IUC Vehicle Tax Subjective Incidence: Who Is Liable When Vehicle Ownership Changes? (CAAD 424/2015-T)

ARBITRAL DECISION

I. - REPORT

A - PARTIES

A…, with tax identification number…, hereinafter referred to as "Claimant", with residence in…, … …-… - …, filed a request for the constitution of an arbitral tribunal, under the provisions of paragraph a) of paragraph 1 of article 2 and articles 10 et seq. of Decree-Law No. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), with a view to examining the following claim which opposes the Tax and Customs Authority (which succeeded, among others, the Directorate-General for Taxes) hereinafter referred to as "Respondent" or "AT".

B - CLAIM

1 - The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on July 13, 2015 and notified to the AT on July 16, 2015.

2 - The Claimant failed to nominate an arbitrator, and therefore, pursuant to the provisions of paragraph 1 of article 6 of the RJAT, the signatory, on 28-08-2015, was designated by the Deontological Council of the Centre for Administrative Arbitration as arbitrator of a Single Arbitral Tribunal, having accepted in accordance with legally established procedures.

3 - The Parties were, on 28-08-2015, duly notified of such designation, and did not manifest any intention to refuse it, in accordance with the combined provisions of paragraphs a) and b) of paragraph 1 of article 11 and articles 6 and 7 of the Deontological Code.

4 - Under these circumstances, in accordance with the provisions of paragraph c) of paragraph 1 of article 11 of Decree-Law No. 10/2011, of January 20, as amended by article 228 of Law No. 66-B/2012, of December 31, the arbitral tribunal was regularly constituted on 14-09-2015.

5 - On March 3, 2016, the Arbitral Tribunal, under article 16, paragraph c) of the RJAT, issued an order dispensing with the meeting provided for in article 18 of the same instrument, taking into account both the circumstance that the subject matter of the dispute essentially concerns a matter of law, and the understanding established between the parties in this regard, with the latter having requested no autonomous evidentiary measures, with the relevant documents being part of the proceedings and the administrative file being attached to the case.

6 - The now Claimant requests that the present Arbitral Tribunal:

a) - Declare the illegality and consequent annulment of the acts of assessment relating to the single circulation tax (hereinafter referred to as IUC), referenced in the case file, relating to the years 2009 to 2012, with respect to the vehicle with license plate …-…-… .

b) - Condemn the Tax and Customs Authority to refund the sum of € 1,023.12, wrongfully paid, plus the payment of compensatory interest associated therewith.

c) - Condemn the Tax and Customs Authority to pay compensation for damages resulting from the payment of the IUC.

C - CAUSE OF ACTION

7 - The Claimant, in the substantiation of its request for arbitral pronouncement, asserts, in summary, the following:

8 - That having, between mid-August and mid-September 2014, been summoned in four tax enforcement proceedings, it requested from the Tax Office of…, a certificate regarding the identification of the vehicle in question, regarding copies of the tax assessments underlying said proceedings, and regarding the grounds for such assessments.

9 - That, on September 29, 2014, the said Tax Office issued a certificate in which it certifies that the enforcement proceedings in question with numbers …2014…; …2014…; …2014… and …2014… were instituted due to non-payment of the IUC relating to the years 2009 to 2012, with respect to the vehicle with license plate …-…-… .

10 - That, although convinced that the amounts of tax assessed are not due, it proceeded to pay them, in order to avoid the aggravation of interest and costs in the said enforcement proceedings.

11 - That it was the owner of the vehicle with license plate …-…-…, but that, on December 10, 1992, it proceeded to sell it to Mr. B…, for the price of 100,000$00 (approximately € 498.80), as appears from a copy of the receipt/declaration of sale that it attaches as Document No. 10.

12 - That it has not been the owner of said vehicle since 10/12/1992, having no responsibility since that date for any tax obligations relating to said vehicle, given that it is not, nor can it be considered a taxpayer of the IUC.

13 - That it was never notified to make any payment, or even had notice of any possible assessments relating to the vehicle …-…-…, until the moment it was summoned in the enforcement proceedings mentioned above.

14 - That, on October 1, 2014, it filed an Administrative Claim against the IUC assessments Nos.…;…; … and … relating to the vehicle with license plate …-…-…, in which the arguments relating to the sale of said vehicle, which it now indicates in the request for arbitral pronouncement underlying the present case, were raised.

15 - That the said Administrative Claim was dismissed by an order of the Head of the Tax Office of…, issued on 14-10-2014, which was notified to it on 23-10-2014, on the ground that the only relevant facts are the maintenance of the license plate and registration of the right of ownership at the Motor Vehicle Registration Office, regardless of the actual alienation of the motor vehicle.

16 - That paragraph 1 of article 3 of the CIUC establishes a presumption of ownership which, in light of the provisions of article 73 of the LGT, always admits proof to the contrary, which, in light of the sale, on 10-12-1992, of the vehicle in question and in the context of the Administrative Claim filed on 01-10-2014, was rebutted.

17 - That, with respect to the assessment No.…, relating to the year 2009, relating to the aforementioned vehicle with license plate …-…-…, the period that the AT had to assess the IUC commenced on 01-01-2010 and ended on 01-01-2014, with the statute of limitations for assessment of the tax in question having expired, in violation of the provisions of paragraphs 1 and 4 of article 45 of the LGT, given that the corresponding notification only occurred on 29-09-2014.

18 - That the registration of vehicles is essentially intended to give publicity to their legal situation, and its absence does not affect the acquisition of the quality of owner, nor is it a condition of the validity of contracts.

19 - That the legislator, in replacing, in paragraph 1 of article 3 of the CIUC, the expression "presuming themselves to be such" with the expression "considering themselves to be such", places us before a semantic question, which does not in the slightest alter the content of said rule.

20 - That, on October 17, 2014, it filed an Administrative Appeal, which was dismissed, on the ground that the taxpayers of the IUC are the owners of the vehicles in whose names they are registered.

21 - That, as results, particularly, from the order dismissing the Administrative Appeal that it filed, the AT excluded the possibility of prior hearing, which could not have happened, given that such dispensation is only provided for in the case where the decision on the claim, administrative claim or appeal is favorable to the taxpayer.

D - RESPONSE OF THE RESPONDENT

22 - The Respondent, the Tax and Customs Authority, (hereinafter referred to as AT), presented its Response on 05-11-2015.

23 - In said Response, the AT considers that the grounds of fact and law raised by the Claimant cannot proceed, because and first of all:

24 - The omission of an essential formality, associated with the failure to afford the right of prior hearing related to the decision on the administrative appeal filed by the Claimant, does not occur, insofar as such right of prior hearing had been exercised within the framework of the administrative claim procedure previously filed, with no new facts being added in the mentioned administrative appeal.

25 - The defect of statute of limitations on the right to assess the tax in question invoked by the Claimant does not occur, given that the IUC relating to the year 2009 and concerning the vehicle with license plate …-…-… was assessed in 2012 and notified within the period legally provided for that purpose.

26 - The allegations of the Claimant make a notoriously wrong interpretation of the legal rules applicable to the case, showing the Claimant's understanding, not only a biased reading of the letter of the law, but also an interpretation that does not heed the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire tax-legal system, also resulting from an interpretation that ignores the rationale of the regime established in paragraph 1 of article 3 of the CIUC. (See article 65 of the Response)

27 - The tax legislator in determining in article 3, paragraph 1 of the CIUC who are the taxpayers of the IUC established, expressly and intentionally, that such taxpayers are the owners, considering as such the persons in whose names they are registered.

28 - It emphasizes that the legislator did not use the expression "it is presumed" as it could have done, for example, in the following terms: "the taxpayers of the tax are the owners of the vehicles, with such presumption applying to natural or legal persons, of public or private law, in whose names they are registered". (See article 70 of the Response)

29 - It considers that the understanding that the legislator established a presumption in article 3 of the CIUC, as the Claimant understands, would unequivocally be to make an interpretation against the law. (See article 79 of the Response)

30 - It considers that in light of the wording of article 3, paragraph 1 of the CIUC it is not manifestly possible to invoke that this is a presumption, being instead a clear option of legislative policy adopted by the legislator, whose intention, within its freedom of legislative configuration, was that for purposes of the IUC, those who, as such, appear in the register should be considered owners.

31 - It refers to the fact that said understanding has already been adopted by the jurisprudence of our courts, transcribing for this purpose part of the judgment of the Administrative and Tax Court of Penafiel, issued in Case No. 210/13.OBEPNF. (See articles 82 and 83 of the Response)

32 - Referring to the systematic element of interpretation, the AT considers that the solution advocated by the Claimant is intolerable, insofar as it has no legal basis, neither in article 3, paragraph 1 of the CIUC, nor in other provisions established in said Code.

33 - It also considers that in light of a teleological interpretation of the regime established throughout the Code of the IUC, the interpretation advocated by the Claimant, to the effect that the taxpayer of the IUC is the actual owner regardless of not appearing in the motor vehicle registry the registration of such quality, is manifestly wrong, insofar as it is the very rationale of the regime established in the CIUC that 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 registry. (See article 100 of the Response)

34 - It adds that the CIUC carried out a reform of the vehicle taxation regime in Portugal, substantially altering the vehicle taxation regime, with the taxpayers of the tax becoming the owners appearing in the property registry, regardless of the circulation of vehicles on the public road. (See article 101 of the Response)

35 - It also considers that the interpretation conveyed by the Claimant is in conflict with the Constitution, insofar as such interpretation results in the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality. (See articles 151, 152 and 153 of the Response)

36 - It adds that the document attached by the Claimant (copy of invoice/receipt) does not constitute sufficient proof to "undermine the (supposed) legal presumption established in article 3 of the CIUC", insofar as such document is not suitable to prove the conclusion of a bilateral contract, such as a purchase and sale. (See articles 113, 114 and 116 of the Response)

37 - It further states that it was not the Respondent who gave rise to the deduction of the request for arbitral pronouncement, but rather the Claimant, and consequently, the Claimant should be condemned to pay the costs of arbitration "in accordance with article 527/1 of the New Code of Civil Procedure ex vi of article 29/1-e) of the RJAT", also referring to the fact that the legal requirements that confer the right to compensatory interest are not met.

38 - It considers, in conclusion, that, in light of all the arguments presented, the request for arbitral pronouncement should be judged groundless, with the tax assessment acts impugned remaining in the legal order, and the Respondent should be absolved of the claim, also referring to the fact that the tribunal should judge the defense of procedural error well-founded as to the statute of limitations on assessment of the IUC, relating to the year 2009.

E - ISSUES TO BE DECIDED

39 - It is therefore incumbent upon us to examine and decide.

40 - In light of the foregoing, in relation to the positions of the Parties and the arguments presented, the main issues to be decided are whether:

a) - The tribunal is materially competent to examine the claim for compensation for damages resulting from the wrongful payment of the tax.

b) - Whether the rule of subjective incidence contained in article 3, paragraph 1 of the CIUC establishes or does not establish a presumption.

c) - What is the legal value of motor vehicle registration in the economy of the CIUC, particularly for the purposes of subjective incidence of this tax.

d) - If, at the date of occurrence of the taxable event, the vehicle has already previously been alienated, although the right of ownership of it continues registered in the name of its previous owner, for the purposes of the provisions of article 3, paragraph 1 of the CIUC, is the taxpayer of the IUC the previous owner or the new owner.

e) - If, with respect to assessment No.…, relating to the year 2009, relating to the vehicle with license plate …-…-…, the statute of limitations on the right to assess the IUC expired.

f) - If the omission of an essential formality occurred in the context of the order dismissing the Administrative Appeal filed by the Claimant.

F - PROCEDURAL REQUIREMENTS

41 - The Arbitral Tribunal is regularly constituted and is materially competent, under the provisions of paragraph a) of paragraph 1 of article 2 of Decree-Law No. 10/2011, of January 20.

42 - The Parties possess legal personality and capacity, are legitimate and are legally represented (see article 4 and paragraph 2 of article 10 of Decree-Law No. 10/2011 and article 1 of Ordinance No. 112/2011, of March 22).

43 - The proceedings do not suffer from defects that invalidate them.

44 - Taking into account both the administrative tax proceedings and the documentary evidence attached to the case, it is now appropriate to present the factual matter relevant to the understanding of the decision, as established in the terms mentioned below, although it is important, first of all, to examine the tribunal's competence regarding the claim for compensation for damages resulting from the wrongful payment of the tax.

G - CLAIM FOR COMPENSATION FOR DAMAGES RESULTING FROM WRONGFUL PAYMENT OF THE TAX

45 - In light of the provisions of article 13 of the Code of Procedure in Administrative Courts (CPTA), applicable here by virtue of article 29, paragraph 1, paragraph c), of the RJAT, the question of competence should first be addressed, since, in light of the provision of the aforementioned rule of the CPTA, its examination precedes that of any other matter.

46 - The Claimant, in its request for arbitral pronouncement, in addition to the annulment of the assessment acts relating to the IUC, for the years 2009 to 2012 and the request for restitution of the corresponding sum of € 1,023.61, also requested the payment of compensation associated with damages resulting from the wrongful payment of the tax, the amount of which is not, moreover, concretely identified.

47 - It is known that the tax legal relationship, as follows in particular from the provisions of paragraphs 2 and 3 of article 1 of the LGT and article 30 of this same instrument, implies, in addition to the active and passive subjects of that relationship, that its subject matter concerns the assessment and collection of taxes or the resolution of conflicts arising therefrom.

48 - The scope of competence of tax arbitral tribunals comprises, precisely, the claims that are inscribed in the aforementioned tax legal relationship. Article 2, paragraph 1 of the RJAT indeed establishes, as amended by Law No. 64-B/2011, of December 30, that the competence of said tribunals includes: a) The declaration of illegality of acts of tax assessment, of self-assessment, of withholding at source and of payment on account; b) The declaration of illegality of acts of determination of taxable matter, of acts of determination of assessable matter and of acts of fixing of patrimonial values, which evidences the lack of competence of tax tribunals for the purposes of examining claims for compensation.

49 - What the law manifestly privileged, regarding the competence of arbitral tribunals in tax matters, was the judgment of cases which in administrative and tax courts take the form of judicial challenge, in accordance with the provision of paragraph a) of article 101 of the LGT and paragraphs a) to f) of paragraph 1 of article 97 of the CPPT, it being noted that, even in this domain, there are limitations, as results, in particular, from the provision of paragraph 2 of Ordinance No. 112-A/2011, of March 22.

50 - Thus, the claim deduced by the Claimant as compensation for damages caused to it by the wrongful payment of the tax does not fall within the competence, ratione materiae, of this arbitral tribunal, and such claim is therefore groundless.

II - SUBSTANTIATION

H - SUBSTANTIATION OF FACT

51 - With respect to relevant facts, the present tribunal considers the following facts to be established:

52 - The Claimant, between mid-August and mid-September 2014, was summoned in four tax enforcement proceedings, having requested from the Tax Office of…, a certificate regarding the identification of the vehicle in question, regarding copies of the tax assessments underlying said proceedings and regarding the grounds for such assessments.

53 - The said Tax Office issued, on September 29, 2014, a certificate in which it certifies that the enforcement proceedings in question with numbers …2014…; …2014…; …2014… and …2014… were instituted due to non-payment of the IUC relating to the years 2009 to 2012, with respect to the vehicle with license plate …-…-… .

54 - The Claimant proceeded to pay the assessed tax amounts, relating to the years 2009 to 2012, with respect to the vehicle with license plate …-…-… .

55 - The Claimant, on December 10, 1992, proceeded to sell the vehicle with license plate …-…-… to Mr. B…, for the price of 100,000$00.

56 - The Claimant, on October 1, 2014, filed an Administrative Claim against the IUC assessments Nos.…;…; … and … relating to the vehicle with license plate …-…-…, in which it raised the arguments relating to the sale of said vehicle, which it indicates in the request for arbitral pronouncement underlying the present case.

57 - The Administrative Claim was dismissed by an order of the said Head of the Tax Office issued on 14-10-2014, which was notified to it on 23-10-2014, on the ground that the only relevant facts are the maintenance of the license plate and registration of the right of ownership at the Motor Vehicle Registration Office, regardless of the actual alienation of the motor vehicle.

58 - The Claimant, on October 17, 2014, filed an Administrative Appeal against the order dismissing the aforementioned Administrative Claim, which was dismissed, on the ground that the taxpayers of the IUC are the owners of the vehicles in whose names they are registered.

SUBSTANTIATION OF ESTABLISHED FACTS

59 - The facts established are based on the documents mentioned, with respect to each of them, insofar as their correspondence to reality was not questioned.

UNESTABLISHED FACTS

60 - There are no facts established as unproven, given that all facts deemed relevant for examining the claim were proven.

I - SUBSTANTIATION OF LAW

61 - The factual matter has been established, and it is now important to proceed with its legal subsumption and determine the law applicable to the underlying facts, in accordance with the issues to be decided enumerated in paragraph 40.

62 - The first and decisive issue in the present case, with respect to which there are absolutely opposed understandings between the Claimant and the AT, is whether the rule of subjective incidence contained in paragraph 1 of article 3 of the CIUC establishes or does not establish a rebuttable presumption.

63 - The positions of the parties are known. Indeed, for the Claimant the provision in paragraph 1 of article 3 of the CIUC establishes a legal presumption of ownership which, in light of the provision of article 73 of the LGT, always admits proof to the contrary.

64 - The Respondent, for its part, considers, in particular, that the tax legislator in determining in article 3, paragraph 1 of the CIUC who are the taxpayers of the IUC established, expressly and intentionally, that such taxpayers are the owners, considering as such the persons in whose names they are registered.

J - INTERPRETATION OF THE RULE OF SUBJECTIVE INCIDENCE CONTAINED IN PARAGRAPH 1 OF ARTICLE 3 OF THE CIUC

65 - On this issue, that is, whether the rule of subjective incidence contained in paragraph 1 of article 3 of the CIUC establishes a presumption, it should be noted that the established jurisprudence in the CAAD points to the fact that said rule establishes a rebuttable legal presumption. Indeed, since the first Decisions issued on this matter in 2013, among which may be mentioned those issued in the context of Cases Nos. 14/2013-T, 26/2013-T and 27/2013-T, to the most recent ones which may be mentioned in Decisions issued in Cases Nos. 69/2015-T and No. 79/2015-T, passing through numerous Decisions issued in 2014, of which may be mentioned, by way of mere example, the Decisions issued in Cases Nos. 34/2014-T, 120/2014-T and 456/2014-T, all point to the understanding that paragraph 1 of article 3 of the CIUC establishes a rebuttable legal presumption.

In this regard, the understanding inscribed in the Ruling of the Central Administrative Court South, issued on 19-03-2015, Case 08300/14, available at: www.dgsi.pt, should also be considered, which supports said jurisprudence, when it expressly states therein that article 3, paragraph 1 of the CIUC "[…] establishes a legal presumption that the holder of motor vehicle registration is its owner, and such presumption is rebuttable by virtue of article 73 of the LGT".

This is an understanding in which we rely entirely and which is given, without further ado, as valid and applicable in the present case, not considering it necessary for further development, in light of the abundant substantiation contained in the mentioned Decisions and the said Ruling.

66 - Since this is the understanding which, with respect to article 3, paragraph 1 of the CIUC, is entirely adopted by this tribunal, it is, however, still important to note the lack of merit in the position of the Respondent when, in articles 151, 152 and 153 of its response, it alleges that the interpretation that goes in the direction of understanding that a rebuttable legal presumption is established in paragraph 1 of article 3 of the CIUC violates the constitutional principles of trust and legal certainty, efficiency of the tax system and proportionality.

Let us examine, then, that issue.

Let us see,

• With respect to the principle of proportionality, it should first be noted that the same, insofar as it is materially inherent to the regime of rights, freedoms and guarantees, being inscribed in their protection, aims, in essence, to regulate the action of Public Administration in order that its activity in its relationship with individuals is guided by the choice of the measures most equitably suited to the pursuit of the public interest.

As Professor Freitas do Amaral teaches, in Curso de Direito Administrativo (Course in Administrative Law), Vol II, Almedina, 2002, pp. 127/128 and following, the "principle of proportionality constitutes a constitutive manifestation of the principle of the Rule of Law", with "[…] the idea being strongly anchored that, in a democratic Rule of Law state, the measures of public authorities should not exceed what is strictly necessary for the realization of the public interest".

The principle of proportionality, adds the said Professor, ibidem, p.129, means that "[…] the limitation of goods or private interests by acts of public authorities must be adequate and necessary to the concrete ends pursued by such acts, as well as tolerable when confronted with those ends".

With respect to the principle of proportionality, it should also be noted what J. J. Gomes Canotilho and Vital Moreira tell us, in CONSTITUTION OF THE PORTUGUESE REPUBLIC, ANNOTATED, VOLUME I, 4th Edition, 2007, Coimbra Editora, pp. 392/393, when they consider that the said principle is capable of being broken down into three subprinciples, namely: "[…] a) principle of adequacy (also referred to as the principle of suitability); b) principle of necessity (also called the principle of necessity or indispensability); c) principle of proportionality in the strict sense, which means that the legal restrictive means and the ends obtained should be in a "just measure", preventing the adoption of legal restrictive measures that are disproportionate, excessive, in relation to the ends obtained […]".

The said subprinciples all have a common denominator, which is that of just balance and permanent coherence between the purposes of the law and the means adopted to achieve such purposes, which, in the circumstance and attempting the transposition of said principle to the case at hand, will imply answering the question of what the appropriate interpretation is of paragraph 1 of article 3, with a view to pursuing the legal purposes provided for in article 1 of the CIUC, which translate into the fiscal burden of actual vehicle owners (and not necessarily those appearing in the registry) to the extent of the environmental and road cost they cause.

As Professor J. J. Gomes Canotilho refers in Direito Constitucional e Teoria da Constituição (Constitutional Law and Theory of the Constitution), Almedina - Coimbra, 1998, pp. 264 and following, the most important field of application of the principle of proportionality or the prohibition of excess, which has constitutional foundation in articles 18, paragraph 2 and 266, paragraph 2 of the CRP, "[…] is that of the restriction of rights, freedoms and guarantees by acts of public authorities. However, the logical field of application of the principle of proportionality extends to conflicts of legal goods of any kind." The administration, adds the said author, idem, "[…] must always observe, in each concrete case, the requirements of the prohibition of excess […]".

In this same sense the jurisprudence points, particularly the ruling of the STA of 01-07-1997, Case No. 041177, available at: www.dgsi.pt, when it considers that the principle of proportionality in the broad sense comprises the congruence, adequacy or suitability of the means or measure to achieve the legally proposed end and, in the strict sense, encompasses the prohibition of excess.

The principle of proportionality is a corollary of the principle of justice, which means and implies that in its action the Public Administration must harmonize the specific public interest it pursues with the rights and legitimate interests of individuals potentially affected by its acts, interests and rights which, in the case at hand, are reduced to the non-taxation in IUC of persons who are no longer owners of vehicles and who consequently contribute nothing to the realization of any road and environmental cost.

What matters is to balance the legal purposes and the means to pursue them, and, in the context of a weighing judgment, to identify the means best suited for this purpose, which, in the case, translates into the interpretation adopted by the arbitral tribunal.

It will be said, moreover, that the understanding that said paragraph 1 of article 3 of the CIUC establishes a rebuttable legal presumption corresponds to the only interpretation that coherently aligns with the said principle of equivalence, and which is in line with the principles of justice and proportionality.

The interpretation that understands that a rebuttable legal presumption is established in paragraph 1 of article 3 of the CIUC is therefore the only one that makes it possible to ensure the pursuit of the purposes envisioned by the law - burdening vehicle owners to the extent of the environmental and road cost they cause - as established in article 1 of the CIUC, which means that the taxpayers of the IUC are, presumptively, the persons in whose names the vehicles are registered, that is, the said taxpayers are, in principle, and only in principle, the persons in whose names such vehicles are registered, there being, therefore, no other interpretation capable of achieving the said legal purposes, only thus, it is reaffirmed, are the said principles of proportionality and justice fulfilled.

The contrary understanding, that is, the one considered by the AT, which interprets paragraph 1 of article 3 of the CIUC as not establishing a rebuttable legal presumption, understanding that the taxpayers of the IUC are, definitively, the persons in whose names the vehicles are registered, in that it leads to the imposition of a tax burden on whoever may no longer be the owner of the vehicle in question and who thus does not pollute, removing from tax liability the person who is in reality the actual cause of environmental and road damages resulting from the use of the vehicles of which they are the real owners, makes clear that the legally prescribed purposes would not at all be achieved, thus not respecting the principle of equivalence which, in the context of the CIUC, has an absolutely structural function. Such understanding, that is, does not appear, in these circumstances, in harmony with the principle of proportionality.

The interpretation made by the tribunal with respect to paragraph 1 of article 3 of the CIUC took into account the principle of proportionality when, contrary to the Respondent's understanding, it duly takes into account that the definitive registration does not have constitutive effect because it is intended to give publicity to the registered act, functioning only as a mere rebuttable presumption of the existence of the right and when, in homage to that principle, it heeds the principle of equivalence, as a fundamental element of the CIUC.

• As for the efficiency of the tax system, it will be said that the efficiency of the Administration in general, or of the AT in particular, in the ordinary sense, corresponds to the capacity/work methodology oriented toward optimizing the work performed or services provided, which means producing the maximum, in quantity and quality, with the minimum costs and means, having nothing to do with the observance of legally established principles and with respect for the rights of citizens, whether as taxpayers or not.

In the technical sense, it will be said that the principle of efficiency of the tax system is commonly held, in the domain of tax procedure, as a corollary of the principle of proportionality, which as is known imposes an adequate proportion between legal purposes and the means chosen to achieve those purposes, or, as Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa refer, in Lei Geral Tributária, Anotada e Comentada (General Tax Law, Annotated and Commented), 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488, in annotations to article 55 of the LGT, it is a principle that requires "[…] the tax administration to refrain from imposing on taxpayers obligations that are unnecessary to satisfy the purposes it pursues".

In this context, the said principle of efficiency of the tax system will mean the capacity to achieve legally fixed objectives with a minimum of means, which will have nothing to do either with respect for the rights of citizens, nor with the need to observe other principles to which the tax administration must subordinate its activity, particularly those of inquiry and discovery of material truth, and the application of the mentioned principle of efficiency clearly cannot be done either with prejudice to the rights of citizens or by the failure to observe legal purposes. [1]

• As for the principle of legal certainty and trust, it should first be noted that the latter principle, that of trust, is a realization of the principle of good faith, which, having establishment in our legal order since 1996, came to have express constitutional inscription, as appears in paragraph 2 of article 266 of the CRP, which establishes that "The organs and agents of the administration are subordinated to the Constitution and the law and must act, in the exercise of their functions, with respect for the principles of equality, proportionality, justice, impartiality and good faith". (emphasis ours)

With respect to good faith, it should be noted what Professor Freitas do Amaral refers to when, in Curso de Direito Administrativo (Course in Administrative Law), Vol. II, Almedina, 2002, pp. 135/136, citing Professor V. Fausto de Quadros, tells us that "[…] the Public Administration is obliged to comply with good faith in its relations with individuals. More: it must even set the example for individuals in the observance of good faith, in all its manifestations, as the essential nucleus of its ethical behavior. Without this, one can never assert that the State (and with it other public entities) is a trustworthy person".

On the other hand, the principle of trust is also considered a consequence of the principle of legal certainty, inseparable from the Rule of Law, which, having to guarantee a minimum of certainty in the rights of persons and in the legal expectations created for them, generates confidence of citizens in the legal protection of the Public Administration.

Regarding the principles of legal certainty and protection of trust, Professor J. J. Gomes Canotilho tells us in Direito Constitucional e Teoria da Constituição (Constitutional Law and Theory of the Constitution), Almedina - Coimbra, 1998, p. 250 and following, that the said principles are closely associated, considering that "[…] legal certainty is connected with objective elements of the legal order - guarantee of legal stability, security of orientation and realization of law - while protection of trust is more connected with the subjective components of security, particularly the calculability and predictability of individuals in relation to the legal effects of acts of public authorities". In any case, adds the said Professor, idem, that the "[…] general principle of legal certainty in the broad sense (thus encompassing the idea of protection of trust) can be formulated as follows: the individual has the right to be able to trust that to his acts or to public decisions affecting his rights, positions or legal relations based on valid legal norms in force, are linked the legal effects provided for and prescribed by those same norms".

It follows from this doctrine that persons, when alienating their vehicles, must be secure that, if they proceed to sell the vehicles of which they are owners, and should the same not be registered in the names of the acquirers, the legal effects resulting therefrom will be those provided for and resulting from the legal rules in force and their adequate interpretation, in light of the legal purposes of those same rules, which, in the present case, led the arbitral tribunal to consider the registration as a rebuttable presumption of the existence of the right and that only those persons who cause road and environmental costs should be taxed.

The best way to, in the case at hand, ensure legal certainty, in the broad sense, is thus that achieved through the interpretation made by the arbitral tribunal, when it considers that a rebuttable legal presumption is established in paragraph 1 of article 3 of the CIUC, allowing any citizen who proceeds to sell a motor vehicle to a third person the possibility of demonstrating that, at the time of exigibility of the IUC, they were no longer its owner nor responsible for the payment of that tax.

• Beyond what is mentioned above, it is also important to know whether the interpretation adopted by the arbitral tribunal, in addition to not conflicting with any of the referenced principles, is directly and substantively inscribed in the context of the constitutional order.

With respect to the interpretation of law in light of the Constitution, or interpretation in conformity with the Constitution, Professor Jorge Miranda tells us, in Manual de Direito Constitucional (Manual of Constitutional Law), TOME II, Introduction to the Theory of the Constitution, 2nd edition, Coimbra Editora, 1987, p. 232 and following, that what is involved, first of all, is "[…] taking into account, within the systematic element of interpretation, what relates to the Constitution. Indeed, each legal provision must not only be understood in the context of the provisions of the same law and each law in the context of the legal order; it must also be considered in the context of the constitutional order [..]". (emphasis ours)

The understanding that considers a rebuttable legal presumption established in paragraph 1 of article 3 of the CIUC is supported by various elements of interpretation, among which may be mentioned the systematic element, insofar as interpretation in conformity with the Constitution implies that within the systematic element of interpretation, account is taken of what relates to the Constitution.

With respect to the mentioned systematic element, the following should be noted:

a) In the understanding of BAPTISTA MACHADO, in Introdução ao Direito e ao Discurso Legitimador (Introduction to Law and Legitimizing Discourse), p. 183, the systematic element "[…] comprises the consideration of other provisions that form the normative complex of the institute in which the rule to be interpreted is integrated, that is, which regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel provisions). It also comprises the systematic place that corresponds to the rule to be interpreted in the overall legal order, as well as its consonance with the spirit or intrinsic unity of the entire legal order".

b) It is known that a legal principle, in this case the principle of equivalence, does not exist in isolation, but is linked by an intimate nexus with other principles that integrate, at the more global level, the respective legal order, in this case, with the other principles embodied in the system inscribed in the CIUC, and with other constitutionally established principles. In that sense, each article of a given legal instrument, in this case the CIUC, will only be comprehensible if we place it both before the other articles that follow or precede it, and before the constitutional order.

c) With respect to the systematization of the CIUC, environmental concerns were decisive in leading the mentioned principle of equivalence to be inscribed from the outset in the first article of said Code, which necessarily leads to subsequent articles, insofar as they are grounded in such principle, being influenced by it. This occurred, in particular, with the taxable base, which came to consist of various elements, particularly those relating to pollution levels, and with the tax rates established in articles 9 to 15, which were influenced by the environmental component, and naturally also with the subjective incidence itself, provided for in article 3 of the CIUC, which cannot escape the mentioned influence.

d) The said principle of equivalence, as Sérgio Vasques points out, in Os Impostos Especiais de Consumo (Excise Taxes), Almedina, 2001, p. 122 and following, implies that "[…] the tax must correspond to the benefit the taxpayer derives from public activity; or the cost that the taxpayer imputes to the community by its own activity". The said author adds, idem, that "Thus, a tax on automobiles based on a rule of equivalence will be fair only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different wear and environmental cost pay a different tax also." For this reason, as the quoted author also states, idem, the realization of the principle of equivalence imposes special requirements "[…] with respect to the subjective incidence of the tax [..]."

The mentioned principle that informs the current Single Circulation Tax is inscribed in the environmental concerns stated in paragraph 2, paragraph a) of article 66 of the CRP and in the need - having in view to ensure the right to environment, in the context of sustainable development - to "Prevent and control pollution and its effects and harmful forms of erosion", concerns which are manifestly taken into account in the interpretation defended by the arbitral tribunal.

On the other hand, the provision in paragraph h) of paragraph 2 of article 66 of the Constitution, when it establishes that, in the context of sustainable development, it is incumbent on the State to "ensure that fiscal policy makes development compatible with environmental protection and quality of life", has as a corollary the principle of the polluter-payer, which implements the idea inscribed therein that whoever pollutes must therefore pay, and thus the interpretation defended by the arbitral tribunal is in perfect accordance with the constitutional order.

e) It is still important to leave a brief note, only to raise the question of why the rules contained in article 9 of the Civil Code bind the interpreter of ordinary legislation, when it is certain that said Code does not occupy any prominent place in the legal system.

To this question Professor Jorge Miranda responds, ibidem, p. 230, when he considers that the "[…] conclusion to which one is inclined is that rules such as these are valid and effective, not because they are contained in the Civil Code - for it occupies no prominent place in the legal system - but directly, as such, because they express a legislative will, not contradicted by any other provisions, regarding the problem of interpretation (which are not only technical-legal) which they address."

The said author adds, idem, that "rules on these matters can be considered substantially constitutional and it would not even be repugnant to see them raised to the Constitution in the formal sense."

With respect to the problem of interpretation and its rules, as we take from Professor José de Oliveira Ascensão, in O Direito, Introdução e Teoria Geral (The Law, Introduction and General Theory), 2nd edition, Fundação Calouste Gulbenkian, 1980, pp. 352/353, the imperative character of these rules should be emphasized, and their binding nature for the interpreter.

The interpretation that the arbitral tribunal makes of paragraph 1 of article 3 of the CIUC and the criteria it considered for this purpose, from the literal element to the systematic element, passing through the historical and rational (or teleological) element, do not thus collide with any constitutional principles.

Paragraph 1 of article 9 of the CC provides that the search for legislative thought should have "[…] especially in mind […] the unity of the legal system, the circumstances under which the law was drafted and the specific conditions of the time in which it is applied", circumstances and conditions which, today more than ever, are affected by sensitivity to the environment and respect for matters related to it, and which are inscribed in the constitutional order.

Thus, in light of what has been mentioned, it does not appear, with all due respect, that the AT has merit in its position, insofar as the interpretation considered by the arbitral tribunal, as being the only one capable of respecting legal purposes, does not violate any of the principles in question, that is, the principles of trust and legal certainty, efficiency of the tax system and proportionality, and on the other hand, such interpretation is expressly and substantively in conformity with the principles inscribed in the Constitution.

Thus, it is not apparent that the interpretation made by the tribunal on paragraph 1 of article 3 of the CIUC conflicts with any constitutional norms or principles in force.

L - ACQUISITION OF VEHICLE OWNERSHIP AND THE VALUE OF REGISTRATION

67 - First of all, it should be stated with respect to the value of registration that acquirers of vehicles become owners of those same vehicles through the conclusion of the corresponding purchase and sale contracts, with registration or without it.

68 - There are three articles of the Civil Code that it is important to take into account with respect to the acquisition of ownership of a motor vehicle. They are, first, article 874, which establishes the notion of a purchase and sale contract as being "[…] the contract by which the ownership of a thing, or other right, is transmitted, by means of a price"; article 879, in whose paragraph a) it is established, as essential effects of the purchase and sale contract, "the transmission of ownership of the thing or the title to the right" and article 408, which is titled contracts with real effect, and establishes in its paragraph 1 that "the constitution or transfer of real rights over a determined thing is effected by mere effect of the contract, except for exceptions provided by law". (emphasis ours)

We are indeed in the domain of contracts with real effect, which means that their conclusion causes the transmission of real rights, in this case motor vehicles, determined by mere effect of the contract, as expressly follows from the previously mentioned rule.

69 - With respect to said contracts with real effect, it is important to note the teachings of Pires de Lima and Antunes Varela, when, in annotations to article 408 of the CC, they tell us that "These contracts called real (quoad effectum), because they have as their immediate effect the constitution, modification or extinction of a real right (and not merely the obligations tending to that result) are distinguished from the so-called real contracts (quoad constitutionem), which require the delivery of the thing as an element of their formation (see articles 1129, 1142 and 1185) ".

We are thus before contracts in which the ownership of the sold thing is transferred, without more, from the seller to the buyer, having as its cause the contract itself.

70 - Also from jurisprudence, particularly from the Ruling of the STJ No. 03B4369 of 19/02/2004, available at: www.dgsi.pt, it is derived that, in light of the provision of article 408, paragraph 1 of the Civil Code, "the constitution or transfer of real rights over a determined thing is effected by mere effect of the contract, except for exceptions provided by law". This is the case of a contract for the purchase and sale of a motor vehicle (articles 874° and 879, paragraph a) of the Civil Code), which does not depend on any special formality, being valid even when concluded in verbal form - as stated in the Ruling of the STJ of 3-3-98, in CJSTJ, 1998, year VI, Volume I, page 117". (emphasis ours)

71 - Having the purchase and sale contract, in light of what has been mentioned, real nature, with the mentioned consequences, it is important also to consider the legal value of motor vehicle registration subject to such contract, insofar as the transaction of said good is subject to public registration.

72 - Article 1, paragraph 1 of Decree-Law No. 54/75, of February 12, relating to motor vehicle registration indeed establishes that "Motor vehicle registration is essentially intended to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce". (emphasis ours)

73 - It being clear, in light of said rule, what the purpose of registration is, there is, however, no clarity within the scope of the said Decree-Law on the legal value of that registration, and it is important to consider article 29 of the mentioned legal instrument, relating to motor vehicle property registration, when it provides that "The provisions relating to land registration shall apply, with necessary adaptations, to motor vehicle registration, […]". (emphasis ours)

74 - In this context, in order that we may achieve the sought knowledge on the legal value of motor vehicle property registration, it is important to take into account what is established in the Land Registration Code, approved by Decree-Law No. 224/84, of July 6, when it provides in its article 7 that "definitive registration constitutes a presumption that the right exists and belongs to the registered title holder in the precise terms in which registration defines it". (emphasis ours)

75 - The combination of the provisions of the articles mentioned above, particularly that established in paragraph 1 of article 1 of Decree-Law No. 54/75, of February 12 and in article 7 of the Land Registration Code, allows one to consider, on the one hand, that the fundamental function of registration is to give publicity to the legal situation of vehicles, allowing on the other hand to presume that the right exists and that such right belongs to the title holder for whom it is registered, in the precise terms in which it is defined in the registration.

76 - Thus, definitive registration is nothing more than a presumption that the right exists and belongs to the registered title holder, in the exact terms of the registration, but a rebuttable presumption, admitting therefore counterproof, as follows from the law and jurisprudence has noted, being able, in this regard, to see among others the Rulings of the STJ Nos. 03B4369 and 07B4528, respectively of 19/02/2004 and 29/01/2008, available at: www.dgsi.pt.

77 - The function legally reserved to registration is thus, on the one hand, to publicize the legal situation of goods, in this case vehicles, and on the other hand to allow us to presume that the right over those vehicles exists and that it belongs to the title holder, as such inscribed in the registration, which means that the registration does not have a constitutive nature of the right of ownership, but only declarative, hence registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer.

78 - Thus, if the buyers of vehicles, as their "new" owners, do not promptly promote the appropriate registration of their right, it is presumed, for the purposes of paragraph 1 of article 3 of the CIUC and of the provision of article 7 of the Land Registration Code, that the vehicles continue to be the property of the person who sold them and who remains in the registration as their owner, such person being the taxpayer of the tax, in the certainty, however, that such presumptions are rebuttable, either by force of that established in paragraph 2 of article 350 of the CC, or in light of the provision of article 73 of the LGT. Thus, from the moment in which the presumptions in question are dispelled, through proof of the respective sale, the AT cannot persist in considering the seller of the vehicle, who continues to appear in the registration as its owner, as the taxpayer of the IUC.

M - MEANS OF PROOF PRESENTED

79 - Since written form is not legally required for the transmission of ownership of motor vehicles, proof of such transmission may be made by any means, namely by oral or documentary evidence, in the latter including in particular invoices-receipts or receipts relating to sales of vehicles.

80 - On this matter, reference should be made to the aforementioned Ruling of the Central Administrative and Tax Court South, issued on 19-03-2015, Case 08300/14, available at: www.dgsi.pt, when it expressly states, with respect to the invoice and debit note, that "[…] both documents appear in the phase of charging the amount payable by the buyer, thus not constituting proof of payment of the price by the buyer and consequently proof that the purchase and sale was concluded (only the issuance of invoice/receipt or receipt constitutes proof of payment and discharge - see article 787 of the Civil Code)" (emphasis ours)

81 - As a means of proof that the vehicle with license plate …-…-… was sold on December 10, 1992, to B…, for the price of 100,000$0, the Claimant attached a copy of the corresponding sales receipt, which evidences the conclusion of such sale.

82 - The mentioned receipt refers, in particular, both to the names of seller and buyer, as well as the identification of the vehicle in question, the value of the respective sale and the date on which it was made, information which enjoys the presumption of truthfulness conferred on it in paragraph 1 of article 75 of the LGT, and it being incumbent on the AT, in light of the provision of article 75, paragraph 2 of the LGT, within the founded and objective reasons it had, to demonstrate that the same do not correspond to reality.

83 - The transfer of title to the vehicle occurred thus on December 10, 1992, and the exigibility of the corresponding IUC concerns the years 2009; 2010; 2011 and 2012.

84 - Under these circumstances, since the AT is requiring the IUC for the years 2009 to 2012, and the Claimant is not in these years the owner of said vehicle, it is considered that the mentioned documentation constitutes adequate proof and capable of rebutting the presumptions in question in the case, that is, the presumption established in article 7 of the Land Registration Code and that enshrined in paragraph 1 of article 3 of the CIUC, which means that at the time when the tax was exigible in all the said years (2009 to 2012), the Claimant was not the taxpayer of the IUC.

N - REFUND OF AMOUNT PAID AND COMPENSATORY INTEREST

85 - Under the terms of the provision of paragraph b) of paragraph 1 of article 24 of the RJAT, and in accordance with what is established there, the arbitral decision on the merit of the claim which is not subject to appeal or impugnation binds the tax administration from the end of the period provided for appeal or impugnation, with such administration - in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the period provided for voluntary execution of sentences of the tax courts - "Restore the situation that would have existed if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose." (emphasis ours)

86 - These are legal commands that are in total harmony with the provision of article 100 of the LGT, applicable to the case by virtue of the provision of paragraph a) of paragraph 1 of article 29 of the RJAT, which establishes that "The tax administration is obliged, in case of total or partial success of administrative claims or appeals, or of legal proceedings in favor of the taxpayer, to immediately and fully restore the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in accordance with the terms and conditions provided for by law." (emphasis ours)

87 - The case contained in the present proceedings gives rise to the manifest application of the mentioned rules, since as a result of the illegality of the assessment acts referenced in this case and the payment of the sum of € 1,023.12, as appears from the documentation forming part of the case file (PA, Documents 5/6/7/8/9, page 178 and following), there should be a refund of the amounts paid, both as tax and as compensatory interest, as a way to achieve the restoration of the situation that would have existed if the illegality had not been committed, amounts which in the case at hand total € 1,023.12.

88 - As for compensatory interest, it is manifest that, in light of what is established in article 61 of the CPPT and with the requirements of the right to compensatory interest having been met, that is, with the existence of error attributable to the services resulting in payment of the tax debt in an amount exceeding the legally due amount, as provided for in paragraph 1 of article 43 of the LGT, the Claimant is entitled to compensatory interest at the legal rate, calculated on the aforementioned sum of € 1,023.12.

CONCLUSION

89 - In the circumstances that have been referred to, the AT, in performing the assessment acts at issue in the present case, based on the idea that article 3, paragraph 1 of the CIUC does not establish a rebuttable presumption, makes an incorrect interpretation and application of this rule, committing an error in the legal premises, which constitutes a violation of law.

90 - On the other hand, because the AT, at the date of occurrence of the tax facts, considered the Claimant to be the owner of the vehicle referenced in the present case, considering it as such a taxpayer of the tax, when such ownership, with respect to the vehicle in question, was no longer inscribed in its legal sphere, basing itself thus on factual matter divergent from the actual reality, commits an error in the factual premises and therefore a violation of law.

PREJUDICED ISSUES

91 - With the request for arbitral pronouncement proceeding on the basis of the defect of violation of law, which ensures effective and stable protection of the Claimant's rights, knowledge of the other defects that are raised in the case is prejudiced.

This results from the provision of article 124 of the CPPT, applicable by virtue of the provision of article 29, paragraph 1, paragraph a) of the RJAT.

III - DECISION

92 - Therefore, in light of all the foregoing, this Arbitral Tribunal decides:

• Not to examine, on the basis of subject matter, the claim for compensation deduced by the Claimant, relating to the alleged damages caused by the wrongful payment of the tax;

• To judge well-founded, as proven, on the basis of a defect of violation of law, the claim for declaration of illegality of the IUC assessment acts formulated by the Claimant, relating to the years 2009; 2010; 2011 and 2012, relating to the vehicle identified in the case;

• To annul, consequently, the IUC assessment acts relating to the years 2009 to 2012, relating to the vehicle with license plate …-…-…, as identified in the case file;

• To condemn the AT to refund the sum of € 1,023.12, relating to the IUC assessed and paid, in the terms mentioned in the case, and to the payment of compensatory interest at the legal rate, counted from the date of payment of the tax until the full refund of said sum;

• To condemn the AT to pay the costs of the present proceedings.

VALUE OF THE CASE

In accordance with the provision of articles 306, paragraph 2 of the CPC (formerly 315, paragraph 2) and 97-A, paragraph 1 of the CPPT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 1,023.12.

COSTS

In accordance with the provision of article 12, paragraph 2, in fine, and article 22, paragraph 4, both of the RJAT, and article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I attached thereto, the total amount of costs is fixed at € 306.00.

Let notification be made.

Lisbon, March 8, 2016

The Arbitrator

António Correia Valente

(The text of this decision was drafted by computer, in accordance with article 131, paragraph 5 of the Code of Civil Procedure (formerly 138, paragraph 5), applicable by referral from article 29, paragraph 1, paragraph e) of Decree-Law No. 10/2011, of January 20 (RJAT), with its writing governed by orthography prior to the Orthographic Agreement of 1990.)

[1] See the study on this matter, prepared by Professor Carlos Pestana Barros, in Ciência e Técnica Fiscal (Science and Tax Technique), 2005, No. 416, pp. 105-126