IUC Subjective Incidence: CAAD Arbitral Decision on Vehicle Tax Liability Based on Vehicle Registration Presumption (514/2017-T)

ARBITRAL DECISION

I – REPORT

1. A… – BRANCH IN PORTUGAL, collective person no. …, with registered office in …– …, filed on 27-03-2017 a request for constitution of the arbitral tribunal, in accordance with the provisions of articles 2º and 10º of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as LFAT), in conjunction with article 102º of the Code of Tax and Customs Procedure, in which the Tax and Customs Authority (hereinafter referred to only as Respondent or TA) is named as defendant.

2. The Claimant seeks, through its request, a declaration of illegality of the decision issued on 21.06.2017 by the Large Taxpayers Unit (TA), which dismissed the Request for Official Review, filed against 41 assessments of Single Motor Vehicle Tax (SMVT) and default interest (DI), relating to the years 2010, 2011, 2014 and 2015, totaling € 5.548,65 with the consequent reimbursement of amounts unduly paid.

3. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 21-09-2017. The Claimant did not appoint an arbitrator, whereby, pursuant to paragraph a) of article 6, paragraph 2, and paragraph b) of article 11, paragraph 1, of the LFAT, the President of the Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal, who duly communicated acceptance of the appointment. On 28-09-2017 the parties were notified of the appointment of the arbitrator, with no impediments being raised. In accordance with the provisions of paragraph c) of article 11, paragraph 1, of the LFAT, the arbitral tribunal was constituted on 06-12-2017. In these terms, the Arbitral Tribunal is duly constituted to assess and decide on the subject matter of the case.

4. To substantiate the request for arbitral pronouncement, the Claimant seeks a declaration of illegality of the dismissal of the review request and the respective underlying assessments, for which it alleges, in summary, the following:

a) The decision impugned here was preceded by a draft decision to dismiss, a copy of which is attached here as doc. 2, for purposes of any exercise of the right to be heard.

b) The Claimant also seeks a declaration of illegality of the SMVT and DI assessment acts, subject of the same Request for Official Review, which total €5.548,65, whose copies are attached here aggregately as doc. 3 and whose content is considered to be fully reproduced for all legal purposes.

c) The assessments impugned here were made by the Claimant and paid in full, despite disagreeing with them. For this reason, it filed a request for official review against those SMVT and DI assessments, having submitted all relevant documentation.

d) This Request for Official Review was processed in the Large Taxpayers Unit under the Official Review administrative process no. …2017…, which was dismissed by the TA on the basis solely and exclusively of the presumption of Motor Vehicle Registration.

e) It further alleges that the Claimant was unaware of this SMVT and DI until it consulted the Tax Portal and found the existence, among others, of the SMVT and DI collection documents in question here, for self-assessment and payment of the SMVT and DI. The Claimant conducted a case-by-case analysis of all vehicles and requested Official Review of the SMVT and DI assessments selected here, because they relate to vehicles whose tax debtor for SMVT and DI was not the Claimant.

f) It alleges that the sole importing company of all motor vehicles of brand B… for the national market and, once imported, all vehicles are immediately sold to the brand dealers who in turn sell them to end customers – who will be the users of the vehicles and in whose interest they enter road circulation.

g) All imported vehicles are so through prior request of the dealers, submitted electronically directly to the Claimant and consequently, by C…, with the factory.

h) The vehicles, once imported, are immediately sold and invoiced to the dealers to whom they are delivered at their facilities, with the exception of those destined for Madeira and the Azores which are deposited in the warehouse of a logistics company, awaiting subsequent shipment to that destination.

i) Although in an initial phase the registration and registration of the vehicles is initially done in the name of the importer (the Claimant), on the date of the registration requests the dealer is already the owner of them, as they have already been sold and invoiced to them, and it is this dealer who requests the vehicle registrations.

j) Given that the vehicles were sold to the dealers before the date of their registration, those sales invoices do not contain the respective registration numbers, containing only the chassis numbers of the vehicles sold to the dealers.

k) Only the Vehicle Registration Tax/Circulation Tax (ISV/IA) debits to the dealers, which occur after the date of the sales invoices of the vehicles to the dealers, contain the registration number and the date of registration, as it was only meanwhile, after the sale of the vehicles to the dealers, that the vehicles were registered.

l) After selling them to third parties, the Claimant never resumes ownership of the vehicles, since it is not merely a car dealer but rather the national importer of the brand.

m) The price is paid by the dealer to the Claimant on the day immediately following the date of the invoice.

n) The CIUC incorporates the principle of equivalence as a basic principle of taxation of this tax, making clear that taxpayers should be burdened in proportion to the environmental impact they cause to the environment and the road network, thus enshrining the polluter-pays principle. Therefore, the real polluters – or possessors – should bear the burden of the tax, and it is certain that the Claimant was never the real polluter and cause of the environmental damages caused by the motor vehicles.

o) The Claimant is only a taxpayer of ISV (Vehicle Registration Tax), in accordance with article 3, paragraph 1 of the ISV Code, contrary to what happens in the case of SMVT, a distinct tax from that in which, as a "registered operator" responsible for the introduction of the vehicle into consumption, the taxpayer of this tax (ISV) is not confused with SMVT.

p) The SMVT presupposes the effective use of vehicles and the "environmental and road cost" caused by that same use – taxing the users of the vehicles, who derive benefit from that same use, with the said social costs, representing, given the provisions of article 4, paragraph 3 of the General Tax Law, a case of "special contribution". From the provisions of articles 3, paragraph 1 and 6, paragraph 1 of the CIUC it is extracted that SMVT applies to the owner or acquirer with reservation of property on the date of vehicle registration – presuming that the owner (or acquirer with reservation of property) on that date is the one in whose name the vehicle is then registered or matriculated.

In summary, according to the Claimant, none of the vehicles subject to the disputed assessments were property of the Claimant on the dates of their respective registrations as it had already sold them to the aforementioned dealers, as it proves with copies of the sales invoices and subsequent ISV debits.

f) Notwithstanding having been surprised by the SMVT and DI amounts appearing on the Tax Portal / reserved area, in order to maintain its tax situation properly regularized and given the enormous constraints and losses that would result from tax non-compliance, the Claimant took the initiative of self-assessing and paying the respective SMVT and DI, obtaining the respective payment documents. Notwithstanding having proceeded with such payment, the Claimant strongly opposes such assessments, insofar as it was not the taxpayer for the SMVT and DI here in dispute, so all these tax acts suffer from error in the assumptions of fact and defect of violation of law, whereby the illegality of that decision and those assessments should be declared.

1. According to the Tax and Customs Authority (TA), the Claimant owed SMVT and DI with reference to the vehicles listed in the supporting document and document no. 5 attached to it, relating to the years 2010, 2011, 2014 and 2015, inclusive, totaling € 5.548,65, on the basis of articles 3, paragraph 1, 4, paragraph 2, 6, paragraphs 1 and 3 of the CIUC, since it appeared in the motor vehicle register as owner of the vehicles in question. The decision dismissing the Request for Official Review impugned here is based on that same understanding. In fact, the TA alleges it has no other way of identifying the taxpayers of the tax. Moreover, SMVT is not assessed according to information generated by the Respondent itself, so it cannot be held responsible for error in the assessment of the tax. It contends for the validity of the impugned tax acts and for the total inadmissibility of the requests.

2. From the perspective of applicable law, it is further the Claimant's understanding that it cannot be considered as a taxpayer of SMVT, given that none of the vehicles subject to the disputed assessments were property of the Claimant on the dates of their respective registrations as it had already sold them to the aforementioned dealers, as evidenced by copies of the sales invoices and subsequent ISV debits. The legislator has always been clear about the subordination of motor vehicle registration in relation to the actual ownership of the vehicle – the true and only taxable event, regardless of the formal appearance resulting from motor vehicle registration. Although the taxable event is ownership of the vehicle, the registration presumption is rebuttable (iuris tantum), that is, susceptible of proof to the contrary. In fact, this is what results from article 73º of the General Tax Law, which clearly states that presumptions established in tax incidence rules (as is the case here) always admit proof to the contrary, in fulfillment of constitutional principles applicable in the fiscal domain. Also, article 7º of the Portuguese Constitution, applicable supplementarily to motor vehicle registration, provides that registration constitutes mere presumption that the right exists and belongs to the registered holder.

The Claimant further invokes the argument flowing from the principle of consensuality, the legal-civil effects of the transfer of vehicles, in particular the legal effect of the transfer of vehicle ownership, are produced immediately, by simple purchase and sale agreement between the parties (rule "casum sentit dominus"), without the need for any material act of delivery, written purchase and sale contract, or any acts of publicity or registration (article 408, paragraph 1 of the Civil Code). To which is added the fact that the Claimant benefits from the presumption of truthfulness and good faith enjoyed by documents presented as proof of the transfer of vehicle ownership – as is the case with the sales invoices of vehicles that it attaches (cf. article 75, paragraph 1 of the General Tax Law).

The Claimant attaches the sales invoices of the vehicles referenced in the SMVT assessments subject to the review request and the present arbitral request, to demonstrate that it sold the vehicles in question before the date of their registration, which, in the terms referred to, constitutes factual impediment to the right of taxation (legally presumed) of the TA, since SMVT, in the year of registration, applies to the owner (or equivalent) on the date of registration.

All the sales invoices in question are known ex officio to the TA, because duly communicated to the TA via SAF-T (cf. article 74, paragraph 2 of the General Tax Law) and the dealers will also have communicated the invoices issued by them to end customers to the TA, by the same means. Indeed, those sales invoices were recorded as sales revenue, as is also known ex officio to the TA, as they were declared in the respective income statements for corporate income tax purposes and in the successive corporate tax return statements filed. And, in accordance with article 58º of the General Tax Law, "The tax authority must, in the procedure, carry out all necessary steps to satisfy the public interest and to discover the material truth, not being subordinated to the initiative of the petitioner", as a manifestation of the inquisitorial principle. In this case, the TA demonstrated total disinterest in seeking the material truth – it did not heed, in particular, the sales invoices of the vehicles in question, of which it has full ex officio knowledge, as stated above. It is certain that "The non-investigation of elements necessary to discover the material truth, with the consequent violation of the inquisitorial principle, is grounds for illegality of the tax act (…)".

The Claimant filed a Request for Official Review against the SMVT and DI assessments in question, which was dismissed, with the TA basing itself solely and exclusively on the Motor Vehicle Registration presumption.

Finally, the Claimant indicates and attaches a set of various and numerous arbitral decisions rendered in previous proceedings, with understanding favorable to the Claimant's claim, namely, the decisions rendered in Cases nos. 159/2016-T, 374/2015-T, 250/2014-T, 688/2014-T, 607/2015-T, 758/2015-T, among others, all decided by arbitral tribunals constituted with the CAAD.

1. The TA counters in its response that within the scope of article 17 of the CIUC, the introduction into consumption and assessment of tax on vehicles that do not have national registration is evidenced by the issuance of a Customs Declaration of Vehicles (CDV), constituting such issuance the taxable event, in accordance with and for the purposes of the provisions of article 5 of the Vehicle Tax Code (VTC).

In accordance with article 117, paragraph 4 of the Road Code, registration is requested from the Institute of Mobility and Transport (IMTT) by the entity that will carry out the admission or introduction of the vehicle into consumption.

On the other hand, article 24, paragraph 1 of the Motor Vehicle Registration Regulation (approved by Decree-Law no. 55/75, of 12 February) (MRR), provides that "the initial registration of ownership of vehicles imported, admitted, assembled, constructed or reconstructed in Portugal is based on the respective request and proof of compliance with fiscal obligations relating to the vehicle. Thus, the first registration of each motor vehicle is executed in the name of the importing entity, in this case the Claimant.

The granting to the Claimant of a registration certificate constitutes, in accordance with article 6 of the CIUC, the taxable event, so that, having the Claimant requested the issuance of a registration certificate and the same being registered in its name, the prerequisites of the taxable event of SMVT are met, as well as its enforceability, with the Claimant being the taxpayer of the tax.

The first misconception underlying the interpretation defended by the Claimant relates to a skewed reading of the letter of the law, with the thesis defended by it having no support in the letter of the law. The tax legislator, in establishing in article 3, paragraph 1, who are the taxpayers of SMVT, expressly and intentionally established that these are the owners (or in the situations provided for in paragraph 2, the persons listed there), considering as such the persons in whose name they are registered. It emphasizes that the legislator did not use the expression "presumed", as it could have done, for example, in the following terms: "the taxpayers of the tax are the owners of vehicles, presumed to be such the natural or legal persons, of public or private law, in whose name the same are registered".

The tax normative is replete with provisions similar to that established in the final part of paragraph 1 of article 3, in which the tax legislator, within its freedom of legislative configuration, expressly and intentionally, establishes what should be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others.

It is a clear option of legislative policy embraced by the legislator, whose intention, within its freedom of legislative configuration, was that, for purposes of SMVT, those who appear as such in the motor vehicle register should be considered owners.

In summary, article 3 of the CIUC contains no legal presumption, and it is certain that the thesis proposed by the Claimant directs its objective at the wrong target.

Even admitting that, from the perspective of the rules of civil law and land registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effect, in accordance with what is established in the CIUC (which in the case in question constitutes special law, which, under the general rules of law, derogates the general norm), the tax legislator intentionally and expressly wanted that those who appear as owners, lessees, acquirers with reservation of property or holders of the right of option to purchase in long-term leasing in whose name the vehicles are registered should be considered as such. It is further the case that, in light of a teleological interpretation of the regime established throughout the Single Motor Vehicle Tax Code, the interpretation proposed by the Claimant to the effect that the taxpayer of SMVT is the actual owner, independently of not appearing in the motor vehicle register, the registration of that quality, is manifestly wrong, insofar as it is the proper ratio of the regime established in the SMVT Code that constitutes clear proof that what the tax legislator intended was to create a Single Motor Vehicle Tax based on the taxation of the vehicle owner as appearing in the motor vehicle register.

Even if, by mere academic hypothesis, it were to be admitted as admissible to override the presumption in light of the jurisprudence already established in this arbitral tribunal, the truth is that the invoice is not capable of proving the conclusion of a bilateral contract, such as purchase and sale, for that document does not reveal by itself an essential and unequivocal declaration of will by the purported acquirers.

It concludes, therefore, for the legality of the tax acts in question, because in conformity with the legal regime in force on the date of the tax facts, so that no error attributable to the services occurred in this case. It further understands that there is no disputed matter of fact, but only different understanding as to the applicable law, so it sees no justification for the production of witness evidence indicated by the Claimant, nor for the holding of the meeting provided for in article 18 of the LFAT.

1. Considering the position of the parties and what was requested by the TA regarding the waiver of the meeting provided for in article 18 of the LFAT, an arbitral order was issued on 01-02-2018 for the Claimant to state its position on this matter, and a date was set for the holding of the meeting. The Claimant responded on 09-02-2018, stating in favor of waiving the meeting, waived the questioning of the indicated witness, in the sense of the case proceeding to the phase of submission of written arguments.

Accordingly, an arbitral order was issued on 14-02-2018, in which the tribunal waived the holding of the meeting, accepted the position of the parties, set a deadline for written arguments of the parties, and indicated as the (probable) deadline for the pronouncement of the arbitral decision, thirty days after the end of the deadline for arguments set for the parties. The Claimant submitted its arguments on 02-03-2018 and the Respondent on 15-03-2018.

II – CURATIVE MEASURES

1. The tribunal is competent and was duly constituted. The parties have legal standing and capacity, are legitimate and are regularly represented (articles 4 and 10, paragraph 2, of the LFAT and article 1 of Ordinance no. 112-A/2011, of 22 March). The case does not suffer from nullities.

III – MATTERS OF FACT AND LAW

1. Matter of Fact

The Tribunal does not have to rule on everything that was alleged by the parties; rather, it has the duty to select the facts that matter for the decision and discriminate the proven matter from the unproven (cf. article 123, paragraph 2, of the Code of Tax and Customs Procedure and article 607, paragraphs 3 and 4, of the Code of Civil Procedure, applicable by virtue of article 29, paragraph 1, paragraphs a) and e), of the LFAT), taking into account the positions assumed by the parties, the documentary evidence attached to the case file and the witness evidence produced, the following facts are considered proven:

Thus, given the elements contained in the case file, the means of documentary evidence attached by the Claimant and contained in the Administrative Process (AP) attached by the Respondent, it is important to establish the proven and unproven matters of fact.

10.1 PROVEN FACTS

The following facts are considered proven:

a) The Claimant is a commercial company, whose business activity consists of the sole importation of all motor vehicles of brand B… for the national market.

b) The vehicles are imported by the Claimant from C…, through prior request of the dealers, submitted electronically directly to the factory.

c) The importation of the vehicles is carried out on the basis of orders made directly by the dealers to the Claimant, so there are no sales of vehicles to the Claimant, and from the Claimant to them, without the respective order.

d) Upon arrival in Portugal, the vehicles are immediately invoiced by the Claimant to the dealers and immediately delivered at their facilities, with the exception of vehicles destined for Madeira and the Azores which are deposited in the warehouse of a logistics company.

e) Once the vehicles are imported, the official dealer representative requests the assignment of registrations to the vehicles on behalf of the Claimant.

f) When the registration is requested, the vehicles have already been sold to the dealers.

g) The sales invoices of the vehicles to the dealers do not contain the registration numbers, as they have not yet been requested, but only the chassis numbers of the vehicles sold to the dealers.

h) After sale to the dealers, the Claimant pays the Vehicle Registration Tax due and requests the issuance of the registration and invoices them for the tax borne, showing the registration numbers of the vehicles on the respective invoices.

i) On the date of registration and first registration of the vehicles in the Claimant's name, they had already been sold to the dealers.

j) The disputed assessments result from the fact that the Claimant is the first owner of the vehicles, for purposes of motor vehicle registration, as the importer of the same.

k) There are 41 disputed SMVT assessments and respective default interest, relating to the years 2010, 2011, 2014 and 2015, which the Claimant paid.

l) The Claimant filed a request for official review of the assessments in question, which was processed by the Large Taxpayers Unit under the Official Review administrative process no. …2017…, which received a dismissal decision on 21-06-2017.

m) The Claimant filed a request for constitution of an arbitral tribunal on 20-09-2017.

10.2 There are no facts given as unproven with relevance to the assessment of the request.

10.3 The matter given as proven and unproven was based on the documents attached to the case by the Claimant and the administrative process attached by the Respondent and the express agreement of the parties as to the matters of fact, with their disagreement lying only in the underlying legal matter.

11. MATTERS OF LAW

11.1 Having established the matters of fact, it is important to determine the essential legal question raised by the Claimant, which consists of assessing the terms of the configuration of the subjective incidence of SMVT in light of the provisions of article 3 of the Single Motor Vehicle Tax Code (CIUC), namely, the question of whether the subjective incidence is strictly based on the registration of vehicle ownership in the Motor Vehicle Register, or whether registration operates only as a rebuttable presumption of tax incidence, in accordance with article 73 of the General Tax Law.

In connection with this essential question, the following questions arise: if it is mere presumption, how can it be rebutted by the taxpayer, and on whom lies the burden of proof.

On this matter, there is already abundant and fairly settled arbitral jurisprudence contained in various arbitral decisions.

Finally, depending on the decision of the previous questions, it will be important to decide the question raised by the Claimant regarding default interest. Let us examine this.

11.2 As a preliminary matter, it should be noted that the contentious regime provided for in the LFAT is one of mere legality, aimed only at the declaration of illegality of acts of the types provided for in paragraphs a) and b) of article 2, paragraph 1. Therefore, the legality of the impugned acts must be assessed as they were carried out by the TA, with the reasoning that was used in them, with other possible reasonings that could support other acts not being relevant, whose decisional content is totally or partially coincident with the act carried out. Thus, reasoning invoked a posteriori, after the end of the tax procedure in which the act whose declaration of illegality is requested was carried out, including those ventured in the judicial proceeding, are irrelevant.

On the other hand, it should be noted once again that the Courts (which obviously include arbitral ones) do not have to assess all the arguments formulated by the parties, but only those determinative of the decision of the case. (Cf., inter alia, Decision of the Plenary of the 2nd Section of the Supreme Administrative Court, of 7 June 95, appeal 5239, in Official Gazette – Appendix of 31 March 97, pages 36-40 and Decision Supreme Administrative Court – 2nd Series – of 23 April 97, Official Gazette/AP of 9 October 97, p. 1094).

Regarding Subjective Incidence:

11.3 On this question, this tribunal follows the numerous and majoritarian tax arbitral jurisprudence contained in numerous arbitral proceedings. [Cf., in particular, decisions rendered in CAAD case nos. 14/2013, 26/2013, 27/2013, 73/2013, 170/2013, 154/2014, 212/2014 and, more recently, in case nos. 539/2016-T, 580/2016-T, 623/2016-T, 109/2017-T; 145/2017-T, 185/2017-T, all published at www.caad.org.pt].

Let us therefore examine this:

On this question, article 3 of the CIUC (Single Motor Vehicle Tax Code) provides as follows:

"Article 3
Subjective Incidence

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

2 – Equivalent to owners are financial lessees, acquirers with reservation of property, as well as other holders of purchase option rights by virtue of the leasing contract".

As for the interpretation of the tax legal norm, article 11, paragraph 1, of the General Tax Law establishes that "in determining the meaning of tax norms and in qualifying the facts to which they apply, the rules and general principles of interpretation and application of laws are observed".

Accordingly, promoting the necessary interpretive activity of the norms in question, the best interpretation[1] of article 3, paragraph 1, of the CIUC must be examined in light of the fundamental hermeneutic principles. Thus, and first of all, attention should be paid to the literal element, that is, the one aimed at detecting the legislative thinking that is objectified in the norm, to verify whether it contemplates a presumption or definitively determines that the taxpayer of the tax is the owner appearing in the register.

The question that arises is whether the expression "considered as" used by the legislator in the CIUC, instead of the expression "presumed", which was what appeared in the diplomas that preceded the CIUC, will have removed the nature of "presumption" from the legal provision in question.

In our view, and contrary to what the TA defends, the answer must necessarily be in the negative, since from an analysis of our legal system it is extracted clearly that the two expressions have been used by the legislator with equivalent meaning, both at the level of rebuttable presumptions and in the context of irrebuttable presumptions, so nothing entitles us to draw the conclusion intended by the Tax Authority on the basis of a mere semantic reason.

In fact, this occurs in various legal norms that establish presumptions using the verb "consider". See, by way of example, in the context of civil law, paragraph 3 of article 243 of the Civil Code, when it establishes that "the third party who acquired the right after the registration of the action of simulation shall always be considered acting in bad faith, when this takes place". Also in the field of industrial property law the same applies, when article 59, paragraph 1 of the Industrial Property Code provides that "(…) inventions whose patent has been applied for within the year following the date on which the inventor leaves the company are considered made during the execution of the employment contract (…)". Now, also in the field of tax law, when paragraphs 3 and 4 of article 89-A of the General Tax Law provide that it is incumbent on the taxpayer the burden of proof that the declared income corresponds to reality and that, if such proof is not made, it is presumed ("considered" in the letter of the Law) that the income is that which results from the table appearing in paragraph 4 of the said article.

This conclusion of there being total equivalence of meanings between the two expressions, which the legislator uses indifferently, satisfies the condition established in article 9, paragraph 2 of the Civil Code, since the minimum of verbal correspondence is ensured for purposes of determining legislative thinking.

Moreover, on this question, arbitral jurisprudence is already so abundant, accompanied by the jurisprudence of our superior Courts. It is therefore a presumption.

Furthermore, this conclusion is equally reinforced when the other elements of interpretation are revisited, that is, the historical element, the rational or teleological element, and the systematic element.

Discussing interpretive activity, FRANCESCO FERRARA states that this "is the most difficult and delicate operation to which a jurist can dedicate himself, and demands fine treatment, refined sense, happy intuition, much experience and perfect command not only of positive material but also of the spirit of a certain legislation. (…) Interpretation must be objective, balanced, without passion, sometimes bold, but not revolutionary, sharp, but always respectful of the law" (Cf. Essay on the Theory of Interpretation of Laws, translated by MANUEL DE ANDRADE, (2nd ed.), Arménio Amado, Editor, Coimbra, 1963, p. 129).

As BAPTISTA MACHADO states, "the legal provision presents itself to the jurist as a linguistic utterance, as a set of words that constitute a text. Interpreting obviously consists of extracting from that text a certain sense or content of thought. The text allows for multiple meanings (polysemy of the text) and often contains ambiguous or obscure expressions. Even when apparently clear on first reading, its application to concrete cases of life often raises unexpected and unpredictable interpretation difficulties. Besides, although apparently clear in its verbal expression and bearing only one meaning, there is still the possibility that the verbal expression has betrayed legislative thinking – a phenomenon more frequent than might appear at first sight" (Cf. Introduction to Law and to Legitimating Discourse, pp. 175/176).

"The purpose of interpretation is to determine the objective meaning of the law, the vis potestas legis. (…) The law is not what the legislator wanted or meant to express, but only what he expressed in the form of law. (…) On the other hand, the legal command has an autonomous value that may not coincide with the will of the makers and drafters of the law, and may lead to unexpected and unforeseen consequences for the legislators. (…) The interpreter should seek not what the legislator wanted, but what appears objectively wanted in the law: the mens legis and not the mens legislatoris (Cf. FRANCESCO FERRARA, Essay, pp. 134/135).

To understand a law "is not only to grasp mechanically the apparent and immediate meaning resulting from verbal connection; it is to deeply inquire into legislative thinking, to descend from the verbal surface to the intimate concept that the text encloses and to develop it in all its possible directions" (loc. cit., p. 128).

With the objective of unveiling the true meaning and scope of legal texts, the interpreter makes use of interpretive elements which are essentially the grammatical element (the text, or the "letter of the law") and the logical element, which in turn is subdivided into the rational (or teleological) element, the systematic element, and the historical element. (Cf. BAPTISTA MACHADO, loc. cit., p. 181; J. OLIVEIRA ASCENSÃO, The Law – Introduction and General Theory 2nd Ed., Calouste Gulbenkian Foundation, Lisbon, p. 361).

Among us, it is article 9 of the Civil Code (CC) that provides the rules and fundamental elements for the correct and adequate interpretation of norms. The text of paragraph 1 of article 9 of the CC begins by saying that interpretation should not be limited to the letter of the law but should reconstruct, from it, the "legislative thinking". On the expression "legislative thinking," BAPTISTA MACHADO tells us that article 9 of the CC "did not take a position in the controversy between subjectivist doctrine and objectivist doctrine. It is proven by the fact that it does not refer either to the 'will of the legislator' nor to the 'will of the law', but rather points as the scope of interpretive activity to the discovery of 'legislative thinking' (art. 9, para. 1). This expression, purposefully colorless, means precisely that the legislator did not want to commit itself" (loc. cit., p. 188).

PIRES DE LIMA and ANTUNES VARELA express themselves in the same sense in annotation to article 9 of the CC (Cf. Annotated Civil Code – vol. I, Coimbra ed., 1967, p. 16).

And on paragraph 3 of article 9 of the CC, that author states: "(…) this paragraph 3 thus proposes to us a model of ideal legislator that enshrined the most correct solutions (more correct, just or reasonable) and knows how to express itself correctly. This model clearly has objectivist characteristics, as it does not take as point of reference the concrete legislator (often incorrect, hasty, unhappy) but an abstract legislator: wise, foreseeing, rational and just (…)" (loc. cit. p. 189/190). Shortly thereafter, it calls attention to the fact that paragraph 1 of article 9 refers to three other elements of interpretation: "the unity of the legal system", "the circumstances in which the law was elaborated" and "the specific conditions of the time in which it is applied" (loc. cit, p. 190).

As for the "circumstances of the time in which the law was elaborated," BAPTISTA MACHADO explains that this expression "(…) represents what has traditionally been called the occasio legis: the conjunctural factors of a political, social and economic order that determined or motivated the legislative measure in question (…)" (loc. cit., p. 190).

Regarding the "specific conditions of the time in which it is applied," this author says that this element of interpretation "has decidedly an updateist connotation (loc. cit., p. 190) which coincides with the opinion expressed by PIRES DE LIMA and ANTUNES VARELA in annotations to article 9 of the CC.

With respect to the "unity of the legal system," BAPTISTA MACHADO considers this the most important interpretive factor: "its consideration as a decisive factor would always be imposed on us by the principle of axiological or axiological coherence of the legal order" (loc. cit., p. 191). It is also this author who tells us, regarding the literal or grammatical element (text or "letter of the law") that this "is the starting point of interpretation. As such, it has from the outset a negative function: to eliminate those meanings that have no support, or at least any correspondence or resonance in the words of the law. But it also has a positive function, as follows: if the text allows for only one meaning, that is the meaning of the norm – with the caveat, however, that based on other norms it can be concluded that the wording of the text has betrayed the legislator's thinking" (loc. cit., p. 182).

Referring to the rational or teleological element, this author states that it consists "in the raison d'être of the law (ratio legis), in the end aimed at by the legislator in elaborating the norm. Knowledge of this end, especially when accompanied by knowledge of the circumstances (political, social, economic, moral, etc.,) in which the norm was elaborated or the political-economic-social conjuncture that motivated the legislative decision (occasio legis) constitutes a subsidy of the utmost importance for determining the meaning of the norm. It suffices to recall that clarification of the ratio legis reveals to us the valuation or balancing of the various interests that the norm regulates and, therefore, the relative weight of those interests, the choice between them expressed by the solution that the norm expresses" (loc. cit., pp. 182/183).

It is still BAPTISTA MACHADO who tells us, now with respect to the systematic element (context of the law and parallel places), that "(…) this element comprises the consideration of the other provisions that form the normative complex of the institute in which the interpreted norm 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 systematic place that belongs to the interpreted norm in the global order, as well as its consonance with the spirit or intrinsic unity of the entire legal system.

This interpretive subsidy is based on the postulate of intrinsic coherence of the order, in particular on the fact that the norms contained in a codification obey in principle a unitary thinking (…)" (loc. cit., p. 183).

As JOSEF KOHLER teaches, cited by MANUEL DE ANDRADE "(…) in particular we must take into account the linking of the various laws of the country, because a fundamental requirement of all sound legislation is that the laws adjust to one another and do not result in a congeries of disconnected provisions (…)" (Essay, p. 27).

In conclusion, through analysis of the historical element, it is extracted the conclusion that, from the entry into force of Decree-Law 59/72, of 30 December, the first to regulate the matter, until Decree-Law no. 116/94, of 3 May, the last to precede the CIUC [cf Law no. 22-A/2007, as amended by Law 67-A/2007 and 3-B/2010], the rebuttable presumption was established that the taxpayers of SMVT are the persons in whose name the vehicles are registered on the date of their assessment.

11.4 It appears that tax law has, from the outset, had the objective of taxing (for the case that now concerns us) the true and actual owner[2] and user of the vehicle, by force of the principle of equivalence underlying SMVT. Thus, the legislator, in adopting the principle of equivalence, opted to burden the subject using the vehicle in proportion to the cost caused due to the negative externalities caused by motorized vehicles. In the letter of the law, it establishes only the presumption that the owner appearing in the Motor Vehicle Register also coincides with its user and that the register evidences the reality relating to the use of the vehicle. This choice of extrafiscal policy also justifies the solution contained in paragraph 2 of article 3 of the CIUC regarding lessees, elected by the legislator as the subjects burdened with the payment of the tax even during the term of a leasing contract which may not necessarily result in the acquisition of vehicle ownership. In fact, the current and new framework of motor vehicle taxation establishes principles aimed at subjecting vehicle owners to bearing the losses from road and environmental damages caused by them, as is evident from the tenor of article 1 of the CIUC.

Now, the consideration of these principles, in particular the principle of equivalence, which deserve constitutional protection and establishment in community law, and are also recognized in other branches of the legal order, determines that the aforementioned costs be borne by the real owners, the causers of the said damages, which entirely precludes an interpretation aimed at preventing the presumed owners from proving that they are no longer so because ownership is in someone else's legal sphere[3]. Thus, also from the interpretation made in light of the rational and teleological elements, given what the rationality of the system guarantees and the purposes aimed at by the new CIUC, it is clear that paragraph 1 of article 3 of the CIUC establishes a rebuttable legal presumption. Therefore, interpretation of a rational or teleological nature also leads us to the same conclusion.

In light of the foregoing, it is important to conclude that the ratio legis of the tax points toward the taxation of the actual owner-users of vehicles, so the expression "considered as" is used in the provision in question in a sense similar to "presumed", which is why there is no doubt that a legal presumption is established.

11.5 Having stated this, finally, but with great accuracy for the concrete case, attention must be paid to the provisions of article 73 of the General Tax Law, which establishes that "(…) presumptions established in tax incidence rules always admit proof to the contrary, so they are rebuttable (…)".

Accordingly, since article 3, paragraph 1 of the CIUC establishes a rebuttable presumption, the person who is registered in the register as the owner of the vehicle and who, for that reason was considered by the Tax Authority as the taxpayer, can present elements of proof aimed at demonstrating that the holder of ownership, on the date of the taxable event, is another person, to whom the ownership was transferred.

Regarding the Burden of Proof and Suitable Means of Proof to Rebut the Presumption

11.6 Moving now to the question of the burden of proof, there is no doubt that it is incumbent upon the taxpayer to present suitable means to promote the necessary proof to overcome the presumption. It falls to the taxpayer to provide "proof to the contrary", that is, proof that they were not the owner on the date of the taxable event. Let us examine how this objective can be achieved, which raises the question regarding the suitability of sales invoices for motor vehicles as a means of proof of the sale of those vehicles. However, it should be noted that contracts for the purchase and sale of motor vehicles have a consensual basis and are not subject to special formalities (Cf. articles 219 and 408-1 of the Civil Code).

As for invoices, account must be taken of the fact that these essentially have the formalities provided for in article 36 of the VAT Code and 5 of Decree-Law no. 198/90. Furthermore, a presumption of truthfulness applies, which can be rebutted by the TA, as results from the provisions of article 75-2 of the General Tax Law.

On the other hand, ownership of motor vehicles is subject to mandatory registration (cf. art. 5-1 and 2 of Decree-Law no. 54/75, of 12/2). The obligation to register falls on the buyer – the subject who is the active party of the fact subject to registration (cf. art. 8-B – 1 of the Code of Land Registration, applicable to Motor Vehicle Registration by virtue of art. 29 of Decree-Law no. 54/75, of 12/2, read together with art. 5-1/a) of that latter diploma).

However, the Motor Vehicle Registration Regulation contains a special regime, in effect since 2008, for entities that, by virtue of their commercial activity, regularly carry out the transfer of ownership of motor vehicles. According to this regime, which is established in art. 25-1/d) of Decree-Law no. 55/75, of 12/2 (version resulting from Decree-Law no. 20/2008, of 31/1), registration can be promoted by the seller, by means of a request signed only by the seller.

SMVT is legally configured to function in integration with motor vehicle registration, which is inferred, from the start, from the cited art. 3-1 of the CIUC, a norm where it is established that the taxpayers of the tax are the owners of vehicles, further adding that those in whose name the same are registered are considered as such.

The rebuttal of the legal presumption obeys the rule contained in art. 347 of the Civil Code, according to which full legal proof can only be contradicted by means of proof that shows that the fact of which it is the object is not true. This means that it is not enough for the opposing party to merely present counterproof – which is intended to cast doubt on the facts (cf. art. 346 of the Civil Code) that render the presumed facts doubtful; instead, it must show that the presumed fact is not true, in such a way that there remains no uncertainty that the facts resulting from the presumption are not real.

Now, the invoice constitutes an accounting document prepared within the company and intended for outside parties, particularly the TA, which draws all effects from it inherent in the assessment for the incidence of various taxes. Therefore, unless its falsity is demonstrated, the invoices are presumed valid for all legal purposes, and cannot fail to be so solely as a means of proof of the transaction, relevant for purposes of SMVT incidence. For its part, the debit note also constitutes the document in which the issuer communicates to the recipient that the latter owes it a certain monetary amount. Both documents appear in the phase of liquidation (which often does not coincide with actual payment) of the amount to be paid by the buyer. Thus, although not constituting proof of actual payment of the price by the same buyer, they constitute proof of that same transaction, that is, of the purchase and sale effected. A purchase and sale which may moreover be carried out with reservation of property[4] for the seller until payment of the price without this preventing SMVT obligation from falling on the buyer.

11.7 It further follows that presumptions of tax incidence can be rebutted through the contradictory procedure itself provided for in article 64 of the Code of Tax and Customs Procedure or, alternatively, through the avenue of administrative reconsideration, review of a tax act or judicial challenge of the tax acts based on them.

In the present case, the Claimant did not use that specific procedure, having instead opted for the request for review of the tax act followed by the arbitral request, and in both it invoked and submitted proof to demonstrate that it was not the owner of the vehicles on the date the taxable event occurred. Therefore, the documents attached to the case file, which served as the basis for the matter of fact established, in the terms substantiated above, constitute the proper means to rebut the presumption of subjective incidence of SMVT, on which the tax assessments whose annulment is sought in this case are based.

The tribunal's understanding, having assessed the proof produced by the Claimant, particularly with the complement of the testimony of the witnesses it called, is in the sense of deciding that this proof is sufficient to attest to the sale of all the vehicles contained in the tax assessments to the acquirers, so that at the time of the taxable event and the first registration of ownership effected, the Claimant was no longer their owner. Indeed, it should be said that the Respondent TA at no time, neither in the Response nor in the Arguments attached to the case file, questioned the actual occurrence of the transfers, and it is certain that it is not enough to impugn the invoices to undermine the evidentiary value of these, the same invoices that served as the basis for the incidence of other taxes assessed to the Claimant (for example VAT and corporate income tax).

It is thus concluded that proof of the sale of a motor vehicle is admitted through demonstration of the existence of the issuance of a valid invoice. Having analyzed the elements brought to the case by the Claimant and the proven facts, it is extracted the conclusion that the Claimant was not actually the owner of the vehicles to which the assessments in question relate, having transferred, on the date when the respective SMVT was due, the ownership of the vehicles, in accordance with the terms provided for in civil law.

The documentary elements attached to the case file enjoy the presumption of truthfulness granted to them by the aforementioned art. 75, paragraph 1 of the General Tax Law, thus having suitability and sufficient force to rebut the presumption that supported the assessments made based exclusively, as the Law provides, on motor vehicle registration.

These operations of apparent transfer of ownership are opposable to the Tax and Customs Authority, since although facts subject to registration produce effects only in relation to third parties when registered, given the provisions of art. 5, paragraph 1 of the Code of Land Registration [applicable by reference from the Code of Motor Vehicle Registration], the Tax Authority is not a third party for purposes of registration, since it is not in the situation provided for in paragraph 2 of the said art. 5 of the Code of Land Registration, applicable by virtue of the Code of Motor Vehicle Registration, that is, it has not acquired from a common author rights incompatible with each other.

11.8 Thus it is that, in summary, motor vehicle registration, in the economy of the CIUC, represents mere rebuttable presumption of the taxpayers of the tax.

In the case, the Claimant succeeded, with complete success, in rebutting that presumption and demonstrating that the reality of the register was mere appearance of that same reality, that is, the registered owner was not the actual owner, taxpayer of SMVT.

In these circumstances, the mentioned and now impugned assessments appear to be illegal, suffer from the defect of violation of law due to error in the assumptions of fact and law underlying them, so their annulment is required, and consequently the restitution to the Claimant, by the Tax and Customs Authority, of the respective amounts paid unduly, as appears from the documents attached to the case file.

Regarding the Request for Default Interest:

11.9 In the arbitral request, the Claimant petitions, as a consequence of the illegality and annulment of the impugned assessments, the right to default interest.

It is thus necessary to ascertain whether, under article 24, paragraph 5 of the LFAT, the request for payment of default interest in favor of the Claimant (Cf. art. 43 of the General Tax Law and 61 of the Code of Tax and Customs Procedure) should proceed.

On this question, paragraph 1 of article 43 of the General Tax Law establishes that default interest is owed when it is determined that there was error attributable to the services as a result of which the tax debt was paid in an amount greater than legally due. In response to this, the TA invokes the jurisprudence contained in the arbitral decision rendered in case no. 26/2013-T, of 19/7/2013 (which dealt with a situation similar to the one being assessed here) that is, that "(…) the right to default interest to which the aforementioned General Tax Law rule alludes presupposes that tax has been paid in an amount greater than what is due and that this derives from error, of fact or law, attributable to the services of the TA. […] even though it is recognized that the tax paid by the Claimant is not owed, because the Claimant is not the taxpayer of the tax obligation, determining consequently its reimbursement, it is not seen that, at its origin, there is the error attributable to the services that determines such right [to default interest] in favor of the taxpayer. In fact, by promoting the official assessment of SMVT considering the Claimant as the taxpayer of this tax, the TA merely complied with the rule of paragraph 1 of art. 3 of the CIUC, which, as extensively stated above, attributes that quality to the persons in whose name the vehicles are registered."[5]

On this question, it must be ascertained whether or not the grounds for annulment are based on error attributable to the services.

Let us examine whether the Claimant's reasoning is well-founded on this matter.

In the present case, it was the Respondent that proceeded, in a first moment, on its own initiative, to the self-assessments (avoiding the prejudice and loss of rights resulting from the existence of tax debts registered in the system). It subsequently proceeded to their payment and, only later, came forth in the context of a procedure for review of the tax act to expose its reasons of fact and law for which it claims the annulment of the assessments, previously self-assessed and paid.

In conformity with this factuality, it cannot be concluded, from the outset, for the existence of error attributable to the TA in the assessments in question.

However, after the Claimant's submission of the request for review of the act, the TA had the opportunity to verify the correct facts and conclude that the previously paid tax was not owed. At that moment, taking into account the information at its disposal, it should have noticed the error. By failing to do so and having decided as it did for the inadmissibility of the review request, the TA became responsible from that moment on for the payment of default interest, to be calculated, note well, only after the date it became aware of that factuality, that is, since the date it rendered the decision dismissing the review request submitted by the Claimant. Only from this moment can we consider the prerequisites contained in article 43 of the General Tax Law to be met.

In the case, the errors affecting the assessments are attributable to the Tax and Customs Authority, in that it should have corrected the act when confronted with that reality and the underlying proof. By dismissing the review request deduced by the Claimant, the TA decided based on error concerning the assumptions of fact and law underlying it, and in that measure and only after that date, the illegal assessment acts subsisted by its initiative.

On the other hand, reimbursement of the tax paid by the Claimant is due, by virtue of the provisions of the said articles 24, paragraph 1, paragraph b), of the LFAT and 100 of the General Tax Law, as this is essential to "restore the situation that would exist if the tax act subject to the arbitral decision had not been carried out".

In conclusion, the Claimant has the right to be reimbursed for the amount it paid unduly (in accordance with the provisions of articles 100 of the General Tax Law and paragraph 1 of article 24 of the LFAT) and furthermore to be indemnified for the unduly paid amount through the payment of default interest by the Respondent, from the date of dismissal of the request for review of the tax act, until reimbursement, at the applicable legal rate, in accordance with paragraphs 1 and 4 of article 43 and paragraph 10 of article 35 of the General Tax Law, article 559 of the Civil Code, and Ordinance no. 291/2003, of 8 April.

Finally, as to the costs of the case, it appears that payment of costs at the end of the case falls on the losing party, in proportion to the extent it is defeated. However, this will not be the case if, despite being defeated, that party did not give rise to the action, which is not the case, as the TA had, as stated in the preceding point, the opportunity to revoke the act after being called to decide the question in the context of the procedure for review of the tax act. Therefore, by choosing not to do so, it gave rise to the present arbitral request, and, in that measure, is responsible for payment of the costs of the case.

Consequently, the TA will have to bear the full costs.

IV – DECISION

In harmony with the foregoing, this Arbitral Tribunal decides:

1. To find well-founded the requests for declaration of illegality of the dismissal of the request for Review of the tax acts embodied in the self-assessments of SMVT and default interest subject to this case, in the total amount of 5.548,65€, with the consequent annulment of the said assessments;

2. To find well-founded the request for payment of default interest by the Tax and Customs Authority, to be calculated from the date of dismissal of the Review request until full payment;

3. To condemn the Tax and Customs Authority in the costs of this proceeding.

V – VALUE OF THE CASE

The value of the case is fixed at 5.548,65 €, in accordance with article 97-A, paragraph 1, a), of the Code of Tax and Customs Procedure, applicable by virtue of paragraphs a) and b) of article 29, paragraph 1 of the Legal Framework for Tax Arbitration and paragraph 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

VI – COSTS

The arbitration fee is fixed at 612,00€, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, in accordance with articles 12, paragraph 2, and 22, paragraph 4, both of the Legal Framework for Tax Arbitration, and article 4, paragraph 4, of the said Regulation.

Let it be notified.

Lisbon, 13 April 2018

The sole arbitral tribunal,

(Maria do Rosário Anjos)

[1] The genesis of the legal relationship of tax presupposes the cumulative verification of the three necessary prerequisites for its emergence, namely: the real element, the personal element and the temporal element. (In this sense see, among many other authors, Freitas Pereira, M. H., Taxation, 3rd Edition, Almedina, Coimbra, 2009).

[2] Or equivalent, as is the case with financial lessees, acquirers with reservation of property, as well as other holders of purchase option rights by virtue of the leasing contract (article 3-2 of the CIUC).

[3] Under the heading "principle of equivalence," article 1 of the CIUC establishes: "The single motor vehicle tax obeys the principle of equivalence, seeking to burden taxpayers in proportion to the environmental and road cost that they cause, in implementation of a general rule of tax equality". On the notion of the principle of equivalence, SÉRGIO VASQUES tells us: "In obedience to the principle of equivalence, the tax must be configured with attention to the benefit the taxpayer derives from the public activity, or with attention to the cost he imputes to the community by his own activity" (Cf. Special Consumption Taxes, Almedina, 2000, p. 110). And, further on, this Professor explains, regarding motor vehicles: "a tax on motor vehicles based on a rule of equivalence will be equal 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 as well.

[4] It should be noted that acquirers of vehicles with reservation of property are equivalent to the taxpayers of SMVT, that is, to the entities referred to in article 1-1 of the CIUC.

[5] (See also in this sense, e.g., the tax arbitral decisions rendered in CAAD case nos. 170/2013-T, of 14/2/2014, 136/2014-T, of 14/7/2014, 230/2014-T, of 22/7/2014, and 140/2014-T, of 29/8/2014.