IUC Tax Liability After Vehicle Sale: Subjective Incidence and Legal Presumptions (CAAD 571/2015-T)

ARBITRAL DECISION

1 STATEMENT OF CASE

1.1

A..., with NIF:..., Claimant in the above-referenced tax procedure, hereinafter referred to as "Applicant", came, invoking the provisions of articles 2, no. 1, paragraph a) and 10 of Decree-Law no. 10/2011, of 20 January (hereinafter RJAT) and article 99 of the Code of Tax Procedure and Process (CPPT) and articles 1 and 2, paragraph d) of article 95 of the General Tax Law (LGT), to request the constitution of a Singular Arbitral Tribunal, in order to:

• The annulment of a liquidation act relating to the Single Vehicle Circulation Tax (hereinafter designated by Applicant), corresponding to the years 2013 and 2014, concerning the vehicle with the registration number: ...-...-... (see evidence documents, attached to the proceedings and which are fully reproduced for all legal purposes).

• The reimbursement of the total amount of € 500.00 plus the respective compensatory interest provided for in articles 43 of the LGT and article 61 of the CPPT.

1.2

Pursuant to the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as sole arbitrator Maria de Fátima Alves, who communicated acceptance of the assignment, within the applicable period:

• On 03-11-2015 the parties were duly notified of this appointment, and did not express any wish to refuse the designation of the arbitrator, pursuant to the combined provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code,

• Therefore, the arbitral tribunal was constituted on 17-11-2015, as provided for in paragraph c) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20 January, in the wording introduced by article 228 of Law 66-B/2012, of 31 December;

• Before the Response of the Respondent (AT), on 05-01-2016, the Arbitral Tribunal issued an Order on 13-01-2016, to the effect that the hearing provided for under article 18 of the RJAT be dispensed with;

• Consequently, the rendering of the Arbitral Decision was set for 25-01-2016.

1.3

The Applicant, in substantiation of its request for arbitral decision, states, in summary, the following:

• The vehicle to which the single vehicle circulation tax assessed relates was not, at the date of the taxable event, the property of the Applicant, the same not being subject to the obligation to pay the tax, which prevents any objective liability for its payment;

• The Applicant bases its position on the fact that the motor vehicle taxed had already been sold to "Company B... of C..., Ltd." in 2006 (see the description in the attachment/levy records at PEF...T, as the said Company was declared insolvent - no. .../06.TBBRG which proceeded in the ... Civil Court of the Judicial Court of Braga), evidence documents attached to the proceedings and which are fully reproduced for all legal purposes;

• Therefore, the property of the said vehicle cannot be imputed to the Applicant, since with the act of sale, the transfer of said property to the current owner took place;

• Given that, with the transfer of the vehicle, the same ceased to be in its possession, which removes from it the figure of "polluter/payer", and therefore cannot be the obligated party to the tax, according to the letter and spirit of article 3 of the Code of the Single Vehicle Circulation Tax;

• It is a fact that article 3 of the CIUC considers the ownership of the motor vehicle to be the person in whose name the same is registered;

• However, the registration of vehicles in the competent Automotive Registry Office is not a condition of transfer of ownership, since such registration aims only to give publicity to the legal situation of the goods, as results, in particular, from the provisions of article no. 1 of Decree-Law no. 54/75, of 12 February;

• Therefore, taxation relating to CIUC cannot only focus on those listed in the registry as vehicle owners; the actual owners must be considered, through a rebuttable presumption.

1.4

The Respondent, the Tax Authority and Customs (hereinafter referred to as AT), proceeded to attach the Administrative Tax Process and submitted a Response, from which it is apparent that the tax act in question does not suffer from any defect of violation of Law, pronouncing itself on the lack of merit of the claim and the maintenance of the questioned liquidation act, arguing, summarily, the following:

• The obligated parties of the single vehicle circulation tax are the persons who appear in the registry as vehicle owners, as provided for in no. 1 of article 3 of the CIUC, which in the case sub judice applies to the Applicant;

• For this purpose, it is necessary that the registration of the vehicle be in the name of a determined person for that person to corporize the position of obligated party to the IUC tax obligation;

• That notoriously the interpretation that the Applicant makes of the provisions of article 3 of the CIUC is incorrect, insofar as it incurs in a "distorted interpretation of the letter of the law" and in the adoption "of an interpretation that does not heed the systematic element, aiming at the unity of the regime enshrined in all of the CIUC and, more broadly, throughout the entire legal-tax system", with the Applicant also following an "interpretation that ignores the ratio of the regime enshrined in the article in question and, likewise in all of the CIUC".

2 ISSUES FOR DETERMINATION

2.1

In light of the above, relative to the written submissions of the parties and the arguments presented, the main issues to be determined are as follows:

• The challenge made by the Applicant relating to the substantive assessment of the liquidation act, for the years 2013 and 2014, concerning the IUC on the vehicle referenced above in the Statement of Case;

• The incorrect interpretation and application of the rules on subjective scope of the single vehicle circulation tax assessed and collected, which constitutes the central issue to be determined in the present process;

• The legal value of the registration of the motor vehicle.

3 FINDINGS OF FACT

3.1

As a matter of fact, relevant for the decision to be rendered, this Tribunal considers as established, based on the evidence in the proceedings, the following facts:

• The Applicant presented evidence documents of the motor vehicle in question, corresponding to the period prior to the taxation period – see evidence documents, "PEF...T", attached to the Hierarchical Appeal (contained in the proceedings) which are fully reproduced for all legal purposes.

3.1.1 JUSTIFICATION OF PROVEN FACTS

• The facts established as proven are based on the attachment/levy records at PEF...T, which proves that the vehicle, in the case at hand, was transferred to third parties, at a date prior to the assessment of the IUC, see the evidence documents, contained in the Administrative Process and Statement of Case, which are fully reproduced for all legal purposes.

3.1.2 UNPROVEN FACTS

• There are no facts established as unproven, given that all facts deemed relevant to the assessment of the claim were proven.

4 LEGAL FOUNDATIONS

4.1

The Tribunal is materially competent and is regularly constituted, pursuant to the provisions of articles 2, no. 1, paragraph a), 5, no. 2, paragraph a), 6, no. 1, 10, no. 1, paragraph a) and no. 2 of the RJAT:

• The parties enjoy legal personality and capacity and are legitimately parties, by virtue of articles 4 and 10, no. 2, of the RJAT and article no. 1 of Ordinance no. 112-A/2011, of 22 March;

• The process does not suffer from any nullities;

• There are no preliminary questions on which the Tribunal should pronounce itself.

4.2

The claim, object of the present process, is the declaration of annulment of the acts of assessment of the IUC relating to the motor vehicle better identified in the process.

4.2.1

Condemnation of the AT to reimburse the amount of tax relating to such assessment in the amount of € 500.00;

4.2.2

Condemnation of the AT to payment of compensatory interest on the same amount.

4.3

According to the understanding of the AT, it is sufficient that in the registry the vehicle appears as property of a determined person, for that person to be the obligated party to the tax obligation.

4.4

The matter of fact is fixed, as stated in no. 3.1 above, and it is now important to determine the applicable law to the underlying facts, in accordance with the issues for determination identified in no. 2.1 above, and it is certain that the central issue in the present proceedings, regarding which there are absolutely opposing understandings between the Applicant and the AT, consists in knowing whether or not no. 1 of article 3 of the CIUC relating to the subjective scope of the single vehicle circulation tax establishes a rebuttable presumption.

4.5

All analyzed and, taking into account, on the one hand, the positions of the parties in confrontation, mentioned in points 1.3 and 1.4 above and, considering, on the other hand, that the central issue to be determined is whether or not no. 1 of article 3 of the CIUC establishes a legal presumption of tax scope, it is necessary, in this context, to evaluate and render a decision.

5 QUESTION OF INCORRECT INTERPRETATION AND APPLICATION OF THE RULE ON SUBJECTIVE SCOPE OF THE IUC

5.1

Considering it to be undisputed in doctrine that in the interpretation of tax laws the general principles of interpretation apply fully, which will be, only and naturally, limited by the exceptions and particularities dictated by the law itself, subject to interpretation. This is an understanding that has been embraced in the General Tax Laws of other countries and which has also found its place in article 11 of our General Tax Law, which has, moreover, been frequently emphasized by jurisprudence.

It is consensually accepted that, in order to grasp the meaning of the law, interpretation resorts, a priori, to reconstructing the legislative intent through the words of the law, which means seeking its literal meaning, valuing it and assessing it in light of other criteria, with the so-called elements of a logical, rational or teleological nature and of a systematic order intervening:

• With regard to the interpretation of tax law, the jurisprudence must be considered, namely, the Judgments of the STA of 05-09-2012, case no. 0314/12 and of 06-02-2013, case 01000/12, available at www.dgsi.pt, the importance of the provision in article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

• Article no. 1 of article 3 of the CIUC provides that "The obligated parties to the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered";

• The formulation used in the said article resorts to the expression "being considered" which raises the question of whether such expression can be given a presumptive meaning, being equated with the expression "presumed", which are expressions frequently used with equivalent meanings;

• As Jorge Lopes de Sousa teaches, in Code of Tax Procedure and Process, Annotated and Commented, volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in the matter of tax scope, presumptions can be revealed by the expression "it is presumed" or by a similar expression, mentioning various examples of such presumptions, referring to the one contained in article 40, no. 1 of the CIRS, where the expression "it is presumed" is used and the one contained in article 46, no. 2, of the same Code, where the expression "is considered" is used, as an expression with an effect similar to that one and also embodying a presumption;

• In the legal formulation expressed in no. 1 of article 3 of the CIUC, a presumption was established, revealed by the expression "being considered", of meaning similar and of equivalent value to the expression "being presumed", in use since the creation of the tax in question;

• The use of the expression "being considered" aimed at nothing more than establishing a more marked and clear approximation between the obligated party of the IUC and the effective owner of the vehicle, which is in line with the strengthening conferred on vehicle ownership, which came to constitute the taxable event, in accordance with article 6 of the CIUC;

• The relevance and the interest of the presumption in question, which historically was revealed through the expression "being presumed" and which now resorts to the expression "being considered", resides in the truth and justice that, by this means, is conferred to tax relations and that embody fundamental tax values, allowing to tax the real and effective owner and not the one who, by circumstances of a different nature, sometimes passes for nothing more than an apparent and false owner. If the case were not considered in this way, not allowing and weighing the presentation of evidence elements intended to demonstrate that the effective owner is, after all, a person different from the one registered and who initially, and in principle, was supposed to be the true owner, those values would be objectively set aside.

5.2

The principle of equivalence, inscribed in article 1 of the CIUC, which underlies the principle of the polluter-payer and concretizes the idea contained therein that whoever pollutes should, for that reason, pay, must also be considered. The said principle has constitutional basis, insofar as it represents a corollary of the provision in paragraph h) of no. 2 of article 66 of the Constitution, and has also basis in Community law, both at the level of primary law, article 130-R of the Maastricht Treaty (Treaty on European Union, of 07-02-1992), where the said principle came to be included as support for Community Policy in the environmental field and which aims to hold responsible those who contribute to the damage arising to the community, resulting from the use of motor vehicles, to be assumed by their owners-users, as costs that only they should bear.

5.3

Given the facts described above, it is important to note that the aforementioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, whether those relating to logical elements of interpretation, of a historical or rational nature, all point in the direction that the expression "being considered" has a meaning equivalent to the expression "being presumed", and therefore it should be understood that the provision in no. 1 of article 3 of the CIUC establishes a legal presumption which, in light of article 73 of the LGT, where it is established that "Presumptions enshrined in tax scope norms always admit contrary evidence", will necessarily be rebuttable, which means that the obligated parties are, in principle, the persons in whose name such vehicles are registered. It will therefore be these persons, identified in these conditions to whom the AT must necessarily address itself;

• But it will be, in principle, given that within the scope of prior hearing, of a mandatory character, in view of the provision in paragraph a) of no. 1 of article 60 of the LGT, the tax relation may be reconfigured, validating the initially identified obligated party or redirecting the procedure towards the one who is, after all, the true and effective obligated party to the tax in question.

• The taxpayer has the right to be heard, through prior hearing (José Manuel Santos Botelho, Américo Pires Esteves and José Cândido de Pinho, in Administrative Procedure Code, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 of article 100).

• The prior hearing which, naturally, must take place at the moment immediately preceding the assessment procedure, corresponds to the proper seat and time to, with certainty and security, identify the obligated party of the IUC.

6 ON THE LEGAL VALUE OF THE REGISTRATION

6.1

Regarding the legal value of the registration, it is important to note what is established in no. 1 of article 1 of Decree-Law no. 54/75, of 12 February (amended several times, the last being by Law no. 39/2008, of 11 August), when it states that "the registration of vehicles is essentially intended to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce":

• Article 7 of the Property Registry Code (CRP), applicable, subsidiarily, to the registration of motor vehicles, by virtue of article 29 of the CRA, provides that "The definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it";

• The definitive registration is nothing more than a rebuttable presumption, admitting, therefore, contrary evidence, as follows from the law and jurisprudence has pointed out, which can be seen, among others, in the Judgments of the STJ no. 03B4369 of 19-02-2004 and no. 07B4528, of 29-01-2008, available at: www.dgsi.pt;

• Therefore, the function legally reserved to registration is on the one hand to publicize the legal situation of the goods, in the case at hand, of vehicles and, on the other hand, allows us to presume that there exists the right over those vehicles and that the same belongs to the holder, as such registered in the registry, it does not have a constitutive nature of the right of ownership, but only declarative, hence registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer;

• The acquirers of vehicles become owners of those same vehicles through the celebration of the corresponding purchase and sale contracts, with or without registration;

• In this context it is important to recall that, in light of the provision in no. 1 of article 408 of the CC, the transfer of real rights over things, in the case sub judice, motor vehicle, is determined by the mere effect of the contract, and in accordance with the provision in paragraph a) of article 879 of the CC, among the essential effects of the purchase and sale contract, stands out the transmission of the thing;

• In view of the foregoing, it becomes clear that the legislative intent points in the direction that the provision in no. 1 of article 3 of the CIUC establishes a presumption "juris tantum", consequently rebuttable, thus allowing the person who, in the registry, is registered as owner of the vehicle, to present evidence elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, to whom the ownership was transferred.

7 THE PRESUMPTION OF ARTICLE 3 OF THE CIUC AND THE DATE ON WHICH THE IUC IS EXIGIBLE

7.1 THE PRESUMPTION OF ARTICLE 3 OF THE CIUC

• The AT considers that the presumption that exists in no. 1 of article 3 of the CIUC is a result of an interpretation against the law, resulting from a distorted reading of the letter of the law and, therefore, violating the unity of the legal system, however, and saving the respect due, the understanding of the jurisprudence goes in the direction that one should consider the existence of a legally rebuttable presumption, and therefore consequently serves the values and interests questioned, both at the level of material tax justice and at the level of the environmental purposes aimed at by the IUC;

• Regarding the unity of the legal system, all of the above is to be considered, namely, regarding the ratio of article 1 of the CIUC; regarding the norms and principles of the LGT; regarding the relevant and applicable norms to the registration of motor vehicles, regarding the interpretation that best serves and achieves the mentioned unity and ensures the connection of those same norms, considering the legal presumption that is provided for in article 3 of the CIUC.

7.2 DATE ON WHICH THE IUC IS EXIGIBLE

• The IUC is a periodic taxation tax, whose periodicity corresponds to the year that begins at the moment of registration or at each of its anniversaries, as provided for in nos. 1 and 2 of article 4 of the CIUC;

• It is exigible pursuant to no. 3 of article 6 of the said Code;

• It being noted that, as for the assessment of the IUC taxed to the Applicant on the vehicle referenced above, in the years 2013 and 2014, it is not to be considered, because at the moment of the taxable event the vehicle no longer belonged to it, as the said vehicle was sold to a third party in the year 2006, see the evidence document, already cited above and attached to the Hierarchical Appeal (contained in the Administrative Process and Statement of Case) which is fully reproduced for all legal purposes.

7.2.1

Regarding the burden of proof, article 342, no. 1 of the CC stipulates: "it is incumbent upon the one who invokes a right to prove the facts constitutive of the right alleged";

7.2.2

Also article 346 of the CC (contrary evidence) determines that "to the evidence that is produced by the party on whom the burden of proof falls, the contrary party can oppose contrary evidence with respect to the same facts, intended to make them doubtful; if it succeeds, the matter is decided against the party burdened with proof." (As Anselmo de Castro states, A., 1982, ED. Almedina Coimbra, "Civil Declaratory Procedural Law", III, p. 163, "if the burden of proof falls on one of the parties, it is sufficient for the contrary party to oppose contrary evidence, this being evidence intended to make doubtful the facts alleged by the first").

Thus, in the case at hand, what the Applicant has to prove, in order to rebut the presumption that arises from both article 3 of the CIUC and from the Motor Vehicle Registry itself, is that she, the Applicant, was not the owner of the vehicle in question, in the period to which the challenged assessment refers. What it proposes to prove, as results from the proceedings, is that the ownership of the vehicle did not belong to it in the period to which the assessment refers, see the document attached to the Hierarchical Appeal, contained in the Administrative Process and Statement of Case, which is fully reproduced for all legal purposes.

7.3 REBUTTAL OF THE PRESUMPTION

• The Applicant, as referred to in 3.1., with respect to the proven facts, alleged, with the purpose of overcoming the presumption, that it was not the owner of the vehicle at the time of the taxable event, referencing, for this purpose, the following document:

• PEF...T (attached to the attachment/levy records) which proves the transfer of the ownership of the respective motor vehicle to third parties;

• In this way, the ownership of the said vehicle no longer belonged to it, and therefore it could not enjoy its use, since a date prior to the date on which the IUC was exigible, thus embodying means of evidence with sufficient and appropriate force to rebut the presumption based on the registry, as provided for in no. 1 of article 3 of the CIUC, a document which enjoys the presumption of truthfulness provided for in no. 1 of article 75 of the LGT. It follows from the above that, on the date on which the IUC was exigible, the one who held the ownership of the motor vehicle was not the Applicant.

8 OTHER ISSUES RELATING TO THE LEGALITY OF THE ASSESSMENT ACTS

• Regarding the existence of other issues relating to the legality of the assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of defects, as provided for in article 124 of the CPPT, that proceeding with a request for arbitral decision based on defects that prevent the renewal of the challenged assessments, it is prejudiced, because useless, the knowledge of other defects, it does not appear necessary to rule on the other issues raised.

9 REIMBURSEMENT OF THE TOTAL AMOUNT PAID

• Pursuant to the provisions in paragraph b) of no. 1 of article 24 of the RJAT and, in accordance with what is established there, the arbitral decision on the merits of the claim which does not permit appeal or challenge, binds the tax administration from the end of the period provided for appeal or challenge, and it must, in the exact terms of the merits of the arbitral decision in favor of the obligated party and until the end of the period provided for the spontaneous execution of sentences of the tax judicial courts "Restore the situation that would have existed if the tax act, object of the arbitral decision, had not been carried out, adopting the acts and operations necessary for this purpose"

• These are legal commands that are in complete harmony with the provision in article 100 of the LGT, applicable to the case, by virtue of the provision in paragraph a) of no. 1 of article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial merit of complaints or administrative remedies or judicial proceedings in favor of the obligated party, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, with the payment of compensatory interest corresponding to the terms and conditions provided for in law".

• The case contained in the present proceedings raises the manifest application of the mentioned norms, given that as a consequence of the illegality of the assessment acts referenced in this process, there will necessarily have to be reimbursement of the amounts paid, whether as title of the tax paid, whether of the corresponding compensatory interest, as a way to achieve the restoration of the situation that would have existed if the illegality had not been committed.

10 OF THE RIGHT TO COMPENSATORY INTEREST

• The declaration of illegality and consequent annulment of an administrative act confers on the recipient of the act the right to restoration of the situation in which it would have found itself before the execution of the annulled act.

• Within the scope of the assessment of the tax, its annulment confers on the obligated party the right to the restitution of the tax paid and, as a rule, the right to compensatory interest, pursuant to no. 1 of article 43 of the LGT and article 61 of the CPPT.

• Therefore, the Applicant has the right to compensatory interest on the amount of tax paid, relating to the annulled assessment.

11 DECISION

In view of the above, this Arbitral Tribunal decides:

• To judge the claim for declaration of illegality of the assessment of the IUC, relating to the years 2013 and 2014, concerning the motor vehicle identified in the present process, as well-founded, and consequently annuls the corresponding tax acts;

• To judge the claim for condemnation of the Tax Administration to reimburse the amount wrongfully paid, in the amount of 500.00 Euros, plus the respective compensatory interest legally due, condemning the Tax Authority and Customs to effect these payments.

VALUE OF THE CASE:

• In accordance with the provisions in articles 306, no. 2 of the CPC and 97-A, no. 1 of the CPPT and in article 3, no. 2 of the Costs Regulation in Tax Arbitration Proceedings, the case is valued at 500.00 Euros.

COSTS:

• In accordance with no. 4 of article 22 of the RJAT, the amount of costs is fixed at € 306.00, pursuant to Table I, attached to the Costs Regulation in Tax Arbitration Proceedings, at the charge of the Tax Authority and Customs.

Notify the parties.

Lisbon, 25-01-2016

The Arbitrator

Maria de Fátima Alves

(the text of the present decision was prepared by computer, pursuant to article 131, no. 5 of the Civil Procedure Code, applicable by referral of article 29, no. 1, paragraph e) of Decree-Law 10/2011, of 20 January (RJAT), its drafting being governed by current orthography)