Summary
Full Decision
ARBITRAL DECISION
I. REPORT
A..., hereinafter Claimant, legal entity no. ..., domiciled at Street ..., ..., in Lisbon, in the jurisdiction of the ... Lisbon Tax Authority office and at Street ..., ..., ..., in Lisbon, came, in accordance with article 10, no. 2, of Decree-Law no. 10/2011 of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter designated as LRIAT), to request the constitution of a singular Arbitral Tribunal, in which the Tax and Customs Authority is requested, hereinafter AT or Respondent, with a view to the declaration of illegality and consequent annulment of the tax assessment acts relating to the Unique Vehicle Circulation Tax identified in the case file.
The request for the constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD and automatically notified to AT on 17 March 2017.
In accordance with no. 1 of article 11 of the LRIAT, in the wording introduced by article 228 of Law no. 66-B/2012 of 31 December, the singular Arbitral Tribunal was constituted on 20 September 2017.
AT responded, contending that the petition should be ruled unfounded.
In light of the nature of the matter contained in the case file, the meeting referred to in article 18 of the LRIAT and the holding of final submissions were dispensed with.
The Arbitral Tribunal is properly constituted and materially competent, in accordance with article 2, no. 1, paragraph a) of the LRIAT.
The parties have legal personality and capacity, are legitimate and are properly represented (article 4, and no. 2 of article 10 of the LRIAT and article 1 of Ordinance no. 112/2011 of 22 March).
There are no nullities, exceptions or preliminary matters that would prevent the immediate consideration of the merits of the case.
II. FACTS
Based on the elements contained in the case file and the administrative process attached to the case, the following facts are considered proven:
a) The Claimant is a financial institution specialising in the automobile sector, proceeding to purchase new vehicles from national importers B... and C... and habitually carrying out leases – leasing (financial leasing) or ALD (long-term rental) of these same vehicles in favour of third parties;
b) The Claimant was notified of the assessments for Unique Vehicle Circulation Tax (IUC) contained in the case file, in the total amount of €4,343.96;
c) The Claimant filed an administrative appeal against the aforementioned IUC assessment acts;
d) By decision dated 5 April 2017, the Claimant was notified of the decision partially upholding the administrative appeal filed;
e) The Claimant paid the IUC assessments identified in the case file;
f) The vehicles corresponding to the IUC assessment acts identified in the case file were the subject of vehicle lease contracts or long-term rental contracts without driver with a promise of sale.
The Tribunal did not consider the following facts proven:
The vehicles ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-... were transferred by the Claimant to third parties.
This tribunal formed its conviction on the basis of the documents attached to the case file.
III. MATTERS OF LAW
The main issues raised in the present case concern whether the Claimant should be qualified as the taxable person for IUC purposes, in relation to the IUC assessment acts identified in the case file, in the following situations:
a) With regard to vehicles covered by financial leasing contracts or ALD contracts with a promise of sale;
b) With regard to vehicles alienated before the date of exigibility of IUC.
In this regard the Claimant argues, in summary, the following:
Concerning motor vehicles covered by financial leasing contracts or ALD contracts with a promise of sale, there emerge two other characteristics fundamentally divergent from traditional operational lease contracts and/or rental: (a) the financial lessee of motor vehicles is equated to an owner under legislation on the licensing of motor vehicles and their trailers – see Decree-Law no. 11/84 of 7 January; and (b) the IUC Code, in no. 2 of its article 3, equates financial lessees to owners, as well as holders of purchase option rights arising from lease contracts, for purposes of the subjective scope of IUC;
Given the characteristics enumerated, the meaning of the equation, in the context of the subjective scope of IUC, of financial lessees and holders of purchase option rights arising from lease contracts, to owners of vehicles, is achieved;
It is found that some of the situations under analysis correspond to vehicles that were covered by financial leasing contracts or operational lease contracts with a promise of sale;
In effect, consider the case of the vehicle with registration number ...-...-..., in respect of which a financial leasing contract was concluded with D..., beginning on 20 March 2010 and terminating on 19 March 2015, with A... having been notified by AT to pay the IUC for the year 2014;
Now, in accordance with no. 2 of article 4 of the IUC Code, the taxation period for IUC corresponds to the year in which it begins on the date of registration or on each of its anniversaries, with regard to vehicles in categories A, B, C, D and E;
Consequently, having in mind that the registration date of the vehicle with registration number ...-...-... is 2 March 2010, the IUC for the period of 2014 was due on the date of its anniversary, that is, on 2 March 2014;
Nevertheless, on 2 March 2014, the aforementioned financial leasing contract was in force, so, in accordance with no. 2 of article 3 of the IUC Code, the taxable person was not A..., but rather the financial lessee, since this party is equated to the owner of the vehicle;
On the other hand, if we observe the situation of the vehicle with registration number ...-...-..., it is found that it is bound to a long-term vehicle rental contract without driver with a promise of sale concluded between A... and E... Ltd., the same having been initiated on 8 July 2015 and terminated on 7 July 2017;
Having in mind that the registration date of this vehicle is 3 July 2015, the IUC for the year 2016 was due on 3 July 2016;
However, in this contract a purchase promise was also provided for by the lessee in favour of A..., thus determining that, in accordance with no. 2 of article 3 of the IUC Code, the taxable person was not A..., but rather the holder of the purchase option arising from the lease contract.;
Thus, the Claimant is in no way complicit in such self-assessments of IUC, in that it was not the taxable person for this tax;
In that regard, the aforementioned self-assessments of IUC are illegal, by violation of article 1 and no. 2 of article 3, both of the IUC Code, and should therefore be annulled and the IUC improperly paid should be reimbursed to A...;
With respect to vehicles alienated before the date of exigibility of IUC, the transfers of ownership occurred by mere effect of the contracts concluded, being the same duly supported by the respective invoices, which form part of the files relating to each of the registration plates in question;
Now, in this respect it is important to emphasise that the transfer of automobile ownership may take effect by mere effect of the contract, not being dependent on any subsequent act for it to be constituted or to become effective, legal and juridically, such as the delivery of the thing or the registration;
Consequently, given the legal notion of third party, and insofar as the legal requirements inscribed in that notion are not met, AT cannot be qualified as such, and therefore cannot invoke the absence of registration to justify the ineffectiveness of the vehicle purchase and sale contracts;
In light of the foregoing, AT cannot allege the absence of updating of the registration of the right of ownership, to require the payment of the tax from the former owner in whose name the vehicle is registered, whenever, by any means, it is presented with proof of the respective sale;
Indeed, it would be unjustified to impose a kind of irrebuttable presumption, since, without any apparent reason, one would be imposing a (questionably acknowledged) formal truth at the expense of what could and would actually have been proven;
Moreover, it is important to note that, if the seller were not permitted to rebut the presumption contained in article 3 of the IUC Code, one would be benefiting, without plausible reason, acquirers who, in possession of correctly completed and signed contract forms and enjoying the advantages associated with their status as owners, would attempt to exempt themselves, by means of a "registration formality", from the payment of tax or penalties;
In light of the foregoing, A... proceeded to transfer the ownership of the vehicles for which it was obliged to assess IUC;
Now, such transfers of ownership are documentarily supported by the respective invoices, which form part of the file relating to each of the registration plates in question;
Thus, given the manifest opening that the tax law gave to the taxpayer to provide proof that it is not the holder of the right of ownership, through the invoices of the vehicles in question, the presumption of ownership of such vehicles by A... is undoubtedly rebutted;
Thus, A... does not accept such self-assessments of IUC, in that it was not the taxable person for this tax;
Since the aforementioned self-assessments of IUC are illegal, by violation of articles 1 and no. 1 of article 3 of the IUC Code, they should therefore be annulled and the IUC improperly paid should be reimbursed to A...;
As can be seen from the foregoing and from the documentary evidence produced, all the vehicles in question are not used by A..., nor is it in its interest that they enter road circulation.
For its part, AT argues, in summary, the following:
The Claimant's argument is not well-founded when it alleges the illegality of IUC assessments (by violation of article 3, no. 2 of the IUC Code) concerning vehicles that are the subject of financial leasing contracts concluded;
In the first place, even if it were concluded that we are dealing with financial leasing contracts executed by the Claimant, the latter was always obliged to demonstrate that it had complied with the ancillary obligation imposed by article 19 of the IUC Code;
In this endeavour, that is, the Claimant not having complied with that obligation, it is necessary to conclude that it is the taxable person for the tax;
The Claimant also alleges that the tax acts under judicial review are based on an error as to their presuppositions, in that it was no longer the owner of the motor vehicles at issue at the moments when the obligation to assess the respective IUC became due, despite the vehicle registry showing the Claimant as the owner thereof;
In this endeavour, the arguments invoked by the Claimant fail and, let us acknowledge, what the Claimant presents is insufficient to rebut a legal presumption arising from the registration of the vehicles in its name at the dates of exigibility of the taxes;
Even if by academic hypothesis and without admitting that the Arbitral Tribunal comes to conclude that the arbitral pronouncement petition filed by the Claimant is well-founded, it is important to note that IUC aims to tax the owner of the automobile, and ownership is revealed through its registration;
Now, the Claimant not having taken care to update the vehicle registry, as it indeed could and should have (article 5/1-a) of Decree-Law 54/75 of 12 February, and article 118/4 of the Road Code), and not having had the vehicle registration cancelled, it is necessary to conclude that the Claimant did not proceed with the care required of it;
And by not having proceeded with the care required of it, it inexorably led the Respondent to limit itself to complying with the legal obligations to which it is bound and, in parallel, to follow the registry information that was provided to it by the appropriate party;
Therefore, it was not the Respondent who gave rise to the deduction of the arbitral pronouncement petition, but rather the Claimant itself;
Consequently, the Claimant should be ordered to pay the arbitral costs arising from this arbitral pronouncement petition, in accordance with article 527/1 of the CPC by virtue of article 29/1-e) of the LRIAT, in line, indeed, with a similar matter decided within the framework of the case, under no. 72/2013-T, which took place in these arbitration proceedings.
Let us see what should be understood.
- On the Interpretation of no. 1 of article 3 of the IUC Code
Article 3 of the IUC Code establishes the following:
"1 – The taxable persons for the tax are the owners of vehicles, being considered as such the natural or legal persons of public or private law, in whose names the same are registered.
2 – Financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights arising from the lease contract, are equated to owners."
It follows from article 11 of the General Tax Law (GTL) that the interpretation of tax legislation should be carried out having regard to the general principles of interpretation.
The general principles of interpretation are established in article 9 of the Civil Code (CC), as follows:
"1. Interpretation should not be limited to the wording of the law, but should reconstruct the legislative thought from the texts, taking above all into account the unity of the legal system, the circumstances in which the law was drafted and the specific conditions of the time in which it is applied.
2. The legislative thought that does not have in the wording of the law a minimum of verbal correspondence, even if imperfectly expressed, cannot, however, be considered by the interpreter.
3. In fixing the meaning and scope of the law, the interpreter will presume that the legislator adopted the most appropriate solutions and knew how to express his thought in adequate terms."
It is thus established that there are three elements of interpretation of the Law, namely: the literal element, the historical and rational element, and the systematic element.
Having regard to the literal element of the norm here under discussion, it will be important, first, to reconstruct the legislative thought through the words of the law. It is said in no. 1 of article 3 of the IUC Code that "the taxable persons for the tax are the owners of vehicles, being considered as such the natural or legal persons of public or private law, in whose names the same are registered."
According to AT, the expression "being considered as" does not constitute a legal presumption, it being the legislator's intention to establish expressly and intentionally that those are considered as such (as owners) the persons in whose names the same (vehicles) are registered, since this is the interpretation that preserves the unity of the tax legal system.
It so happens that, from a literal point of view, it is found that the expression "being considered as" or "is considered" is often used with a meaning equivalent to the expression "being presumed" or "is presumed".
Thus, by way of example, see article 191, no. 6, of the Tax Procedure Code, among other articles noted in the arbitral decisions delivered in cases nos. 14/2013-T, 27/2013-T, 73/2013-T or 170/2013-T.
In this way, it can be said that the expression "being considered as" has "a minimum of verbal correspondence, even if imperfectly expressed", and such term should be recognised as having a current and normal correspondence to that presumptive meaning (See arbitral decision delivered, in the framework of case no. 286/2013-T).
Nevertheless, and as is pointed out by AT, the term "considered" is also used outside presumptive contexts – See article 18 of its response.
For this reason, it is important to submit no. 1 of article 3 of the IUC Code to the control of the other elements of interpretation of a logical nature.
Thus, having regard to the historical element of interpretation, it is important to consider that the bill of law no. 118/X of 7.03.2007, underlying Law no. 22-A/2007 of 29.06, consecrates "as a structuring and unifying element (...) the principle of equivalence, thus making it clear that the tax, as a whole, is subordinated to the idea that the taxpayers should be burdened in the measure of the cost they cause to the environment and to the road network, and this is the raison d'être of this tax figure."
In this context, it seems clear to us that the legislator intended to tax the real and effective taxable person causing road and environmental damage and not any mere holder of a vehicle registration.
As has been emphasised on various occasions in several arbitral decisions, the principle of equivalence aims to internalise the negative environmental externalities arising from the use of motor vehicles, and was established as a fundamental principle of the taxation of motor vehicles in circulation.
As Sérgio Vasques argues, in Special Consumption Taxes, Almedina, Coimbra, 2001, p. 122, "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 different tax also", adding that the realisation of the said principle "(...) dictates other requirements still with regard to the subjective scope of the tax (...)".
Having in mind the foundations underlying the creation of the present IUC Code, in particular, the establishment of the principle of equivalence as a structuring and unifying principle of the taxation of vehicles in circulation, it seems to us that no. 1 of article 3 of the IUC Code cannot be interpreted as a closed command, but rather as a rebuttable presumption, which is based on the assumption that in reality the agent responsible for environmental damage is, as a rule, the registered owner of the automobile. An assumption that cannot fail to be disregarded, if in reality it is another who is the agent responsible, that is, the taxable person for IUC.
From a systematic point of view, it is important to reinforce once again that at the very outset of article 1 of the IUC Code it is established that "The unique vehicle circulation tax complies with the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that they cause, in realisation of a general rule of tax equality."
As A. Brigas Afonso and Manuel T. Fernandes argue, in Tax on Vehicles and Unique Vehicle Circulation Tax, Annotated Codes, pp. page 183, "the legislator seeks to legitimise the taxation of motor vehicles on the basis of the negative externalities they cause (in public health, in the environment, in road safety, in the congestion of communication routes and in the urban landscape) demystifying the idea that motor vehicle taxation is very high in Portugal."
According to Batista Machado, in Introduction to Law and to Legitimising Discourse, p. 183, the systematic element "comprises the consideration of other provisions that form the complex set of norms of the institute in which the norm 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 places). It also comprises the place in the systematic that is proper to the norm to be interpreted in the global legal order, as well as its harmony with the spirit or intrinsic unity of the entire legal order."
This is, moreover, the most just solution if we consider that the unity of the tax system cannot fail to be found in the principle of material truth and in the principle of proportionality (See Saldanha Sanches, in Principles of Tax Proceedings, pp. page 21, and Alberto Xavier, in Concept and Nature of the Tax Act, pp. 147 et seq.).
In fact, the interpretation here defended is not only that which best accords with the principle of material truth, but also the only one that serves the purposes of tax justice.
Indeed, tax law exists to regulate conflicts of interest between the pretensions of the State to pursue the public interest of obtaining revenue and the pretensions of taxpayers to maintain the integrity of their assets, and should not, as a rule, serve as a criterion for interpreting the tax norm, the safeguarding of the patrimonial or financial interest of the State.
In sum: on the basis of article 9 of the CC, it is considered that all elements of interpretation (literal, historical and systematic) point in the direction that article 3, no. 1, of the IUC Code, in the wording applicable at the date of the tax facts, establishes a rebuttable presumption. This means that the taxable persons for IUC being, in principle, the owners of vehicles, being considered as such the persons in whose names the same are registered, may, after all, be others, if it is in fact others who are the causers of environmental damage, as users of vehicles in circulation.
Having in mind what is set out above, it is understood that the provision under analysis establishes a presumption of ownership in favour of the persons in whose names the vehicles are registered.
In accordance with article 73 of the GTL, "The presumptions consecrated in the norms of tax incidence always admit proof to the contrary."
As Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa argue, in General Tax Law, Annotated and Commented, pp. page 652, 4th Edition, "what is intended 'always' is to tax real income and not non-existent income and it is for this reason, of wanting to always tax real values, that article 73 of the GTL always permits rebutting presumptions.
This is the interpretation that is in harmony, on the one hand, with the principle set out in article 11, no. 3, of the GTL, that in cases of doubt about the interpretation of tax rules "attention should be paid to the economic substance of the tax facts" and, on the other hand, with the principle of equality in the distribution of public burdens, which requires that the taxation of the generality of taxpayers, whenever possible, is based on the economic reality underlying the tax facts and is not compatible with the existence of special cases of taxation on the basis of fictitious values in situations where the real value of the tax facts is known or can be determined.
- On the Specific Case
In light of the foregoing, let us see who is the taxable person for IUC in the following situations:
a) Vehicles covered by financial leasing contracts or ALD contracts with a promise of sale:
The Claimant attached to the case file the financial leasing contracts or ALD contracts with a promise of sale concerning the vehicles that are the subject of all the IUC assessment acts issued.
On the basis of the documents attached, the Claimant argues that at the time of the occurrence of the relevant tax fact for purposes of the maturity of the respective IUC, that is, in the years 2014 to 2016, the presuppositions of the subjective scope of the tax fact are verified only in the sphere of the lessees and solely in relation to them.
Having analysed the documents attached, which constitute the financial leasing contracts or ALD contracts with a promise of sale, the Tribunal finds that the vehicles corresponding to the contracts referred to, with the exception of the vehicles ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., were, at the date of the occurrence of the tax fact, the subject of financial leasing contracts or ALD contracts with a promise of sale.
Considering that the Tribunal considers that such contracts imply the transfer of ownership and use of the vehicles in question, it is understood that responsibility for the payment of IUC is imputable to the lessees of such vehicles and not to the Claimant, as results from the provision in article 3, no. 2 of the IUC Code, and the assessment acts corresponding to the vehicles identified should be annulled.
b) Vehicles alienated before the date of exigibility of IUC:
The Claimant remained in the registry as owner and lessor of the vehicles ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., and therefore AT seeks to impute to it the responsibility for payment of IUC in accordance with article 3, no. 1 of the IUC Code.
However, the Claimant alleges that, in fact, the aforementioned vehicles had already been alienated at the date of exigibility of the IUC, and attaches for this purpose the invoices corresponding to the alleged transfers of the vehicles.
However, the Tribunal understands that only with such documents, the transfer of ownership of the vehicles was not demonstrated, since no proof of payment, declarations of sale or other documents demonstrating the transfer of ownership were attached.
In consequence, on the basis of the documents attached, the Tribunal is convinced that as to the IUC assessment acts nos. 2016..., 2014..., 2016..., 2016..., 2016... and 2016... identified in the case file, responsibility for their payment is imputable to the Claimant.
IV. DECISION
Thus, the Tribunal decides to rule partially well-founded the arbitral petition, in the following terms:
A) To rule unfounded, as not proven, the petition with respect to the IUC assessment acts nos. 2016..., 2014..., 2016..., 2016..., 2016... and 2016...;
B) To rule well-founded, as proven, the arbitral pronouncement petition and, in consequence, to declare illegal and annul all the remaining assessment acts for the Unique Vehicle Circulation Tax and compensatory interest, in the total amount of €3,662.66;
C) To rule unfounded the petition for payment of indemnificatory interest, since, with respect to the illegal assessment acts, nothing was verified either as to the registration of the financial leasing contracts or as to the compliance by the Claimant of the obligation incumbent upon it by force of article 19 of the IUC Code.
V. VALUE OF THE CASE
In accordance with the provision in article 306, no. 2 of the Code of Civil Procedure, 97-A of the Tax Procedure Code and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the petition is fixed at €4,343.96.
VI. COSTS
In accordance with the provision in articles 12, no. 2 of the LRIAT, and in article 4, no. 4 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €612.00, in accordance with Table I of the aforementioned Regulation, to be paid by the Claimant and the Respondent in the proportion of 16% and 84%, respectively, in accordance with article 22, no. 4 of the LRIAT.
Notify accordingly.
Lisbon, 24 November 2017
The Arbitrator
Magda Feliciano
(The text of this decision was drawn up by computer, in accordance with article 131, no. 5, of the Code of Civil Procedure, made applicable by referral in article 29, no. 1, paragraph e) of Decree-Law no. 10/2011 of 20 January (LRIAT), being governed in its drafting by the spelling prior to the Spelling Agreement of 1990.)
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