full in each year to which it relates.

2 - The taxation period corresponds to the year which begins on the date of registration or on each of its anniversaries, in relation to vehicles of categories A, B, C, D and E, and to the calendar year, in relation to vehicles of categories F and G".

Finally, No. 1 of Article 6 of the CIUC, concerning "Taxable Event and Enforceability", determines that:

"The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration in Portuguese territory".

b) Arguments of the Parties

1. Having regard to this legal framework, the Claimant in its IP alleges, in essence, the following:

i) "The registration of ownership of a motor vehicle is mandatory (see Articles 1 and 5 of the regulation governing Motor Vehicle Registration) and aims only to 'give publicity' to the legal situation of property. There is (...) no rule in the Portuguese legal system on the constitutive character of motor vehicle ownership registration"(No. 29).

ii) "The motor vehicles listed in the above UCTs are in fact registered in the name of the present claimant, following the acquisition thereof. Therefore, the registration constitutes a presumption that it exists and belongs to the registered holder in the precise terms defined in the registration – see Article 7 of the Property Registry Code applicable by virtue of Article 29 of the Motor Vehicle Registration"(No. 30).

iii) "the expression 'considering as such' contained in No. 1 of Article 3 of the CIUC, constitutes a legal presumption and the same is rebuttable, given the provisions of Article 73 of the LGT, which admits that the presumptions established always admit proof to the contrary"(No. 49).

iv) "to rebut this presumption it is necessary either to prove the nullity of the registration, or to demonstrate the invalidity of the transaction, or still, that the ownership of the registered right belongs to another" – "it was precisely this demonstration – that the ownership of the vehicle belongs to a third party – that the claimant made, by attaching invoices for the sale of the vehicles and their respective salvage, contained in the UCTS, all dated months prior to the tax obligation incurred"(Nos. 32 and 33).

v) "From the copies of the invoices, we can extract that the sale of the vehicles took place at a moment prior to when the taxable event occurred and the consequent enforceability of the tax (see Articles 4 and 6 of the CIUC)", whereby "at the date of enforceability of the tax, the claimant was no longer the owner of the vehicles above identified in the administrative files, as the transfers had already taken place, in accordance with civil law"(Nos. 54 and 55).

1. For its part, in its response, the TA contends, in essence, the following:

i) the understanding advocated by the Claimant "not only incurs an skewed reading of the letter of the law, but also the adoption of an interpretation that does not attend to the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and further derives from an interpretation that ignores the ratio of the regime established in the article in question, and likewise, throughout the CIUC"(Article 8).

ii) "The tax legislator, in establishing in Article 3, No. 1 who are the taxpayers of the UCT, established expressly and intentionally that these are the owners (or in the situations provided for in No. 2, the persons mentioned there), considering as such the persons in whose name the same are registered"; "Even admitting that, from the standpoint of civil law rules and property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effect, according to the terms established in the CIUC (which in the matter in question constitutes special law, which, in view of the general terms of law, derogates from the general rule), the tax legislator intentionally and expressly wished that those in whose name (the vehicles) are registered be considered as owners, financial lessees, acquirers with retention of ownership or holders of the purchase option right in long-term leasing".(Articles 13 and 58).

iii) "(...) the legislator did not use the expression 'are presumed', as it could have done, for example, in the following terms: the taxpayers of the tax are the owners of the vehicles, being presumed as such the natural or legal persons, of public or private law, in whose name the same are registered", whereby "understanding that the legislator established here a presumption would unequivocally be to perform an interpretation contrary to law"(Articles 14 and 23);

iv) "the tax provision is replete with provisions analogous to that established in the final part of No. 1 of Article 3, in which the tax legislator, within its freedom of legislative configuration, expressly and intentionally, establishes what must be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others"(Article 15);

v) "In view of this wording [of Article 3, No. 1 of the CIUC] it is not manifestly possible to invoke that this is a presumption (...)"."It is, rather, a clear choice of legislative policy adopted by the legislator, whose intention, within its freedom of legislative configuration, was that, for the purposes of UCT, those who appear as such in the motor vehicle registration be considered as owners"(Articles 24 and 25).

vi) The systematic element of interpretation, given the provisions of Article 6 of the CIUC, reveals that the solution advocated by the Claimant has no foundation, as from the "articulation between the scope of the subjective incidence of UCT and the constitutive fact of the corresponding tax obligation unequivocally derives that only the legal situations subject to registration (without prejudice to the permanence of a vehicle in Portuguese territory for a period exceeding 183 days, provided for in No. 2 of Article 6) generate the birth of the tax obligation" and, on the other hand, results from No. 3 of the same article that "the moment from which the tax obligation is constituted presents a direct relationship with the issuance of the registration certificate, in which must be contained the facts subject to registration"(Articles 36 to 41).

vii) "the very ratio of the regime established in the Unique Circulation Tax Code (...) constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the vehicle owner as it appears in the motor vehicle registration", as the "CIUC carried out a reform of the regime of taxation of vehicles in Portugal, substantially altering the regime of vehicle taxation, with the taxpayers of the tax becoming the owners appearing in the property registration, independently of the circulation of the vehicles on public roads"(Articles 60 and 62 of the response).

viii) "from the parliamentary debates surrounding the approval of DL No. 20/2008 of 31 January (...) unequivocally results that UCT is due by the persons who appear in the registration as owners of the vehicles"(Articles 64 to 68).

ix) the interpretation conveyed by the Claimant is shown to be "contrary to the Constitution, inasmuch as it violates the principle of confidence and legal certainty, the principle of efficiency of the tax system and the principle of proportionality" as it "devalues the registration reality to the detriment of an 'informal reality' and not subject to minimal control by the Defendant", translates into "an obstruction and increase in costs of the competences assigned to the Defendant, with obvious prejudice to the interests of the Portuguese State", and disregards that "the Claimant has the legal mechanisms necessary and adequate to safeguard its [contributive] capacity (e.g., motor vehicle registration), without, however, having exercised them in due time"(Articles 72 to 78).

c) Tribunal's Appreciation

1. The disagreement between the parties regarding the core legal issue described above in No. 7 – which, it should be noted, has been the subject of various decisions by Arbitral Tribunals of this CAAD[2] – concerns, first and foremost, the "letter of the law" (see Articles 9, Nos. 1 and 2 of the Civil Code and Article 11, No. 1 of the General Tax Law), more specifically the semantic content to be attributed to the word "considerando-se" which appears, as cited (above No. 14) in No. 1 of Article 3 of the CIUC ("The taxpayers of the tax are the owners of the vehicles, considering as such the natural or legal persons, of public or private law, in whose name the same are registered").

For the Defendant, in opposition to the Claimant, which considers that Article 3, No. 1 establishes a legal presumption, the use of the expression "considerando-se" would make impossible, in an absolute manner, a reading in a presumptive sense of the provision of Article 3, No. 1 of the CIUC (see above No. 16, ii), iii), iv), v)).

1. It is considered that it is not possible to accept the semantic exclusion that the Defendant seeks to attribute, in the terms indicated, to the phrase "considerando-se". This phrase, as well as other words with the same lexical base such as "considera-se", "considerar" or "considerando", are frequently adopted in our legal system precisely to establish presumptions, thus possessing a presumptive usage value. To give an example in the tax field, cite Article 191, No. 6 of the CPPT which mentions the following: "The citation is considered effective on the 25th day following its sending if the taxpayer does not access the electronic mailbox on a prior date", and then No. 7 of the same provision states that: "The presumption of the previous number can only be rebutted by the cited when, through a fact not attributable to them, the citation occurs on a date later than the presumed and in cases where it is proved that the taxpayer communicated the alteration thereof in accordance with Article 43".

Thus, as is already noted in other arbitral decisions rendered by this CAAD concerning the same matter (see, for example, the decisions rendered in cases Nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of other legislative provisions in which the expression "considerando-se" or "considera-se" is likewise used with the meaning of presumption), not only can it not be said that the attribution of a presumptive meaning to the expression "considerando-se" does not have "a minimum of verbal correspondence, however imperfectly expressed"(No. 2 of Article 9 of the Civil Code), but, moreover, one must even recognize such word has a normal and current correspondence with such presumptive sense.

For that reason, the fact that, differently from what occurred with the literal statement "presumindo-se" that previously appeared in Article 3 of the Regulation of the Motor Vehicle Tax, the legislator came to use in the CIUC the formula "considerando-se" that appears in the current Article 3 of that Code, does not carry decisive weight, as this expression has perfect semantic capacity to involve the establishment of a presumption.

Evidently, this same word "considerando" is also normally used outside presumptive contexts, so to affirm that it has a normal correspondence with that sense does not imply to sustain, in any way, that it always has it, quite the contrary. It should therefore be emphasized, given what the Defendant alleges about other normative fiscal provisions in which the legislator used the formula "considera-se" or "consideram-se" (see above No. 16, iv)), that these expressions have a plurality of meanings, so that understanding that, in the specific case of Article 3, No. 1 of the CIUC, the expression in question implies a presumption, does not mean that this happens in every other case. It is a golden rule of interpretation that the meaning of a word is dependent on the context in which it appears, in terms of pragmatic-functional coherence – as OLIVEIRA ASCENSÃO writes: "No provision can be interpreted in isolation from its context"; "To attend to the context is to place a provision in its proper position".

Thus, nothing prevents, from the standpoint of the literal element of interpretation, the understanding that, within the framework of Article 3 of the CIUC, there is in the normative segment contained in the second part of No. 1 of this provision, the establishment of a presumption.

1. It is judged that this understanding about the presence of a presumption in No. 1 of Article 3 of the CIUC, beyond finding, as has been said, perfect coverage in the letter of the law, is what should be considered adequate in view of the ratio legis underlying the tax regulation in question.

As results immediately from Article 1 of the CIUC, according to which UCT "complies with the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that they cause, in implementation of a general rule of tax equality", constitutes a relevant scope to which this tax is directed, beyond the obtaining of revenues, to place on the holders of rights of use of the vehicles (Nos. 1 and 2 of Article 3 of the CIUC) the road and environmental costs caused by them. See, in this respect, what was stated in the introductory text of the CIUC attached to the Legislative Proposal No. 118/X, which underlies Law No. 22-A/2007, of 29.06 which carried out the global reform of vehicle taxation, approving the Motor Vehicle Tax Code and the Unique Circulation Tax Code and simultaneously abolishing the vehicle tax, the municipal tax on vehicles, the circulation tax and the haulage tax: "As a structuring and unifying element of these categories, the principle of equivalence is established, thus making it clear that the tax, as a whole, is subject to the idea that taxpayers should be burdened in the measure of the cost they cause to the environment and the road network, this being the reason for existence of this tax figure. It is this principle that dictates the taxation of vehicles as a 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 current tax benefits and the allocation of a portion of the revenue to the municipalities of their respective use".

Now, to maintain, as the Defendant does, that the legislator, in Article 3, No. 1 of the CIUC, fixed, whatever the underlying technical means, the subjective incidence of the tax on the persons in whose name the vehicles are registered, with total independence of whether or not, in the relevant taxation period, they hold the right of use of the vehicle, particularly its ownership, would imply disregarding the indicated purpose that presides over the tax normativity, clearly manifested in the objective incidence and the tax base associated with the various categories of vehicles (see Articles 2 and 7 of the CIUC). For registration, without correspondence with underlying ownership, has no value to satisfy and comply with such purpose, as it is not the persons in whose name 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 actual users of the vehicles, in accordance with the relevant substantive legal situations, even if they do not appear, as they should, in the motor vehicle registration. The registration, in truth, in no way contributes to or serves the principle of equivalence established in Article 1 of the CIUC.

On the other hand, to assume that the determinant element of subjective tax incidence is simple and exclusively motor vehicle registration also does not allow one to assert a connection with any manifestation of relevant contributive capacity, which, as a rule, in taxes not strictly commutative, is essential, as there must exist, notwithstanding requirements of practicability, some effective connection between the tax and an economic assumption materially relevant capable of founding the tax.

The reason for being of the tax figure thus rejects the idea that its incidence is tied strictly and exclusively to the very registration itself of the ownership of taxable vehicles and not to the substantive situations conferring the right of use of the vehicles (Article 3, Nos. 1 and 2 of the CIUC) to which the registration is intended to give publicity (see Article 1 and Article 5 of Decree-Law No. 54/75, of 12 February, as amended, which regulates motor vehicle registration).

1. The logic of the tax, the ratio legis of the tax normativity in question thus leads to the conclusion that the legislator considered as taxpayers of the tax the actual owners of the vehicles or, then, the financial lessees, the acquirers with retention of ownership, as well as other holders of purchase option rights under lease contracts, serving the registration simply as a presumption of ownership or of the other rights subject to registration to which relevance was attributed for the purposes of submission to the tax.

And it is well understood – in the sequence, moreover, of solid tradition (recall only the precedent represented by Article 3 of the Motor Vehicle Tax Regulation) – that the tax legislator established such a presumption, for, precisely, it is that the essential effect associated with registration. It should be emphasized, in truth, that, according to No. 1 of Article 1 of Decree-Law No. 54/75, of 12 February, "the registration of motor vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce", and, in accordance with Article 7 of the Property Registry Code, applicable to motor vehicle registration by virtue of Article 29 of the said Decree-Law No. 54/75 (which provides that: "The provisions relating to property registration shall apply, with the necessary adaptations, to the registration of automobiles, but only to the extent necessary to fill the gaps in its own regulation and compatible with the nature of motor vehicles and the provisions contained in this decree and its regulation"): "Definitive registration constitutes a presumption that the right exists and belongs to the registered holder in the precise terms in which registration defines it".

Thus, it should be understood that the legislator, in defining the subjective incidence of the tax in Article 3, No. 1 of the CIUC, established, in order for its demonstration, a presumption by which, on the basis of the known fact of registration, the presumed fact of ownership or of ownership of another right relevant for purposes of the UCT is deduced.

1. It is further added that this understanding is also supported by the systematic element of interpretation. For, if there were not in question in Article 3, No. 1 of the CIUC a presumption, relevant as such for purposes of evidence, it would not be understandable that in Article 18, No. 2 of the CIUC, relating to official levy, it is said that this is carried out by the TA "on the basis of the elements at its disposal", not limiting itself to referring to what results from the registration.

Furthermore, it is made explicit, in this respect, that it is not relevant for contradicting the presumptive character thus assumed in the competent normative segment of Article 3, No. 1 of the CIUC what is provided in Article 6, No. 1 of the CIUC. For this provision, in regulating the taxable event of the tax, is directed simply to determine the constitutive moment of the tax legal relationship (see Article 36, No. 1 of the LGT), the fact from which the tax obligation originates, whose objective foundation (vehicles "registered in Portuguese territory") and subjective ("owners of the vehicles", "financial lessees", "acquirers with retention of ownership", "other holders of purchase option rights under lease contracts") are established in Articles 2 and 3 of the CIUC. Thus, Article 6, No. 1 of the CIUC serves strictly to fix the moment from which submission to UCT in Portuguese territory occurs ("the ownership of the vehicle, as attested by registration in Portuguese territory").

It should further be said that, regarding the historical element of interpretation, more specifically in the preparatory works, in the Explanatory Memorandum of Legislative Proposal No. 118/X and in the introductory text to the CIUC there is found no explicit indication that the legislator intended that motor vehicle registration would function as a constitutive fact of the tax incidence of the UCT and not as a simple presumption of ownership of vehicles evidentially relevant for purposes of tax submission. It is true that reference is made, in the introductory text to the CIUC contained in that Explanatory Memorandum, to the "numerous failures and delays in the regularization of vehicle acquisition or transfer registrations or in the cancellations of their license plates, in case of scrapping that had meanwhile occurred" and the need for "simplified and less costly mechanisms allowing regularization of vehicle ownership registrations and guaranteeing the reliability necessary for future levying of the new tax", but it is not declared that registration operates only as a presumption of ownership relevant for purposes of taxation. On the contrary, concern with the proper functioning and reliability of motor vehicle registration evidences that, for the legislator, what is decisive are the substantive situations to which registration is intended to give publicity and which it presumes, and not the registration entry itself as considered on its own.

It should further be added that the invocation which the Defendant makes of the parliamentary debates surrounding the approval of Decree-Law No. 20/2008 of 31 January (see above No. 16, viii)) does not seem pertinent, inasmuch as what is thus invoked are materials that do not directly concern the history of the tax legislation here in application, but rather distinct normativities, since that diploma was directed at introducing various amendments to the regulations concerning the registration certificate and motor vehicle registration, but not in the context of tax matters. In any case, the positions assumed within the scope of those parliamentary debates to which the Defendant refers in Article 68 of its response do not appear to be conclusive.

In this manner, this Tribunal considers that Article 3, No. 1 of the CIUC should be interpreted in the sense that it establishes a legal presumption for purposes of the determination of the subjective incidence of the tax.

1. It immediately follows to declare that the presumption thus established in Article 3, No. 1 of the CIUC is rebuttable.

Legal presumptions, as is well known, may be rebuttable (iuris tantum) or irrebuttable (iure et de iure) according to whether they admit or prohibit proof of the contrary fact and, therefore, permit or prevent the demonstration that the presumed fact is not true (Article 350, No. 2 of the Civil Code).

As results from No. 2 of Article 350 of the Civil Code, as a rule legal presumptions are iuris tantum, constituting irrebuttable presumptions the exception ("legal presumptions may be rebutted by contrary proof, except in cases where the law prohibits it"). In these terms, when the law does not prohibit proof to the contrary, it should be understood that the presumption is rebuttable.

This very matter is currently the subject of explicit normative prescription in the context of the tax legal system already as the principle is known, Article 73 of the LGT establishes the necessarily rebuttable character of presumptions in matters of tax incidence by stating that: "The presumptions established in the norms of tax incidence always admit proof to the contrary".

It should further be added that the consideration as rebuttable presumption of the provision of Article 3, No. 1 of the CIUC should be regarded as a requirement resulting from an interpretation in conformity with the Constitution, as this Tribunal cannot fail to give weight to the well-known understanding of the Constitutional Court, affirmed in Decision No. 348/97, of 29.4.1997 and reiterated in Decision No. 311/2003, of 28.4.2003, regarding the unconstitutionality of the "establishment by the tax legislator of an irrebuttable presumption" since it "completely bars taxpayers from the possibility of contradicting the presumed fact, subjecting them to taxation that may be based on a taxable matter fixed in disregard of the principle of tax equality".

In this sequence, the solution thus adopted is perfectly supported by the relevant constitutional paradigm, whereby one does not see how it can be considered that it is contrary to the Constitution, and it is not seen that the "principle of confidence and legal certainty, the principle of efficiency of the tax system and the principle of proportionality" are affected, in reasonable and effective terms.

1. In view of the above, it is decided that Article 3, No. 1 of the CIUC establishes a rebuttable presumption (iuris tantum), whereby, notwithstanding the vehicle ownership registration being in the name of the Claimant, it is possible to rebut this presumption, by demonstrating, by the means of evidence admitted in Law, that it is not the owner of the vehicle or holder of another situation relevant for tax purposes (Article 3, Nos. 1 and 2 of the CIUC) at the date of the taxation period (Article 4 of the CIUC), not thereby constituting the taxpayer of the UCT and not therefore being liable for its payment.

d) Application to the Case at Hand

1. In view of what has been referred to above, summarized in the preceding number, it remains to verify, in light of the facts found proved, the qualification as a UCT taxpayer of the Claimant (see above No. 11 and fact found proved under II) with respect to the vehicles that are the subject of the official levies of UCT in question in the present proceedings.

Now, in this respect, it is necessary only to emphasize that it was found proved in No. IV of the evidence that the vehicles to which the UCT levies at issue in these proceedings relate were sold to the Claimant's customers or totally lost at a time prior to the month and year of taxation relating to the levied UCT corresponding thereto.

In this manner, it is verified that, in the taxation periods in question, notwithstanding what may continue to appear in the registry, the motor vehicles to which the impugned levies relate were no longer owned by the Claimant.

It should be emphasized that, pursuant to Articles 408, No. 1, 874 and 879, sub-paragraph a) of the Civil Code, the transfer of ownership operates by the mere effect of the contract, whereby, from that moment on, the Claimant is not the owner of the vehicles that are the subject of the levies in question, not thereby constituting a taxpayer of the UCT in respect of such vehicles in accordance with No. 1 of Article 3 of the CIUC.

The presumption established in Article 3, No. 1 of the CIUC is therefore rebutted.

1. Consequently, the Claimant cannot be considered, in view of the provision of Article 3, No. 1 of the CIUC, a taxpayer of the levied UCT in relation to the vehicles identified and in the terms set out in the tables contained in No. II of the evidence, whereby the decisions on gracious complaints No. ...2014..., No. ...2014..., No. ...2014... and No. ...2014..., insofar as they did not consider the Claimant's claims to be well-founded, and the tax acts of levy of UCT and compensatory interest which thus maintained, suffer from a defect of violation of law, which implies their annulment in accordance with Article 135 of the Administrative Procedure Code, as is hereby decided.

e) Indemnificatory Interest

1. As a consequence of the annulment of the tax acts that are the subject of the proceedings, the Claimant petitions (see above No. 4) the condemnation of the TA to reimburse the amounts unduly paid in respect of UCT and compensatory interest, the total amount of which comes to €45,937.85, as well as the payment of indemnificatory interest provided for in Article 43 of the LGT and Article 61 of the CPPT.

Sub-paragraph b) of Article 24 of the LRTA prescribes that the arbitral decision on the merits of a claim for which no appeal or challenge is available binds the tax administration from the end of the period provided for appeal or challenge, such administration being obliged, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the spontaneous execution of judgments of judicial tax courts, to restore the situation that would exist if the tax act that is the subject of the arbitral decision had not been executed, adopting the acts and operations necessary for that purpose, which should be understood, in conformity with Article 100 of the LGT, applicable pursuant to sub-paragraph a) of No. 1 of Article 29 of the LRTA, as including the payment of indemnificatory interest, in accordance, moreover, with the provision of No. 5 of this same Article 24 of the LRTA.

Article 43, No. 1 of the LGT prescribes that "indemnificatory interest is due when it is determined, in a gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount exceeding what is legally due", and No. 4 of Article 61 of the CPPT establishes that "if the decision recognizing the right to indemnificatory interest is judicial, the payment period is counted from the beginning of the period of its spontaneous execution".

1. In this respect, the Defendant contends (Article 110 of the IP) that it merely gave strict compliance to Article 3, No. 1 of the CIUC, which attributes the quality of taxpayer of the UCT to the persons in whose name the vehicles are registered, whereby the right to payment of indemnificatory interest should not be recognized.

The right to indemnificatory interest depends, as has been seen, on the determination of error attributable to the services resulting in payment of the tax debt in an amount exceeding what is legally due.

It must be recognized that, with the levies issued, the Defendant merely, as is imposed upon it (Articles 55 of the LGT and 10, No. 1, sub-paragraph a) of the CPPT), gave compliance to the provision of Article 3, No. 1 of the CIUC, which presumes the quality of taxpayer in the entity in whose name the vehicle is registered.

Now, given the mandatory character of motor vehicle registration established by Article 5, No. 2 of DL No. 54/75, of 12 February (as amended), relevance cannot be denied to the attribution to the Claimant of responsibility for the situation resulting from the failure to update motor vehicle registration (see Articles 25 and 42 of the Motor Vehicle Registration Regulation under Decree No. 55/75, of 12 February, as amended) and the consequent administrative-tax action.

Moreover, the Claimant proceeded to pay the tax and compensatory interest, here found to be undue, on a date prior to the filing of the gracious complaints (see Nos. V and VI of the evidence), at a moment when no proof to the contrary had been presented to the Defendant capable of permitting rebuttal of the registration presumption and detection of the undue payment (No. 5 of Article 61 of the CPPT).

It is therefore necessary, in view of this factual context, to declare that it cannot be considered that error attributable to the services occurred in the undue payment of the tax obligation.

In this manner, it is decided, in view of No. 1 of Article 43 of the LGT, that the Claimant does not have the right to payment of indemnificatory interest.

V. DECISION

In these terms, this Arbitral Tribunal decides:

a) To declare itself incompetent to rule on the claim formulated for reimbursement of amounts paid as penalties in the amount of €13,205.82;

b) To find well-founded, as proved, the application for arbitral award seeking the annulment of the tax acts impugned relating to the levies of UCT and compensatory interest for the years 2009 to 2013 relating to the motor vehicles identified in the proceedings, in the total amount of €45,937.85, and, consequently, to condemn the Defendant to reimburse such amount to the Claimant, in accordance with Articles 24, No. 1, sub-paragraph b) of the LRTA and 100 of the LGT;

c) To find unmeritorious the claim for condemnation of the Defendant to payment of indemnificatory interest;

d) To condemn the Defendant to pay the costs of the proceedings.

VI. VALUE OF THE PROCEEDINGS

In accordance with Articles 306, Nos. 1 and 2 of the CPC, Article 97-A, No. 1, sub-paragraph a), and No. 2 of the Tax Procedure and Process Code, applicable pursuant to sub-paragraphs a), c) and e) of No. 1 of Article 29 of the LRTA and No. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings, the proceedings is assigned the value of €45,937.85, which constitutes the total amount of the impugned levies.

VII. COSTS

In accordance with Articles 12, No. 2, and 22, No. 4, both of the LRTA, and Article 4, No. 4 of the Regulation of Costs in Tax Arbitration Proceedings, the arbitration fee is fixed at €2,142.00, in accordance with Table I of the said Regulation, to be borne by the Defendant, given the success of the application for annulment of the tax acts that are the subject of the proceedings.

Let notice be given.

Lisbon, 2 December 2014.

The Arbitrator

(João Menezes Leitão)

[1] The spelling resulting from the Orthographic Agreement of the Portuguese Language of 1990 has been adopted, and the text of the citations has been updated accordingly.

[2] Including decisions signed by the undersigned, whereby, in accordance with Article 8, No. 3 of the Civil Code, the grounds already explained in previous decisions are resumed, notably the decision issued in case 286/2013-T, in whose validity this confidence continues to be held.