IUC Subjective Incidence: Vehicle Tax Liability of Registered Owner vs Actual Owner (CAAD 44/2015-T)

ARBITRAL DECISION

CAAD: Tax Arbitration

Subject: Unique Circulation Tax – Subjective Scope

I – Report

1. On 28.01.2015, the Claimant, A…, S.A., with registered office at Avenue …, …, with tax identification number …, requested the CAAD to constitute an arbitral tribunal, pursuant to Article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter designated merely as LFRM), wherein the Tax and Customs Authority is the Respondent, with a view to the annulment of the Official Assessments of Unique Circulation Tax ("UCT"), relating to the vehicles identified in the summary table attached by the Claimant as document number 5, having the Claimant as the taxpayer, relating to the tax periods 2013 and 2014, which total the amount of 2,431.82€.

The Claimant further petitions for the Respondent to be condemned to refund the taxes assessed and which it alleges to have paid, as well as to the payment of compensatory interest on the same amounts.

1. The request for constitution of the arbitral tribunal was accepted by the Honorable President of CAAD and notified to the Tax and Customs Authority.

Pursuant to the terms and for the purposes of Article 6, No. 1, of LFRM, by decision of the President of the Ethics Council, duly communicated to the parties, within the legally applicable timeframes, the undersigned was designated as arbitrator, who communicated acceptance of the appointment to the Ethics Council and to the Administrative Arbitration Center within the regularly applicable timeframe.

The Arbitral Tribunal was constituted on 31.03.2015.

1. By petition of 1.06.2015, following an arbitral order of 28.05.2015, the Claimant came to rectify the amount of the assessment relating to the vehicle with license plate …-…-… relating to the year 2014 in order to clarify that, in accordance with the documentary evidence of the assessment and contained in the procedural management system, the same is 32.32€ and not 329.86€, and relating to the year 2014 and not to the year 2013.

Consequently, the total amount of the assessments contested is 2,431.82€ and not 2,729.36€ as, due to that lapse, was indicated in the initial petition.

1. Given that there was no situation provided for in Article 18, No. 1, of LFRM, that would make necessary the arbitral meeting provided for therein, the holding of the same was dispensed with, on the basis of the prohibition of the performance of useless acts.

The holding of oral arguments was furthermore dispensed with, pursuant to Article 18, No. 2, of LFRM, "a contrario".

1. The grounds presented by the Claimant, in support of its claim, were, synthetically, the following:

a. The substantiation contained in each of the notices served on the Claimant contains merely the indication of the normative provisions of the Unique Circulation Tax Code, without any reference to fact or facts, notably, it does not indicate the reason why the Claimant is the taxpayer of the tax officially assessed.

b. No. 1 of Article 3 of the Unique Circulation Tax Code establishes a presumption of vehicle ownership, as it considers as such the person in whose name the same is registered.

c. Thus, in light of what is provided by the aforementioned Article 3, each of the notices of the assessments would have to mention facts that would permit the conclusion that, in the years 2013 and 2014 and with respect to the vehicles mentioned therein, the Claimant was the owner, presumed or not, or equated to the owner.

d. But as follows from the content of the same, said notices mention no fact in that respect, whereby the Claimant is left not knowing how and why, what the reason or reasons are, that led the AT to consider it the taxpayer of the UCT that it assessed and which is now being contested.

e. What means that they suffer from lack of substantiation legally required, in accordance with Article 77 of the General Tax Law.

f. The Claimant further understands that the position taken by AT is illegal, as it is not responsible for the payment of any amount by way of assessment of UCT in the period of enforceability since No. 1 of Article 3 of the Unique Circulation Tax Code establishes a presumption of vehicle ownership, considering as such the person in whose name the same is registered.

g. This is a legal presumption inserted in a norm of personal scope of UCT, which is not an irrebuttable presumption.

h. Indeed, Article 73 of the General Tax Law prescribes that the presumptions enshrined in the norms of tax scope always admit proof to the contrary.

i. Being thus, even if in 2013 and 2014 the aforementioned vehicles were registered in the name of the Claimant, in the databases of the NRA and IMT, therefrom does not result, without more, that the Claimant is the taxpayer of the UCT that AT officially assessed to it.

j. Indeed, the Claimant can rebut the presumption contained in No. 1 of Article 3.

k. The Claimant derives from the above, the illegality of the requirement of assessment of UCT, in the manner in which it was made, since the Claimant was not the owner of the vehicles on the date of enforceability of the tax, having to that end delivered documentary evidence of the transfer of the ownership thereof to third parties.

l. Therefore, the presumption contained in No. 1 of Article 3 of the Unique Circulation Tax Code was rebutted, whereby it is concluded that, not even in 2013, was the Claimant the taxpayer of the UCT that AT assessed to it, being, consequently, the assessments at issue unlawful.

1. The ATA – Tax and Customs Administration, called upon to pronounce itself, contested the claim of the Claimant, defending itself by objection, in summary, with the following grounds:

a. The Claimant is not correct when it alleges that the tax acts at issue suffer from the defect of lack of substantiation, alleging that the Respondent entity should have mentioned in the acts of assessment facts that would demonstrate that the Claimant was the owner of the vehicles in question.

b. The argument invoked by the Claimant that the Respondent entity did not prove that it was the owner of the vehicles in 2013 and 2014 constitutes a mere consideration devoid of substance.

c. First, the Respondent entity, in the exercise of the right of prior hearing regarding the vehicles in question, attached to the file a copy of the information provided by the Motor Vehicle Registry Office – Institute of Registries and Notary, where it is clearly attested that the Claimant appeared as owner in the registry – on the date of the facts in question.

d. Substantiation is a relative concept, which varies according to the legal type of administrative act in question, and the legal requirement must be understood in suitable terms, given the functionality of the institute and the essential objectives to be pursued.

e. 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, considering as such the persons in whose name the same are registered, this not being a presumption but a clear legislative policy choice embraced by the legislator within his legislative discretion.

f. The fiscal normative is replete with provisions analogous to that enshrined in the final part of No. 1 of Article 3, wherein the tax legislator, within his legislative discretion, expressly and intentionally, enshrines what should be considered legally, for purposes of scope.

g. Also the systematic element of the interpretation of law demonstrates that the solution advocated by the Claimant is intolerable, with Article 6, No. 1, of CIUC establishing that "The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration or registry in national territory".

h. The failure to update the registration, pursuant to Article 42 of the Motor Vehicle Registration Regulation, shall be imputable in the legal sphere of the taxpayer of UCT and not in that of the Portuguese State, as the active subject of this tax.

i. The interpretation proposed by the Claimant of Article 3, No. 1, of CIUC is contrary to the Constitution of the Portuguese Republic insofar as it devalues the registered reality in face of an "informal reality", violating the principle of trust and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

Even if this were not the case,

j. With the petition for arbitral pronouncement, the Claimant attached copies of the invoices/receipts for the sale of each of the vehicles.

k. The invoices do not constitute suitable documentary evidence to prove the sale of the vehicles in question, since the same is nothing more than a document unilaterally issued by the Claimant and is not suitable to prove a synallagmatic contract such as purchase and sale.

1. The tribunal is materially competent and is regularly constituted pursuant to LFRM.

The parties have legal personality and legal capacity, are legitimate and are legally represented.

The proceedings do not suffer from defects that would invalidate them.

1. It is necessary to resolve the following issues:

1. Whether the assessments sub judice are unlawful due to a defect of violation of law or lack of substantiation.

2. Whether the right to refund of the taxes paid should be recognized to the Claimant.

3. Whether the right to compensatory interest, on the amounts paid, should be recognized to the Claimant.

II – Relevant Facts of the Case

1. The tribunal considers the following facts proved:

2. The Respondent effected the Official Assessments of Unique Circulation Tax ("UCT"), relating to the vehicles identified in the summary table, which fall within categories A), B) or C), attached by the Claimant as document number 5, rectified in accordance with petition by the Claimant on 1.06.2015, relating to the tax periods 2013 and 2014, which total the amount of 2,431.82€, having as the taxpayer the Claimant;

3. The substantiation contained in each of the notices is as follows: "Assessment made pursuant to subparagraph c) of No. 1 of Article 2, combined with Articles 3, 4, 6 and 11, all of the Unique Circulation Tax Code, for failure to have been assessed or paid, until the date of assessment and in the month referred to in the table, the tax relating to the vehicle identified in this document".

4. The motor vehicles contained in the summary table were sold at a time prior to the date of their anniversary relating to the year to which the tax obligations at issue in the present proceedings relate, with the exception of the vehicles with license plate …-…-…, …-…-…, …-…-… and …-…-….

5. On the dates of the anniversaries relating to the years to which the tax obligations at issue in the present proceedings relate, all vehicles to which the assessments at issue in the present proceedings relate were registered in the Motor Vehicle Registry Office in the name of the Claimant.

6. Prior to the taking of the assessment acts at issue, the Respondent notified the Claimant with a view to the exercise of the right of prior hearing;

7. The Claimant exercised such right before the Respondent having alleged, with respect to each of the vehicles, the following:

[content omitted]

1. The claimant, in the exercise of prior hearing, further proceeded to attach sales invoices of the vehicles in question, with the exception of the vehicles with license plate …-…-… and …-…-…, with respect to which it attached documentary evidence of the same appearing in the database of the Public Security Police as stolen.

2. By dispatches of the Deputy Finance Chief by Delegation of the Finance Service of Gaia 2, it was decided not to uphold the claims of the claimant, in the following terms:

[content omitted]

1. On the dates of the occurrence of the taxable events of the tax obligations at issue in the present proceedings, all vehicles to which the contested assessments relate were registered in the Motor Vehicle Registry Office in the name of the Claimant.

2. The Claimant proceeded to pay the amounts corresponding to the contested assessments.

3. Unproven Facts.

With interest for the decision of the case, it was not proved, with respect to the assessments relating to the vehicles with license plate …-…-… and …-…-…, …-…-… and …-…-…, that the same were sold by the Claimant on a date prior to that of the occurrence of the taxable fact and enforceability of the tax.

1. The conviction of the Tribunal regarding the decision on the facts was based on the documents contained in the file and the positions of the parties expressed in the pleadings.

Regarding the facts proved under numbers 3 and 8, it should first be stated that the Respondent did not contest the accuracy of the copies of the invoices[1] attached with the petition for arbitral pronouncement, just as it had not put them in question when they were attached in the administrative proceedings when the right of prior hearing was exercised before the assessment.

The conviction of the Tribunal regarding the facts in question results from the issuance of the respective invoices in conjunction with the other documents contained in the file and with the positions of the Respondent regarding the same.

Despite such documents having been issued unilaterally by the seller, according to the rules of experience, nothing points, indeed to the contrary, to the non-coincidence of such invoices with the reality they represent.

On the other hand, the Respondent does not point to any concrete lack of correspondence of the invoices with the transactions represented therein, and it further appears that, in the same, value added tax was assessed, it not having been alleged that the same was not taken into account in the respective declarations, or that the purchasers, recipients of the same, did not take them into account for legal-fiscal purposes.

The proof of the remaining facts results from the documents contained in the file attached by the Claimant and by the Respondent with the administrative proceeding.

With respect to the unproven facts, the decision of the Tribunal results from the very documents attached to the file by the Claimant, from which it appears that the vehicles …-…-… and …-…-… will not have been sold but rather been the subject of theft, and that the vehicle …-…-… will have been sold, but on a date subsequent to the birth of the respective tax obligation.

Regarding …-…-…, from the documents contained in the file, namely those attached by the Claimant, the proof does not result that the same was sold on a date prior to the date of the taxable event of the tax.

III – Applicable Law

1. Given that the claimant imputed various defects to the tax acts contested, it is necessary to determine the order of examination thereof, and the order of Article 124 of the Code of Tax Procedure must be observed, applicable by virtue of Article 29, No. 1, lit. a) of LFRM (Cfr. Jorge Lopes de Sousa, Commentary on the Legal Framework for Tax Arbitration, in GUIDE TO TAX ARBITRATION, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, p. 202). (Cfr. JORGE LOPES DE SOUSA, Commentary on the Legal Framework for Tax Arbitration, in Guide to Tax Arbitration, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, p. 202).

The merits of any of the defects invoked by the claimant will lead to the annulment of the tax act. However, the defect of violation of law is that which will lead to the "more stable or effective protection of the injured interests" insofar as its possible merits will prevent the renewal of the act, which does not happen with the annulment resulting from the other defects.

In accordance, the Tribunal will examine first the defect of violation of law.

1. Pursuant to Article 3, No. 1, of the Unique Circulation Tax Code, "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."

Article 2 of the same provision provides that "Lessees in financial leasing, buyers with reservation of ownership, as well as other holders of purchase option rights pursuant to the leasing contract, are equated to owners".

The legal problem to be decided is related to the question of whether the person in whose name the property of the vehicles whose official assessments are identified in Annex I attached with the initial petition is registered may prove, despite such circumstance, that he was not the owner of the same on the date of the taxable event, for purposes of removing the quality of taxpayer of the tax.

1. In order to respond to the problem in question, it appears appropriate to inquire whether Article 3, No. 1, of CIUC establishes a presumption, a position sustained by the Claimant, or whether, differently, it is merely the configuration of the legal type of tax, within the scope of legislative discretion, as the Respondent argues.

The answer to this question may be decisive, given that, in accordance with Article 73 of the General Tax Law "The presumptions enshrined in the norms of tax scope always admit proof to the contrary". It further appears, as is referred to in the arbitral decision issued in proceedings 286/2013-T, the "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, as to the unconstitutionality of "the establishment by the tax legislator of an absolute presumption (juris et de jure)" since "it completely prevents taxpayers from the possibility of contradicting the presumed fact, subjecting them to taxation that may be based on a taxable basis fixed in violation of the principle of tax equality".[2]

1. In doctrine, the distinction between fictions and presumptions has been analyzed, from the perspective of tax law.

Thus, ANA PAULA DOURADO, ("The Principle of Fiscal Legality: Typicality, Indeterminate Legal Concepts and Margin of Free Appreciation", Editor Almedina, Theses collection, 2007) writes:

"With respect to fictions, as a technique used in tax laws, and its function, Karl Larenz tells us that "legal fictions normally aim at the application of the rule given for a foreseen fact (F1) to another foreseen fact (F2)... the law 'feigns' that F2 is a case of F1" (p. 603).

"Fiction is distinguished from simple presumption and absolute presumption in that it does not rest "on a probability that normally transforms itself into truth", since it "deforms ('a legal truth') consciously" (p. 604).

Also on this matter, in terms convergent with ANA PAULA DOURADO, JOÃO SÉRGIO RIBEIRO, ("PRESUMPTIVE TAXATION OF INCOME, A Contribution to Re-frame the Indirect Methods of Determining the Taxable Basis, Almedina, Theses, 2010, pp. 48-49) considers that the criterion of distinction between the two realities should be "eminently juridical" and that "In light of that criterion, the essential difference between presumption and legal fiction becomes reside in the fact that the first has as its starting point the truth of a fact, that is, a connection to the natural order of things, given that from a known fact an unknown probable fact is inferred; whereas fiction, conversely, is born from a falsity or something unreal, disconnected from the natural order of things. That is, in fiction a legal truth distinct from the actual is created; in presumption a causal relationship is created between two realities or natural facts. (…).

Despite both presumption and fiction constituting the result of legislative techniques, through which consequences are drawn from legal facts taken as true, what truly distinguishes them is the circumstance that, in legal presumption, the presumed fact has a high degree of probability of existing, and in fiction, the presumed fact is very unlikely."

CASALTA NABAIS has also examined this matter ("The Fundamental Duty to Pay Taxes", Almedina, 2004, p. 500-501) writing that "(...) it is necessary to separate the situations in which we are faced with legal presumptions, in which from a known fact (real or even juridical) a natural probable legal fact is inferred, case in which proof to the contrary must be admitted, to make them compatible with the principle of tax capacity, from situations in which we face the adoption of rules of common experience as rules of taxation, with the construction thus of legal norms (or legal types) with (possible) recourse to legal fictions. In these, the principle of tax capacity suffers the natural impact of the principles of practicality and effective fight against tax evasion, and must be satisfied with a relatively safe valve for those cases that, by reaching such rigors of inequity, cannot but allow the removal of said rules of experience".

1. In the case at hand, and in light of the authoritative doctrine cited, it appears clear that, in Article 3, No. 1, of CIUC, we are faced with a presumption, insofar as it is (highly) probable from the fact of a person having a vehicle registered in his name, that he is, effectively, the owner of the same.

It is this same probability that is the basis of the presumption derived from the registry enshrined in Article 7 of the Property Registry Code, applicable by reference to Article 29 of the Motor Vehicle Registration Regulation.

It is true that the law does not use the expression "presumed as such, until proof to the contrary", which was contained in Article 3, No. 1, of the Regulation on the Municipal Tax on Vehicles (approved by Decree-Law No. 143/78, of 12 June and repealed by Law No. 22-A/2007, of 29 June), ("the tax is owed by the owners of the vehicles, presumed as such, until proof to the contrary, the persons in whose name the same are registered or registered". But such does not appear to prevent us from being materially faced with a presumption.

As was written in the already cited decision issued in arbitral proceedings No. 286/2013-T, "just as is already noted in other arbitral decisions issued by this CAAD in relation to the same matter (cfr. decisions issued in proceedings Nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of legislative provisions, distinct from those invoked above, in which the use of the expression 'considering' or 'considers' also occurs with the meaning of presumption), not only can it not be said, in any way, that the attribution of a presumptive meaning to the expression 'considering' does not possess "a minimum of verbal correspondence, although imperfectly expressed" (No. 2 of Article 9 of the Civil Code), but, more than that, must even be recognized to such word a current and normal correspondence to that presumptive meaning.

Therefore, it does not assume decisive weight the fact that, differently from what happened with the literal wording "presumed" which was previously found in Article 3 of the Regulation on the Tax on Vehicles, the legislator has come to use in CIUC the formula "considering" which is contained in the current Article 3 of that Code, since this expression has perfect semantic force to involve the establishment of a presumption".[3]

1. The Decision of the Supreme Administrative Court of 4-11-2009, issued in proceedings 0553/09, applying Article 73 of the General Tax Law, in the matter of income tax, goes even further in considering that this rule "does not appear applicable only to norms of tax scope in the proper sense, but also to all norms that establish fictions that influence the determination of taxable basis (either directly, through fictitious values for taxable basis, or indirectly, by fictionally fixing the values of incomes relevant for its determination). This is, it appears, the scope of the adverb 'always' used in Article 73 of the General Tax Law, which establishes this rule as a basilar principle of the entirety of the tax legal system, a corollary of the principle of equality in the distribution of public charges, based on the principle of tax capacity".

It is true that UCT is not, essentially, subordinated to the principle of tax capacity, but rather to the principle of equivalence. However, such does not appear to impose different solutions insofar as both principles are intrinsically linked to the general principle of tax equality, where they find their foundation.

In truth, "The principle of tax capacity represents the material criterion of equality appropriate to taxes"[4], whereas "The principle of equivalence represents the material criterion of equality appropriate to fees and contributions".[5]

1. It should also be noted that, in addition to Article 1 of the Unique Circulation Tax Code providing that "The unique circulation tax obeys the principle of equivalence, seeking to burden taxpayers to the extent of the environmental and road cost that these cause, in implementation of a general rule of tax equality", other norms reinforce and specify the weight of this principle in the internal system of this tax.

First, Article 3, No. 1, of the Law that approved CIUC (Law No. 22-A/2007, of 29 June), implementing this idea of equivalence, determines that: "It is the responsibility of the municipality of residence of the taxpayer or equated to receive the revenue generated by UCT relating to vehicles of categories A, E, F and G, as well as 70% of the component relating to cylinder capacity relating to vehicles of category B, unless this revenue is relating to vehicles subject to long-term lease or operational leasing, in which case it must be allocated to the municipality of residence of the respective user."

And, for purposes of effective implementation of this legislative intention, Article 19 of CIUC provides that: "For purposes of the provision of Article 3 of the present code, as well as No. 1 of Article 3 of the law of its approval, the entities that proceed to financial leasing, operational leasing or long-term lease of vehicles are obliged to provide to the Directorate-General for Taxes the data relating to the tax identification of the users of the leased vehicles."

On the other hand, this principle of equivalence is further implemented in No. 2 of Article 3 of the same Code by providing that "Lessees in financial leasing, buyers with reservation of ownership, as well as other holders of purchase option rights pursuant to the leasing contract, are equated to owners".

1. Thus it is made quite clear the decisive importance given by Law to the principle of equivalence, both on the side of the causer of the environmental and road cost, and on the side of the Municipality that tends to bear such costs and which, for that reason, is the beneficiary of the revenue from the tax.

As Sérgio Vasques emphasizes: "The structure of the new unique circulation tax is also clearly commutative, which since 2007 burdens motor vehicles according to the levels of CO2 emissions, openly appealing to the principle of equivalence and to a relationship of exchange with taxpayers"[6].

Should it not be possible for the person registered as owner in the motor vehicle registry to remove the quality of taxpayer, by proving that he was not the owner on the date of the taxable event, this idea of equivalence could be decisively put in question, imposing taxation on one who did not cause the environmental and road cost and not allocating the revenue to the Municipality that tended to bear those costs.

1. The Respondent argues that the interpretation proposed by the Claimant of Article 3, No. 1, of CIUC is contrary to the Constitution of the Portuguese Republic insofar as it devalues the registered reality in the face of an "informal reality",[7] violating the principle of trust and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

It is not clear, with all due respect, how the position that sustains that we are, in Article 3, No. 1, of CIUC, faced with a rebuttable presumption, could put in question the principles of trust and legal certainty, given that the same impose duties and restrictions on legal-public action[8].

The same may be said, in essence, of the principle of proportionality.[9]

Indeed, with respect to this principle, we would say, even, that the question that could be raised would be whether such principle would not be violated with the interpretation advocated by the Respondent insofar as, if it were admitted that the citizen could be prevented, for purposes of taxation, from proving that despite the registration he is not the effective owner of the vehicle, such would amount to suffering the consequence of the omission of an act (the motor vehicle registration) whose interested party in terms of legal certainty, from the civil-law perspective is another person (the buyer).

In truth, even if it is admitted that such solution is suited to achieve the public purpose in view, it does not appear clear the absence of alternative measures equally suitable.

On the other hand, from the point of view of balance or proportionality in the strict sense, it is understood that a rule with the interpretation sustained by the respondent would have excessive costs, from the point of view of the rights and interests of private individuals (in these case of the former owners of the vehicles) compared with the benefits aimed to be achieved with the public interest, and it is not considered verified this fundamental requirement of the principle of proportionality.

In reality, the benefit achieved, from the perspective of the management of the tax, with the rebuttable presumption is already significant, and the cases of absence of registration by the purchasers are certainly situations in a certainly small number in the universe of vehicle transactions, given the natural motivation of purchasers to carry out the registration, since such is in their own interest.

It should also be noted that the rebuttable presumption already represents some sacrifice for the legitimate interests of the seller, insofar as to exempt himself from a taxation offensive to the principle of equivalence, he bears the burden of rebutting the same.

However, weighing, in particular, the requirements of practicality of tax management, it is considered that the same is suitable, necessary and reasonable from the point of view of the principle of proportionality, which would not already occur with an absolute presumption, explicit or implicit, that would not allow, even, that the citizen be permitted to make proof contrary to the presumption.

1. The Respondent further invoked that the rule in question, in the interpretation sustained by the Claimant, would violate the principle of efficiency of the tax system.

It appears to us that the Respondent has in mind the idea of efficiency in tax law, related to administrative efficiency[10]. It must be observed, however, that the relevance of a principle in the solution of a specific case should not operate in isolation but in joint weighing with the other principles and in, in the sequence of what was said above, regarding the principles of equality, equivalence and proportionality, the idea of efficiency is not sufficient to postpone the possibility of the taxpayer removing the presumption resulting from motor vehicle registration. It further appears that efficiency and practicality are sufficiently safeguarded by the existence of a rebuttable presumption, in the terms referred to above.

1. Thus it is concluded that Article 3, No. 1, of CIUC, establishes a rebuttable presumption, the interested party bearing, to remove it, the burden of proving that, despite the registration, he was not the actual owner, by having meanwhile sold it.

In this sense, were the decisions issued in arbitral proceedings numbered 26/2013-T, 27/2013-T, 14/2013-T, 170/2013-T, 256/2013-T, 286/2013-T and 289/2013-T, whose understanding is thus supported.

Consequently, with respect to the taxes relating to vehicles which it was proved were sold by the Claimant before the date of the taxable event, the petition for arbitral pronouncement cannot fail to proceed.

As follows from the evidence, the proof of the sales prior to the taxable events was made, with the exception of what relates to the vehicles with license plates …-…-…[11], to which corresponds the assessment relating to the year 2013, in the amount of 137.21€, …-…-…[12], relating to the year 2013, in the amount of 53.61€, …-…-…, relating to the year 2013, in the amount of 657.48€, and …-…-… relating to the year 2014, in the amount of 32.32€.

Regarding the assessments relating to these vehicles, the alleged defect of violation of law therefore does not proceed, which proceeds regarding all the others, whereby, with respect to these, the examination of the invoked lack of substantiation is prejudiced, pursuant to Article 124 of the Code of Tax Procedure, by application of Article 29, No. 1, of LFRM.

1. It still must be examined whether, regarding the assessments relating to vehicles with license plates …-…-…, …-…-…, …-…-…, and …-…-…, the defect of lack of substantiation[13] proceeds, as alleged by the Claimant.

Article 77, No. 1 of the General Tax Law determines that: "The decision of proceedings is always substantiated by means of a brief exposition of the reasons of fact and law that motivated it, and the substantiation may consist of a mere declaration of agreement with the grounds of previous opinions, information or proposals, including those that form part of the tax audit report."

As may be read in the Decision of the Supreme Administrative Court of 10.02.2010, proc. 01122/09:

"This Supreme Administrative Court has come to understand that the substantiation of the administrative act is a relative concept that varies according to the type of act and the circumstances of the specific case, but that the substantiation is only sufficient when it allows a normal recipient to perceive the cognitive and evaluative course followed by the author of the act to issue the decision, that is, when he can know the reasons why the author of the act decided as he decided and not differently, so as to be able to trigger the administrative or contentious mechanisms of challenge."[14]

In the case at hand, from the notification of the assessment there appears the normative framework that substantiates the assessment, namely Article 3 and 6 of the CIUC.

On the other hand, from the taking of position of the respondent on the right of prior hearing exercised by the Claimant it is deduced, without room for doubt, that the Respondent imputes to the Claimant the responsibility for the payment of the tax by reason of the same appearing in the Motor Vehicle Registry Office as owner of the same.

As was written in the arbitral decision issued in proceedings 76/2013-T[15]:

"if substantiation is, in the terms referred to, necessary and obligatory, such cannot and should not be understood in an abstract and/or absolute manner, that is, the substantiation required of a specific tax act should be that which is functionally necessary so that it does not present itself before the taxpayer as a pure demonstration of arbitrariness."

(…)

As is equally well known, the substantiation may be also express or tacit, "when it is inferred from facts which, with all probability, reveal it."[16]. Whence it should be considered that the "declaration of agreement with the grounds of previous opinions, information or proposals, including those that form part of the tax audit report" may be, in the same way, express or tacit."

In the specific case and not forgetting the nature of "mass proceeding" that represents the assessment of UCT, there are no doubts, even by the positions taken by the Claimant, firstly in the exercise of the right of prior hearing and, also, in the present petition for arbitral pronouncement, that the Claimant perceived the reasons for the taking of the tax act, revealing no doubts regarding the same.

In this conformity, it is understood that there was no violation of Article 77, No. 1 of the General Tax Law, and the alleged defect does not proceed, and the illegality of the four assessments in question is not decreed.

1. The Claimant further came to request the condemnation of the Respondent to refund the amounts paid corresponding to the assessments sub judice, as well as the respective compensatory interest.

Let us see.

In harmony with the provision in subparagraph b) of Article 24 of LFRM, the arbitral decision on the merits of the claim that is not subject to appeal or challenge binds the tax administration from the end of the term provided for appeal or challenge, and it must, in the exact terms of the merits of the arbitral decision in favor of the taxpayer and until the end of the term provided for spontaneous execution of decisions of tax courts, "restore the situation that would have existed if the tax act subject of the arbitral decision had not been taken, adopting the acts and operations necessary for that purpose", which is in harmony with what is provided for in Article 100 of the General Tax Law [applicable by virtue of the provision in subparagraph a) of No. 1 of Article 29 of LFRM] which establishes that "The Tax Administration is obliged, in case of total or partial merits of claim, judicial challenge or appeal in favor of the taxpayer, to the immediate and full restoration of the legality of the act or situation subject of the dispute, comprising the payment of compensatory interest, if applicable, from the end of the term of execution of the decision".

In the case at hand, it is manifest that, following the illegality of the assessment acts indicated above, there is a place for refund of the tax, by virtue of the aforementioned Articles 24, No. 1, subparagraph b), of LFRM and 100 of the General Tax Law, since such is essential to "restore the situation that would have existed if the tax act subject of the arbitral decision had not been taken", in the part corresponding to the correction that was considered unlawful.

Regarding compensatory interest, this claim must still be examined in light of Article 43 of the General Tax Law.

No. 1 of that Article provides that "Compensatory interest is due when it is determined, in an administrative claim or judicial challenge, that there was an error imputable to the services that results in payment of the tax debt in an amount greater than legally due".

We support the understanding of Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa who argue that "The error imputable to the services that effected the assessment is demonstrated when they proceed to an administrative claim or judicial challenge of that same assessment and the error is not imputable to the taxpayer" (General Tax Law, Encounters of Writing, 4th Edition, 2012, p. 342).

In the case "sub judice", given that the error that gave rise to the assessments now annulled is not imputable to the Claimant, since in the exercise of the right of prior hearing before the assessments he presented to the Respondent the invoices representative of the transfer of the vehicles, on which the Respondent did not pronounce itself, the request for condemnation of the Respondent for compensatory interest cannot fail to proceed.

Thus, the Tax and Customs Authority must give execution to the present decision, pursuant to Article 24, No. 1, of LFRM, refunding the amounts paid by the Claimant relating to the assessments annulled, with compensatory interest, at the legal supplementary rate for civil debts, pursuant to Articles 35, No. 10, and 43, No. 1 and 5, of the General Tax Law, 61, of the Code of Tax Procedure, 559 of the Civil Code and Ordinance No. 291/2003, of 8 April (or the act or acts that succeeded it).

Compensatory interest is due from the date of payment until the date of processing of the credit note, in which they are included (Article 61, No. 5, of the Code of Tax Procedure).

IV – Decision

Thus, the arbitral tribunal decides:

To rule partially upheld the challenge in the following terms:

a) To rule that the request is unfounded regarding vehicles with license plates …-…-…, to which corresponds the assessment relating to the year 2013, in the amount of 137.21€, …-…-…, relating to the year 2013, in the amount of 53.61€, …-…-…, relating to the year 2013, in the amount of 657.48€, and …-…-… relating to the year 2014, in the amount of 32.32€.

b) To rule that the request is founded regarding all other assessments, declaring the annulment of the same and, in consequence, condemning the Respondent to refund to the Claimant the respective amounts paid relating to the assessments now annulled with compensatory interest at the legal supplementary rate for civil debts, pursuant to Articles 35, No. 10, and 43, No. 1 and 5, of the General Tax Law, 61, of the Code of Tax Procedure, 559 of the Civil Code and Ordinance No. 291/2003, of 8 April (or the act or acts that succeeded it), from the date of payment by the claimant until the date of processing of the credit note, in which they are included (Article 61, No. 5, of the Code of Tax Procedure).

Amount in dispute: 2,431.82€ pursuant to the provision of Article 315, No. 2, of the Code of Civil Procedure and 97-A, No. 1, subparagraph a), of the Code of Tax Procedure and 3, No. 2, of the Regulation of Costs in Arbitration Proceedings.

Costs payable by the Respondent and by the Claimant in the proportion of sixty-three point seventy-nine per cent and thirty-six point twenty-one per cent, respectively, pursuant to No. 4 of Article 22 of LFRM.

Lisbon, 7 July 2015

The Arbitrator

(Marcolino Pisão Pedreiro)

[1] For purposes of Article 368 of the Civil Code.

[2] Available on the website "https://caad.org.pt"

[3] In addition, as sustained by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in the annotation to Article 73, No. 3 of the General Tax Law ("GTL") "presumptions in matters of tax scope can be explicit, revealed by the use of the expression 'presumed' or similar (…). However, presumptions can also be implicit in norms of scope, namely of objective scope, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not impractical to ascertain the actual value" (Cfr. "General Tax Law Commented and Annotated", Encounters of Writing, 4th Edition, 2012, p. 651).

[4] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, p. 251.

[5] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, p. 260.

As further notes this author on p. 227 of the same work "Until the end of the twentieth century, special taxes on alcohol, tobacco, petroleum products or motor vehicles had no other objective than the collection of revenue, showing the unilateral contours typical of any tax.

From the 1980s and 90s (…), however, these tax figures came to be instrumentalized to the compensation of the costs that the consumption of these brings to public health and the environment, with which special consumption taxes have come to gain the commutative nature that is typical of contributions".

[6] Manual of Tax Law, Almedina, 2011, p. 229.

[7] It should be noted, however, that the principle of freedom of form or consensuality prevails in Portuguese law (Article 219 of the Civil Code). Except where the law requires it, the validity of the statement of will does not depend on the observance of special form. The "informal reality" to which the claimant alludes is in fact the material reality that results from the norms of civil law.

[8] Jorge Bacelar Gouveia notes that the principle of legal certainty requires "the publicity of acts of public power, as well as the clarity and determinability of sources of law" and that the principle of protection of trust requires "that the normative framework in force does not change in a manner that frustrates the expectations generated in citizens regarding its continuity, with the prohibition of an intolerable retroactivity of the laws, as well as the need for its change in accordance with the expectations that are constitutionally protected" (Manual of Constitutional Law, Almedina, 4th Ed., Vol. II, p. 821)

[9] According to the same author, the configuration of this principle "rests on a limitation of an internal material character on the legal-public action of a discretionary nature, containing the excessive effects that may present itself in the issuance of public power measures of an ablative nature for their recipients" (ob. Cit. pp. 839-840).

[10] And not, manifestly, the principle of efficiency in tax law since, as written by Jónatas E.M. Machado and Paulo Nogueira da Costa "From the principle of Efficiency it follows that the tax system should not have distortionary effects and should not interfere with the functioning of markets, except where, due to the existence of market failures, they do not function efficiently." (Course in Tax Law, Coimbra Editor, 2009, p. 28.)

[11] It should be noted regarding the vehicles reported as stolen, that the occurrence of theft does not imply the loss of ownership, and that in light of Article 4, No. 2, of CIUC, the tax is owed until the cancellation of the registration, which was not proved, nor even alleged.

[12] Regarding this vehicle it appears from the file that it was sold on 27.08.2013 and that the enforceability of the tax is in the month of August. In light of Articles 6, No. 3 and 4, No. 2, of CIUC, if the date of registration were after the 27th the subjective scope of the tax would be removed with respect to the Claimant. However, such proof was not made. Consequently the legal presumption was not removed.

[13] Although the Claimant refers to lack of substantiation, it appears to us that more precisely its allegations constitute insufficiency of substantiation, with identical consequence in light of Article 125, No. 2, of the Code of Administrative Procedure in force on the date of the assessments.

[14] It can be consulted on the website www.dgsi.pt.

[15] https://caad.org.pt/tributario/decisoes/decisao.php?s_processo=76%2F2013-T&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=305.

[16] Article 217 of the Civil Code.