ISV Tax on Used Vehicles from EU Member States: CAAD Arbitration Case 53/2016-T

ARBITRAL DECISION

I - REPORT

1. A…, taxpayer no…, with residence at … Street no…, …, hereinafter the Applicant, filed, on 4 February 2016, a request for the constitution of an arbitral tribunal and arbitral pronouncement, pursuant to articles 2, no. 1, subparagraph a) and 10, no. 1, subparagraph a), both of Decree-Law no. 10/2011, of 20 January, which approved the Legal Regime for Arbitration in Tax Matters (LRAT), and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, in which the Tax and Customs Authority (TCA) is the respondent.

Seeks that the illegality of the assessment of the Vehicle Tax (VT) no. 2015/…, of 10.11.2015, made by the respondent through the Customs Authority of…, in the amount of €5,255.18, be declared, with the consequent restitution of the VT and the burden of the evaluation fee of €200 unduly paid, recognition of the right to receipt of indemnity interest and condemnation to payment of arbitral costs.

1. In accordance with articles 6, no. 1, and 11, no. 1, subparagraph a) of the LRAT, the Deontological Board of the Administrative Arbitration Centre (CAAD) designated the undersigned as sole arbitrator on 05 April 2016, and the same communicated acceptance of this appointment.

On that same date, the parties were notified of the designation, in accordance with the combined provisions of article 11, no. 1, subparagraph b) of the LRAT, with articles 6 and 7 of the CAAD Deontological Code, and the parties did not manifest the intention to refuse the arbitrator's designation.

In these circumstances, in accordance with article 11, no. 1, subparagraph c) of the LRAT, the Sole Arbitral Tribunal was constituted on 20 April 2016.

3.1 In accordance with article 17, nos 1 and 2 of the LRAT, the TCA was notified to, as respondent party, within the deadline of thirty days, present its response and, should it deem appropriate, request the production of additional evidence, as well as submit a copy of the administrative file.

3.2 In the response filed on 25 May 2016, which is reproduced in full, the respondent sustained the legality of the assessments made, having concluded that they were made in accordance with national law and Community law, as well as what has been defended by the best case law, and should be maintained in the legal order.

3.3 In the subsequent proceedings, the parties were notified on 30 May 2016 to, given that it is solely a matter of law, waive the holding of the meeting referred to in article 18, no. 1 of the LRAT, which received their agreement, as confirmed by communications of 6 June 2016.

In that sense, the parties were granted a deadline of 10 successive days, beginning with the Applicant, for the presentation of written submissions, and the final deadline of 8 July 2016 was communicated for the rendering of the arbitral decision.

The submissions were presented on 24 June and 4 July 2016, respectively.

II - PROCEDURAL REQUIREMENTS

1. The Arbitral Tribunal is duly constituted, materially competent, and the parties have legal personality and capacity, being legitimate, in light of articles 4 and 10, no. 2 of the LRAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

The case does not suffer from defects that would invalidate it and there are no incidents that require resolution or preliminary issues upon which the Arbitral Tribunal should pronounce.

III – GROUNDS

Arguments of the parties

5.1 In support of the request for arbitral pronouncement, the Applicant, essentially, alleged the following:

a) The Applicant is of French nationality and transferred his residence to Portugal, bringing the light passenger vehicle of the BMW brand, model 5 K, with registration …-…-…, which he had purchased in France from the BMW dealer … …, in … May 2014,

b) The vehicle was first registered on 30 October 2013;

c) In cases of introduction into national territory of used vehicles already bearing definitive licence plates assigned by another Member State of the European Union (EU), the assessment is governed by the extraordinary legal regime set out in article 11 of the Vehicle Tax Code (VTC);

d) Under article 110 of the Treaty on the Functioning of the European Union (TFEU), "No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar national products. Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to protect indirectly other production";

e) In accordance with article 8 of the Constitution of the Portuguese Republic (CPR), international law takes precedence over Portuguese Internal Law and is directly applicable within national territory;

f) Article 11 does not account in the calculation of VT on used vehicles any depreciation until the vehicle has more than one year of use, nor is any additional reduction of the actual value considered for vehicles with more than five years of use, and it is certain that, in the specific case, the vehicle in question, at the time of its acquisition by the Applicant, had less than one year of use;

g) Neither the alternative formula provided in no. 3 of article 11 of the VTC accounts for any depreciation in cases where the vehicle has less usage time, nor any additional reduction in the case of vehicles with more than five years of use;

h) There is an ongoing case against Portugal in the Court of Justice of the European Union (CJEU), as announced by the European Commission in February 2015;

i) According to the consistent case law of the CJEU, there is a violation of article 110 of the TFEU whenever the taxation of automobiles from other EU countries and that which applies to similar national automobiles are calculated differently and on the basis of different criteria, leading to higher taxation of the vehicle originating from another EU country, and the tax cannot exceed the tax applicable to a similar used vehicle already registered in Portugal;

j) The CJEU, in the judgment Ascendi of 12.06.2014, already expressly acknowledged the legal admissibility of the submission to the CJEU of preliminary rulings submitted by the Portuguese Tax Court functioning under the auspices of the CAAD;

l) The Applicant proposes that the Arbitral Tribunal submit to the CJEU the following preliminary ruling question "Is the Portuguese legal regime of article 11 of the VTC, applicable extraordinarily to used vehicles from other EU countries, compatible with European Union law, in particular with the provisions of article 110 of the TFEU?"

5.2 For its part, the respondent in response to the initial petition, in its defence, stated the following:

a) The Applicant had initially filed a request for exemption from VT under article 58 of the VTC, which came to be dismissed for non-compliance with factual requirements;

b) In accordance with the documentation presented, the vehicle was first registered in France on 30 October 2013, and was purchased by the Applicant on 6 May 2014;

c) Following this dismissal, the Applicant requested that upon admission of the vehicle, the VT assessment be carried out using the method provided in article 11, no. 3, and the vehicle was assigned a commercial value of €36,050.00 based on the price indicated in a specialized magazine, and the public sale price was indicated, referring to the year of first registration, of €58,218.00, a request that was accepted, and determined the amount of tax that came to be assessed and paid;

d) Article 11 of the VTC provides two calculation formulas for the VT, consisting of a provisional assessment, in accordance with no. 1 of article 11, or recourse to the alternative valuation method provided in no. 3 of the same provision;

e) For the purpose of calculating the time of use, no. 2 of article 11 considers that it "corresponds to the period elapsed from the assignment of the first licence plate and respective documents by the competent entity, until the end of the deadline for submission of the Vehicle Customs Declaration";

f) The vehicle has a time of use of one year, eight months and 20 days of use, counted from the date of assignment of the first licence plate to the date of the Vehicle Customs Declaration;

g) The allegation that the vehicle has less than one year of use is devoid of foundation, having no support in the letter of the law, since the formula contained in no. 3 of article 11 of the VTC applies regardless of the time of use the vehicle presents;

h) The argument that that method does not consider the time of use of vehicles with less than one year of use does not proceed, alleging that the vehicle had less than one year of use at the date of its acquisition;

i) Only courts that judge in final instance are obliged to submit to the CJEU questions of interpretation of European Union law, being, however, exempted from this referral when there is European case law on the matter, the question is irrelevant, or the interpretation of Community law is clear;

j) In addition to not being before a national court whose decision is not subject to appeal, the issue raised by the Applicant proves to be clear, with no doubts as to its interpretation;

l) Furthermore, the wording of article 11 of the VTC follows from the case law of the CJEU and specifically from the judgment given in case no. 393/98, designated the Gomes Valente judgment;

m) It follows from this case law that in order for a system of taxation of used vehicles to be compatible with article 110 of the TFEU, it is necessary to adopt either a taxation model based on the assessment of each vehicle or a taxation model based on fixed tables that excludes any discriminatory effect whatsoever;

n) Where the Portuguese State has adopted a mixed system based on the two models, that is, a table applicable, as a rule, to the majority of used vehicles from another Member State or to the assessment of each vehicle admitted, applicable to vehicles not specified in the table, whenever the taxpayer manifests preference for the taxation of vehicles in accordance with the assessment resulting from the application of the formula provided in no. 3;

o) The Applicant's argument is unfounded to the extent that it considers that reduction only exists after one year of use, given that the mixed taxation model is not limited to the application of the fixed reductions established in Table D, because whenever the interested party considers that the taxation made based on Table D prejudices it, it can request the taxation of the vehicle in accordance with the assessment made regardless of the years of use;

p) The taxpayer has at his disposal a method that guarantees him that the tax to be paid is determined based on the commercial depreciation that the vehicle has suffered, and for this it is sufficient that he request the application of that method under no. 3 of article 11 of the VTC;

In summary, the respondent requests that the request for arbitral pronouncement be judged not to proceed, maintaining in the legal order the disputed tax acts and, consequently, be absolved of the request.

In the final written submissions, the parties reaffirmed, essentially, the theses defended in the initial petition and in the defence.

With the submissions, the Applicant attached judgment no. C - 200/2015, of 16 June 2016, of the CJEU, recently disclosed.

The respondent, for its part, reiterated that there does not exist the invoked defect of violation of law by breach of article 110 of the TFEU, with no issue as to the matter of fact and law that should be submitted as a preliminary ruling to the CJEU.

IV – FACTS PROVEN AND NOT PROVEN

1. As a matter of fact, with relevance for the decision to be rendered, this Arbitral Tribunal gives as proven, based on the elements in the case file, the following facts:

6.1 The Applicant imported from France the light passenger vehicle of the "BMW" brand, with registration …-…-…, having processed the Vehicle Customs Declaration no. 2015/…, on 20 June 2015, which was handled at the Customs Authority of….

6.2 In accordance with the documentation presented, the vehicle was first registered in France on 30 October 2013, and was purchased by the Applicant on … May 2014.

6.3 The Applicant requested that upon admission of the vehicle, the VT assessment be carried out using the method provided in article 11, no. 3 of the VTC, assigning the vehicle a commercial value of €36,050.00 based on the price indicated in a specialized magazine, and the public sale price was indicated, referring to the year of first registration, of €58,218.00, a request that was accepted, and determined the amount of tax that came to be assessed and paid.

6.4 At the time of submission to technical inspection at the Vehicle Inspection Centre, the vehicle had a mileage of 45,328 kilometres.

6.5 The European Commission services released a statement on 26 February 2015 in which they announced they had instituted proceedings against Portugal in the CJEU due to the non-modification of the registration tax on used vehicles in accordance with EU legislation.

6.6 The Applicant, prior to the introduction into consumption of the vehicle with payment of taxes, had requested that this introduction be carried out with approval of a tax exemption under the residence transfer regime, a claim that was not granted due to non-compliance with legal requirements.

1. There are no facts given as not proven with relevance for the decision of the case.

Grounds for the facts proven

1. The facts were given as proven having regard to the documentary evidence and the elements brought to the case by the Applicant, embodied in the initial petition and the annexes accompanying it, and by the respondent in its respective response and in the administrative file.

V - LEGAL GROUNDS

1. Based on what is stated above, in order to assess the legality of the assessment made in respect of VT, it is necessary to find an answer to the following disputed questions of law:

a) Is the current Portuguese legislation embodied in article 11, no. 3 of the VTC in compliance with Community law, specifically with article 110 of the TFEU, applicable by virtue of article 8, no. 4 of the CPR, on international law;

b) What is the relevance of the years of use of the vehicle for the purposes of calculating the VT;

c) With the VT debt and the evaluation fee paid, in case of success of the challenge, is payment of indemnity interest due or not, and who bears the responsibility for payment of arbitral costs.

1. The legal issues raised in the case relate to the application of article 11 of the VTC, which is formulated in the following terms:

"Article 11

Rates – used vehicles

1 - The tax on vehicles bearing definitive Community licence plates assigned by other Member States of the European Union is subject to provisional assessment, based on the application of the reduction percentages provided in Table D to the tax resulting from the respective table, which are associated with the average social depreciation of vehicles in the national market, calculated with reference to the average commercial depreciation corrected by the respective environmental impact cost:

(Wording given by Law no. 55-A/2010 of 31 December)

TABLE D

2 - For the purposes of application of the preceding paragraph, the term "time of use" means the period elapsed from the assignment of the first licence plate and respective documents by the competent entity until the end of the deadline for submission of the vehicle customs declaration.

3 – Notwithstanding the provisional assessment made, whenever the taxpayer considers that the amount of tax calculated under no. 1 exceeds the tax calculated by the application of the formula below indicated, he may request from the customs director, upon prior payment of a fee to be set by ordinance of the government member responsible for the financial area, and until the end of the payment deadline referred to in no. 1 of article 27, that it be applied to the taxation of the vehicle, with a view to the final assessment of the tax.

VT = V

VR × (Y + C)

where

VT represents the amount of tax to be paid;

V represents the commercial value of the vehicle, on the basis of the average reference value indicated in specialized publications of the sector, presented by the interested party, weighted, through assessment of the vehicle, where justified, according to certain concrete factors, such as mileage, mechanical condition and conservation;

VR is the public sale price of an identical vehicle in the year of first registration of the vehicle to be taxed, as declared by the interested party, being considered as such the vehicle of the same make, model and type of propulsion, or, in the event that this is not available in available information, of a similar vehicle, introduced into the national market, in the same year in which the vehicle to be introduced into consumption was first registered;

Y represents the amount of tax calculated based on the cylinder capacity component, taking into account the table and the rate applicable to the vehicle, in force at the time of the tax charge;

C is the "environmental impact cost", applicable to vehicles subject to Table A, in force at the time of the tax charge, and whose value corresponds to the environmental component of the said table.

(Wording given by Law no. 55-A/2010, of 31 December)

4 - In the absence of a request for assessment made in accordance with the preceding paragraph, it is presumed that the taxpayer accepts as final the tax assessment made by application of the table contained in no. 1."

a) Compliance of article 11, no. 3 of the VTC with Community law.

LEGISLATIVE ANTECEDENTS

11.1 The issue underlying the legal controversy in this case is an issue that in domestic law was born practically with Portugal's accession to the EEC, initially in the way the Motor Vehicle Tax addressed it and later in the VT.

It is a matter concerning Portuguese legislation but also that of other countries that have taxes on automobiles with a nature similar to Portuguese tax, in which there is, first and foremost, a kind of registration or licence tax.

Over time, basically as a result of the activity of the European Commission, as guardian of the Treaties, through the issuance of so-called reasoned opinions, and of the Court of Justice through the delivery of its judgments, there have been legislative developments, of which a brief note is given.

11.2 Following Portugal's accession to the European Communities, initially a transitional period negotiated within the scope of Protocols no. 18 and 23 was in force.

After this period ended, the first decree to be published was Decree-Law no. 405/87, of 31 December, which repealed the IVVA and instituted a regime adapted to the conditions of free movement, established a taxation in which the tax to be paid was the result of a mere and immediate application of the Motor Vehicle Tax table of rates, making no distinction between rates applicable to new or used vehicles.

The said legislation ended up having short validity, since Decree-Law no. 152/89, of 10 May, came to repeal it and institute a system for calculating the tax on used vehicles in which the criterion of the age of vehicles began to have some relevance, still limited only to a 10% reduction of the rate tables applicable to new vehicles when the vehicles were more than two years old.

Decree-Law no. 262/91, of 26 July, took another step and extended the reduction to 15% when the vehicles were between two and three years of use.

With the publication of Decree-Law no. 40/93, of 18 February, a table of reductions by years of use was created, with four brackets, varying between 10 and 25%, depending on whether they had one to two years up to more than four years, a table that in the same year was amended to eight brackets, through Law no. 75/93, of 20 December, beginning to provide for reductions of 18% up to a maximum of 67%, depending on whether the vehicles had one to two years of use to more than eight years of use.

11.3 This legal framework for the admission of used vehicles remained in force until the publication of Law no. 85/2001, of 4 August, which made the first amendment to Law no. 30-C/2000, of 29 December, which had approved the 2001 Budget, date on which, alongside the maintenance of the validity of the said table, the so-called "alternative method" was created.

The taxation of the Motor Vehicle Tax began then to also be able to be done according to the commercial value of the vehicle to be admitted, having as reference the residual tax incorporated in similar vehicles already introduced into consumption.

Later, Law no. 32-B/2002, of 30 December, came to make flexible the reduction percentages of the Motor Vehicle Tax and the years of use taken into account, establishing different brackets between one year and more than ten years and reductions between 20% and 80% of the taxation of new vehicles.

11.4 This bracketing and this form of calculation of taxation were later to be altered by Law no. 64-A/2008, of 31 December, which reduced the brackets to five, with reduction percentages of 20% for vehicles with more than one to two years, 28% for more than two to three years, 35% for more than three to four years, 43% for more than four to five years and 52% for vehicles with more than five years, furthermore, in the calculation method, the proportion of commercial depreciation of the vehicle began to be weighted through a formula that added the cylinder capacity of the vehicle and the CO2 corresponding to the new vehicle.

Although the same bracketing was maintained, the calculation method was to undergo changes through Law no. 55-A/2010, of 31 December, the commercial depreciation being weighted through a factor resulting from the product of cylinder capacity with CO2, in the precise terms contained in the table, a situation that has been maintained.

11.5 Within the scope of the 2015 Budget, the Government presented Bill no. 418/2014, which aimed to restore the reductions by years of use on the same terms that had been in force under Law no. 32-B/2002, a proposal that, however, was not approved by the Parliament.

EVOLUTION OF CASE LAW

12.1 The legality of the Portuguese rules was initially questioned by the European Commission, which understood that the Portuguese rules did not observe article 95 of the Treaty of Rome and in order to lose the protectionist character it was necessary that its amount be identical to the remainder of the tax incorporated in the price of similar used vehicles sold within the Portuguese market, such remainder to be calculated from the percentage of depreciation of the value of those vehicles.

12.2 This issue came to be addressed some time later in the judgment of the CJEC, of 09.03.95, delivered in case C-345/93, in which Nunes Tadeu was the claimant.

As a preliminary ruling, the Supreme Administrative Court requested the interpretation of article 95 of the EEC Treaty and wished to know whether the collection by a Member State of a tax on used vehicles from another Member State, when no tax is levied on used vehicles purchased in national territory, was compatible with article 95.

There was a question of a used vehicle which, after having been imported and the respective tax paid, reimbursement of the respective tax was sought, based on the fact that the institution of that tax had the effect of making imported used vehicles more expensive and, consequently, favour the national market for used vehicles.

The CJEC came to declare that a rule that limits the reduction to 10% of the tax levied on new vehicles, without taking into account the actual depreciation of the vehicle, implies discriminatory taxation of imported used vehicles, having reaffirmed as its conclusion that "The collection by a Member State of a tax on used vehicles from another Member State is contrary to article 95 when the amount of the tax, calculated without taking into account the actual depreciation of the vehicle, exceeds the amount of the residual tax incorporated in the value of similar used motor vehicles already registered in national territory".

12.3 At the time of publication of the cited judgment, Portuguese legislation had already undergone modifications, through the Budget Law for 1994, a table having been created that set brackets of years of use, between one year and eight years or more and provided for reductions of the Motor Vehicle Tax between 18% and 67%, in order to respond to the requirements resulting from compliance with Community law.

Notwithstanding, internally, there continued to be complaints, with the Supreme Administrative Court (SAC), considering that the European Commission was the guardian of the Treaties, adopting a position of acceptance of a presumption of legality of national rules, for if the Commission saw no reason to institute infringement proceedings it was because domestic law complied with Community law, although there was already case law to the effect that the Commission did not have power to decide definitively through opinions and other position statements.

This position, it is thought, largely as a result of the judgment of 23.10.97, in the case that opposed the Commission to Greece, in which it was considered that there is a violation of article 95 whenever the imposition on the imported product and that which applies to the similar national product are calculated differently and according to different procedures that lead, even in certain cases, to higher imposition on the imported product than the national product, came to be altered, with the issue being raised before the Community court.

12.4 It is in this context that the judgment of the CJEC, of 22.02.01, Gomes Valente, delivered by way of preliminary ruling, appears, which created the conditions for finally breaking, at national level, with the classical framework of taxation of used vehicles, based exclusively on fixed reductions according to years of use.

On the substance of the issue, the CJEC, when assessing the need to conduct an individual assessment of each imported vehicle, pronounced itself to the effect that it was not inevitable to conduct such assessment, Member States being able, in order to avoid the burdens resulting from such a bureaucratic process, to fix, through forfeited tables determined by a legislative, regulatory or administrative provision and calculated on the basis of criteria such as age, mileage, general condition, type of propulsion, make or model of vehicle, a value for used vehicles that, in general, would be very close to the actual value. In drawing up these tables, the authorities of a Member State could refer to a file of average prices of used vehicles in the national market or to a list of average current prices used as a reference in the sector.

Although it was mentioned that the application of a table of rates for used vehicles based on a single depreciation criterion would not be contrary to article 95, it was stressed that it was important that other depreciation factors than age alone be taken into account, so as to ensure that the forfeited table more accurately reflected the actual depreciation of vehicles and made it easier to achieve the objective of taxation of used vehicles, in such terms that in no case could they exceed the amount of the residual tax rate incorporated in the value of used vehicles already registered in national territory.

It was likewise noted that the direct effect of article 95 implied that an individual could contest the compatibility in light of this provision of national regulation establishing the criteria or legal tables that were applied to calculate the rate on an imported used vehicle, and it was necessary that they be public knowledge, recalling in this regard the judgment of the Court of Justice of 16 June 1966, delivered in the Lutticke case.

12.5 This case law came to be reinforced with the judgment of the CJEC delivered on 19 September 2002, (101/00) in a case that then involved the Finnish Government and Antti Sillin.

The Finnish tax system, with similarities to the Portuguese tax system, taxed used vehicles up to the first six months after registration or entry into service of the vehicle in the same way it taxed a similar new vehicle and, between the 7th and 150th month of use of the vehicle, taxed in the same way as a similar vehicle, reducing the tax linearly at the rate of 0.5% per calendar month.

In the judgment, it was considered that article 95, first paragraph of the EC Treaty (which, after amendment, became article 90, first paragraph) allows a Member State to apply to used vehicles imported from another Member State a taxation system in which the taxable value is determined by reference to the customs value as defined by the applicable CAC and DACAC, but prevents the taxable value from varying depending on the stage of commercialisation when this could result, at least in certain cases, in the amount of tax on an imported used vehicle exceeding the amount of the residual tax incorporated in the value of a similar used vehicle already registered in national territory.

On the other hand, article 95, first paragraph, of the Treaty opposes a Member State applying to used vehicles imported from another Member State a taxation system in which the tax on those vehicles does not take into account the actual depreciation of the vehicle and does not allow ensuring, always, that the amount of tax it sets does not exceed the amount of the residual tax incorporated in the value of a similar used vehicle already registered in national territory.

Furthermore, it considered that when a Member State applies to used vehicles imported from other Member States a taxation system in which the actual depreciation of vehicles is defined in general and abstract terms on the basis of criteria determined by national law, article 95, first paragraph, of the Treaty requires that this taxation system be organised in such a way as to exclude, taking into account the reasonable approximations inherent in such a system, any discriminatory effect whatsoever. This requirement presupposes, on the one hand, the publicity of the criteria on which the method of calculation of the forfeit depreciation of vehicles is based and, on the other, the possibility for the owner of a used vehicle imported from another Member State to challenge the application of a method of forfeit calculation to that vehicle, which may lead to the need to examine its own characteristics in order to ascertain that the tax applied to it is not higher than the residual tax incorporated in the value of a similar used vehicle already registered in national territory.

12.6 In 2006, within the scope of the Hungarian taxation system, in the judgment of the CJEU of 5 October 2006 (C-295/05), in the Nadasdi case, the environmental issue was examined for the first time in relation to motor vehicle taxes.

The said system ignored the depreciation of the vehicle and treated equally all vehicles that had the same engine type and environmental behaviour. Currently there is a concern of the EU for environmental protection, with explicit provision in article 191 of the Treaty.

The judgment considered that "notwithstanding the environmental character of the objective and basis of the motor vehicle tax and even if these have no relationship with the market value of the vehicle, article 90, first paragraph EC, requires that account be taken of the depreciation of used vehicles which are subject to taxation, given that such taxes are characterised by being levied only once upon first registration of the vehicle for the purpose of its use in the Member State in question and being thus incorporated in the said value".

Furthermore, it considered that Member States have freedom to select the criteria to use in calculating the tax and to establish a differentiated taxation system for certain products, even if similar in the sense of article 110, first paragraph, based on objective criteria such as the nature of the raw materials used or the production processes applied. However, such differentiations will only be considered compatible with EU law if, on the one hand, they pursue objectives also compatible with the requirements of the Treaty and secondary law and, if on the other, the forms they take are such as to avoid any form of discrimination, direct or indirect, of "imports" from other Member States, or of protection in favour of competing national productions.

Within a system relating to motor vehicle taxation, criteria such as the type of engine, cylinder capacity and a classification based on environmental factors constitute objective criteria and thus can be used in such a taxation system; however, these cannot result in discrimination and the said tax cannot burden more products from other Member States than similar national products, implying that the collection by a Member State of a tax on used vehicles from another Member State is contrary to article 110 when the amount of the tax, calculated without taking into account the actual depreciation of the vehicle, exceeds the amount of the residual tax incorporated in the value of similar motor vehicles already registered in national territory.

12.7 Some time later, interpreting the same article 110, the CJEU, in the judgment of 19 March 2009, which opposed the Commission to Finland, considered that this article aims to ensure perfect neutrality of internal taxation as regards competition between products already in the national market and imported products, in a way that cannot in any case have discriminatory effects.

12.8 The judgment of the CJEU no. C – 200/15, of 16 June 2016, directly targeting Portuguese legislation, embodied in article 11, no. 3 of the VTC, came to consider that the Portuguese Republic, in applying, for the purpose of determining the taxable value of used vehicles from another Member State, introduced into national territory, a system relating to the calculation of the depreciation of vehicles that does not take into account its depreciation before reaching one year, nor the depreciation that is greater than 52% in the case of vehicles with more than five years, did not fulfill the obligations incumbent on it by virtue of article 110 of the TFEU.

CONSEQUENCES OF THE GOMES VALENTE JUDGMENT

13.1 The judgment of the CJEC delivered in the Gomes Valente case ended up reversing the direction of national case law, and in addition legislatively opened the door to a new form of taxation of used vehicles admitted from other Member States.

13.2 Thus, in the said national appeal, the Supreme Administrative Court concluded that national law was not in compliance with article 95, so that no national authority, administrative or judicial, could apply national law, which should be disapplied, and in its place, article 95 of the Treaty should be applied directly, since the reduction of the Motor Vehicle Tax should be directly proportional to the loss of value of the vehicle. For this purpose, it considered that when a law was applied that violated Community law, the customs authority incurred in a defect of violation of law by error in the legal presuppositions, as it started from the assumption that national law was valid, when it was invalid for violating norms of higher hierarchy, taking into account the principle of primacy of Community law over national law and the direct applicability, in this case, of Community law.

It would not matter to verify whether the tax calculated, in the specific case, by the impugned assessment action, had been or had not been superior to the residual tax incorporated in similar used vehicles already registered in Portugal, as regardless of the concrete result in the case being considered, national norms could not be applied by being non-compliant with Community law, if they did not guarantee that never, in no case, regardless of what occurred, the tax resulting from their application would be superior to the residual tax incorporated in similar used vehicles registered in Portugal.

13.3 In legislative terms, the way the Portuguese State complied with the Gomes Valente judgment was through the use of a supplementary budget of the 2001 Budget, to, through Law no. 85/2001, of 4 August, add provisions to Decree-Law no. 40/93, providing for the option for vehicle owners to request the use of an alternative method, based on the commercial value of the vehicle, to be determined by expert commissions, in which the tax to be paid would be equal to the residual Motor Vehicle Tax incorporated in vehicles of the same make, model and type of propulsion or, failing this, of identical or similar vehicles, introduced into consumption in Portugal in the same year as the date of assignment of the first registration, instead of the pure application of the reduction table.

These expert commissions were tripartite, having a representative of the then existing Tax and Customs Directorate, today integrated into the TCA, a representative of the Vehicle Directorate, and the vehicle owner or their representative.

The procedure instituted proved to be bureaucratic and slow, given that the customs authorities, although they have always worked with the value of goods, did not have the capacity to respond to the numerous requests nor were they prepared for such specific work as that relating to the value of vehicles in the national market.

13.4 The implementation of the alternative method (which succeeded the expert commissions) came to prove more in keeping with the act to which the vehicle was subjected, that is assessment, based on the commercial value of the vehicle, in which the tax to be paid was equal to the residual Motor Vehicle Tax incorporated in vehicles of the same make, model and type of propulsion or, failing this, of identical or similar vehicles, introduced into consumption in Portugal in the same year as the date of assignment of the first registration.

LEGAL ASSESSMENT

14.1 The Applicant argues that in cases of introduction into national territory of used vehicles already bearing definitive licence plates assigned by another Member State of the European Union (EU), the assessment is governed by the extraordinary legal regime set out in article 11 of the VTC, but, strictly speaking, this is not true.

The taxation regime for used automobiles is an ordinary regime, as ordinary is the regime applicable to the admission of new vehicles, simply adapted to the circumstances. It would not make sense to tax used vehicles on the same terms as new vehicles are taxed, although for some time this did occur, so it was necessary that for what is different a different taxation system was created, without this meaning it is extraordinary.

14.2 Given that in accordance with article 8 of the Constitution of the Portuguese Republic (CPR), international law takes precedence over Portuguese Internal Law and is directly applicable within national territory, without developing any grounds, it echoes a communication from the European Commission in which it is informed that it has instituted proceedings against Portugal in the CJEU.

According to the said communication, article 11 is censurable for not accounting in the calculation of the VT on used vehicles for any depreciation until the vehicle has more than one year of use, nor is any reduction of the actual value considered for vehicles with more than five years of use;

14.3 Article 8, no. 4 of the CPR, on international law, establishes that "The provisions of the treaties governing the EU and the norms issued by its institutions, in the exercise of their respective competencies, are applicable in the internal order, in accordance with the terms defined by European Union law, with respect for the fundamental principles of the democratic rule of law."

For its part, article 110 of the TFEU provides that "No Member State shall impose, directly or indirectly, on the products of other Member States, any internal taxation of any kind in excess of that imposed directly or indirectly on similar national products".

On the interpretation of this article in relation to national laws, the CJEU has already pronounced itself several times, specifying its scope, given that, contrary to other areas of taxation, such as tobacco, alcohol or mineral oils, at which Community level there is formal harmonisation of rates, exemptions and procedures, the admission into national markets of motor vehicles bearing a definitive licence plate from other Member States, that is used vehicles, is governed exclusively by national law, although such law cannot be contrary to the principles on which the functioning of the EU is based.

For this reason, within the discretionary power that the national legislator has to model the tax in order to proceed with its collection in an executable and effective manner, it is necessary to take into account, in addition to the opinion of the Commission, as the entity responsible for ensuring respect for the Treaty, the case law produced by the Community.

14.4 Portuguese legislation, after having respected, in essence, for more than seven years, the case law that came to be produced on this issue of admission of used vehicles, whether through the flexibility of years of use or through alternative taxation solutions, apparently, in recent years has moved away from this course.

In effect, it is more or less evident that the legislator abstracted itself from the concrete and real fact of experience of life, that greater age of a vehicle implies, almost always, a more pronounced depreciation of the value of the vehicle, in taxing through the formula vehicles of the same make, model, cylinder capacity and CO2, equally, regardless of one having, for example, five years and one day of age and another having, for example, twenty years of age.

Only in specific situations, such as when vehicles belonged to some celebrity, participated in certain events, were the subject of very limited series productions, are considered historic vehicles or had owners who gave them great appreciation, is this rule broken, as the value of goods is regulated by price, and that price is so much lower as the lower the prospect of the vehicle being able to be used because it is closer to the standards that define the end of useful life, which is also not identical for all vehicles.

Now the current contours of national legislation ignore in their table this factor for vehicles with more than five years, treating them indifferently, a situation that may have motivated the Commission in its quest for Community justice.

The same applies to the fact that the reduction table does not provide for any percentage for vehicles that have up to one year of age.

It is a matter of public knowledge and notoriety that a vehicle registered as soon as it passes through the exit door of the dealership to be delivered to a buyer automatically suffers a depreciation of its market value, which in many cases can reach 20%.

During that one year period, a vehicle introduced into the national market may have been intensively used, traveling two or three times the normal average of kilometers per year and may have been used in activities of greater wear, such as car rentals, rent without a driver, etc., suffering pronounced commercial depreciation, while a vehicle from another Member State that presents itself to be registered may present itself in impeccable condition.

Table D of article 11, no. 1 of the VTC in providing for a depreciation percentage of the vehicle of 20%, only after one year, obviously does not follow the actual and effective depreciation of the vehicle in the market, so it seems not to observe Community case law.

14.5 That is precisely what was acknowledged by the judgment of the CJEC no. 200/2015, of 16 June, which opposed the Commission to the Portuguese Republic.

In the said judgment it is mentioned that the Commission requests in the petendum of the petition that it be declared that the Portuguese Republic failed to fulfill the duties incumbent on it by virtue of article 110 of the TFEU in applying for the purpose of determining the taxable value of used vehicles from other Member States introduced into national territory in the sense of calculating the depreciation of these vehicles "that does not take into account the actual value of the vehicle and, in particular, that does not take into account the depreciation before the vehicle reaches one year, nor any further depreciation in the case of vehicles with more than five years".

The judgment states "In this respect, although the Commission uses the expression "in particular", it follows from the body of its petition that the Commission in fact formulates two accusations, namely, on the one hand, for the purpose of calculating the tax on the vehicles in question, the failure to take into account the depreciation of motor vehicles used for less than one year and, on the other, the determination of a maximum limit of 52% of the depreciation of motor vehicles used for more than five years. In these circumstances, it should be understood that the action brought by the Commission covers these two accusations."

Apparently, the Commission will have formulated a broader accusation, that is also vehicles with more than one year of use and less than five years of use may be subject to depreciation that does not take into account the actual value of the vehicle, but the fact is that the CJEC, interpreting the term "in particular" restricted knowledge to only two concrete situations of vehicle age, those with less than one year and those with more than five years, which were more or less obvious and notorious. As to the other situations in the table, "that does not take into account the actual value of the vehicle" the Commission substantiated nothing so the Court felt obliged to take no knowledge.

14.6 The Applicant, in the present case, raised the issue solely on the presupposition that the vehicle whose assessment it was challenging was a vehicle with an age of up to one year and covered by the Commission's accusation disseminated in a statement, having invoked as grounds the case law of the Gomes Valente judgment.

The respondent also bases its position on the said judgment.

It asserts that the Portuguese State has adopted a mixed system based on the two models, namely a table applicable, as a rule, to the majority of used vehicles from another Member State or to the assessment of each admitted vehicle, applicable to vehicles not specified in the table, whenever the taxpayer manifests preference for the taxation of vehicles in accordance with the assessment resulting from the application of the formula provided in no. 3, the argument being unfounded that reduction only exists after one year of use, given that the mixed taxation model is not limited to the application of the fixed reductions established in Table D, because whenever the interested party considers that the taxation made based on Table D prejudices it, it can request the taxation of the vehicle in accordance with the assessment made regardless of years of use.

15.1 This Arbitral Tribunal understands that the CJEC, in pronouncing itself as it did, did not call into question the VT reduction percentages contained in the various brackets of age in the Table, for vehicles of one year to five years. There is a presumption of legality in the percentages mentioned in the said table that only comes into question if it is substantively challenged, which does not occur in the present case.

The illegality acknowledged by the CJEC is confined only to vehicles with up to one year of age and vehicles with more than five years and not to the entire Table D.

Thus, insofar as it is not proven in the case that the presupposition of the age of the vehicle is that of a vehicle up to one year, the same is not covered by the consequences of the judgment that declares the illegality of the omission of VT reduction on vehicles with up to one year of age, so there is no justification that any preliminary ruling question be submitted to the CJEU, in the terms in which it is formulated.

15.2 The respondent mentions that the wording of article 11 follows from the case law of the CJEU and specifically from the Judgment delivered in case 393/98, the so-called Gomes Valente judgment, resulting from this case law that in order for a system of taxation of used vehicles to be compatible with article 110 of the TFEU, it is necessary to adopt either a taxation model based on the assessment of each vehicle or a taxation model based on fixed tables that excludes any discriminatory effect whatsoever, hence the Portuguese State has adopted a mixed system based on the two models, namely a table applicable, as a rule, to the majority of used vehicles from another Member State or to the assessment of each admitted vehicle, applicable to vehicles not specified in the table, whenever the taxpayer manifests preference for the taxation of vehicles in accordance with the assessment resulting from the application of the formula provided in no. 3.

It should be noted that following the said case law, a wording was indeed adopted within the scope of the former Motor Vehicle Tax which came to be transposed in substantially equal terms to the VTC in the mentioned article 11, but it cannot be ignored that already within the validity of this code, the legislator through Law no. 55-A/2010, of 31 December, indeed mitigating a previous amendment made by Law no. 64-A/2008, of 31 December, introduced important changes in the construction of the tax, namely due to the effects projected by the environmental factor in its calculation and in its correlation with the actual value of vehicles, the legality of which is not under scrutiny.

In fact, the respondent, in the submissions, when highlighting the legal framework of the issue submitted to the CJEU, made mention and transcribed a Table D with reduction percentages from six months to ten years, but that table, which was transposed from the Motor Vehicle Tax to the VTC, was never called into question by the European Commission. Only the subsequent amendments made to it earned criticism, and these amendments were the subject of judgment.

THE EVALUATION FEE

1. Those who resort to the method of assessment of admitted used vehicles are obliged to pay a fee for the service provided, initially created by Ordinance no. 44/2011, of 26 January, and updated by Ordinance 297/2013, of 4 October.

As Sérgio Vasques states, in Manual of Tax Law, Almedina 2011, page 207, the existence of any fee has a bilateral or synallagmatic structure, in the sense that it has underlying a constitutive fact of that obligation, whether because it corresponds to the provision of a public service, the use of assets of the public domain or the removal of a legal limit to the activity of individuals, that is they are based "on the fact that they are required on the occasion and as a function of a public provision, aiming to remunerate the individualized benefit that the taxpayer derives from it".

The Applicant merely requests the restitution of the payment of the fee, as a mere corollary of the success of the request for annulment of the VT, not assailing any defect in the system of fees nor in the particular fee applied.

Insofar as the request for annulment is not successful and the assessment resulting from the said assessment process is in compliance with the internal and Community legal order, the system of fees functioned instrumentally correctly, and the fee paid, without regard to the reasons why it was only examination of documents and not also inspection of the vehicle, assumed a legal form that is considered unassailable.

Hence, it is concluded that the request for restitution of the evaluation fee paid is rejected.

b) Relevance of the years of use of the vehicle for the purposes of calculating the VT;

In accordance with article 11, no. 2 of the VTC, for the purpose of calculating the age of the vehicle, the term "time of use" means the period elapsed from the assignment of the first licence plate and respective documents by the competent entity until the end of the deadline for submission of the vehicle customs declaration.

The importance of the determination of the years of use of the vehicle is related to the fact that a vehicle from the moment it has a licence plate becomes qualified to be able to legally circulate on public roads and potentially in use. By nature it automatically begins to suffer commercial depreciation, not only that resulting from the mere exit from the dealership, inherent to the loss of the intrinsic commercial margin, but also that corresponding to the greater or lesser mileage traveled, the subjection to adverse climatic conditions or use in activities of intensive use and great wear, deficient use by drivers, etc.

For this reason, it does not matter whether it is a provisional or definitive licence plate, but simply that it has one.

It is equally irrelevant that over periods of time its validity may have been interrupted, whether due to non-payment of any fees due or interruptions as a result of temporary absences, immobilisations due to accidents or others.

In the specific case, the vehicle having had its first registration on 30 October 2013, the period of antiquity of the vehicle is counted from that moment and runs until the moment the deadline for submission of the vehicle customs declaration ends.

It may be questioned whether the deadline for counting the antiquity of the vehicle should not rather be the date of submission of the Vehicle Customs Declaration and not the date on which the deadline for that submission ends, it being certain that between the two dates there may elapse a period of 20 days, capable of generating a different reduction by years of use, depending on whether another year is reached or not, but for the specific case, in which the age is one year and eight months, the question does not even arise.

Contrary to what was stated by the Applicant, changes in vehicle ownership do not interfere with the running of the period of antiquity, being irrelevant that the vehicle was purchased as new or was purchased with the sole purpose of being admitted into national territory. The invoice issued by a BMW dealer does not state that the vehicle is new and is also silent as to the kilometers it had at the date of sale, but regardless of that information, what matters is the date on which it was first registered, and this is evident from the documentation presented to support the request.

Thus, it is to be concluded that the vehicle presented itself to the customs services in conditions to have a provisional assessment that took into account a 20% reduction in relation to the taxation of a new vehicle.

By opting for the assessment method, the age continued to have relevance, given that one of the factors - the VR, is that the public sale price of an identical vehicle is calculated by reference to the year of first registration of the vehicle to be taxed, as declared by the interested party, although the reference is to the year of first registration and not to the specific month in which the vehicle was registered, and small differences in price may occur.

In these terms, and as previously noted in the preceding subparagraph, the presupposition of years of use of the vehicle has relevance in the precise measure in which the Applicant based the challenge on a factual data that did not occur, and for all purposes the vehicle should be considered with an age of one year and eight months corresponding to the bracket of one to two years of age.

c) Right to payment of indemnity interest and responsibility for payment of arbitral costs.

17.1 Insofar as the request for annulment of the VT assessment and the evaluation fee assessment is not successful, the request for recognition of the right to payment of indemnity interest made by the Applicant is equally not successful.

17.2 As regards arbitral costs, account must be taken of the provisions of articles 22, no. 4 of the LRAT, and 4, no. 4 of the Rules of Costs in Tax Arbitration Proceedings (RCTAP), in accordance with which, the arbitral decision contains the fixing of the amount and the apportionment among the parties of the costs directly resulting from the arbitral proceedings.

Insofar as the respondent obtained success in the defence of the legality of the act performed, it falls to the Applicant, as the unsuccessful party, to bear the respective costs.

DECISION

For these reasons, this Sole Arbitral Tribunal judges as follows:

a) To maintain in the legal order the impugned assessment act, as the said assessment carried out under article 11, nos 1, 3 and 4 with reference to article 7, no. 1 of the VTC, approved by Law no. 22-A/2007, of 29 July, in the wording given by Law no. 55-A/2010, of 31 December, given the years of use of the vehicle, enjoys a presumption of legality from which it is not in non-compliance with Community law, specifically with article 110 of the TFEU, applicable by virtue of article 8, no. 4 of the CPR.

b) To maintain in the legal order the assessment of the evaluation fee, as the same, carried out under article 11, no. 3 of the VTC, approved by Law no. 22-A/2007, of 29 July, with reference to Ordinance no. 44/2011, of 26 January, updated by Ordinance no. 1297/2013, of 4 October, has been the support for the performance of a legal act and has not been alleged or proved to be non-compliant with internal and Community law.

c) Consequently, to reject the request for restitution of the amounts paid in respect of VT and evaluation fee as well as the corresponding request for payment of indemnity interest made by the Applicant.

d) To condemn the Applicant to payment of the respective arbitral costs.

In accordance with article 32 of the Code of Administrative Court Proceedings, applicable by virtue of article 29, no. 1, subparagraphs a) and b) of the LRAT and article 3, no. 2 of the RCTAP, the value of the case is fixed at €5,455.18 (five thousand four hundred and fifty-five euros and eighteen cents).

In accordance with Table I attached to the RCTAP, applicable by reference of its article 4, no. 1, the costs are fixed at €612 (six hundred and twelve euros), to be paid by the Applicant.

Notify the parties.

Lisbon, 5 July 2016.

The Sole Arbitrator

António Manuel Melo Gonçalves

(The text of this decision was drawn up on a computer, in accordance with article 131, no. 5 of the New Code of Civil Procedure, applicable by reference of article 29, no. 1, subparagraph e) of the LRAT, with its wording governed by current orthography).