IUC Tax Liability: Vehicle Owner at Registration Date Determines Taxpayer | CAAD 610/2015-T

ARBITRAL DECISION

Claimant: A..., S.A.

Respondent: AT – Tax and Customs Authority

I – REPORT

1. Request

A..., S.A. (formerly designated as B..., S.A.) a company with registered office at Rua..., n.º..., ...-...Lisbon, with unique registration number and company identification number..., hereinafter referred to as Claimant, filed on 2015-09-21, pursuant to article 2º, paragraph 1, subsection a) and article 10º of Decree-Law no. 10/2011, of January 20, which approves the Legal Regime of Arbitration in Tax Matters (RJAT), a request for arbitral decision, against the AT – Tax and Customs Authority, with a view to:

• Annulment of the act of rejection of the gracious claim regarding the acts of assessment of Unique Vehicle Circulation Tax:

• 2010 ...

• 2009 ...

• 2009 ...

• 2011 ...

• 2010 ...

• 2010 ...

• 2010 ...

• 2010 ...

• 2011 ...

• 2009 ...

• 2012 ...

• 2010 ...

• Annulment of the same acts of assessment of Unique Vehicle Circulation Tax;

• Reimbursement of the amounts unduly paid relating to the contested assessments, plus indemnificatory interest.

To support its request, the Claimant alleges, in summary:

• The Claimant was notified of the assessments of Unique Vehicle Circulation Tax indicated, and proceeded to pay them.

• It considers, however, that the assessments are illegal, as it, the Claimant, was not the owner of the vehicles at the date the taxable event occurred.

• Of the contested assessments, four (numbers 2011..., 2009..., 2012... and 2010...) were sold and registered in the name of the purchasers within the period of 60 days following the date of registration allocation;

• The remaining contested assessments concern vehicles sold within 60 days following the date of registration allocation but registered in the name of the purchaser after that period or not registered in the name of the purchaser;

• That the Claimant was no longer the owner of these vehicles at the date of the taxable events is evidenced by the invoices of sale and by the accounting extracts of the "customers" account of the Claimant's accounts;

• Articles 2º, 3º, 4º and 6º of the Unique Vehicle Circulation Tax Code (hereinafter CIUC), require the conclusion that the passive subject of the tax is the owner of the vehicle within the period of 60 days following the date of registration allocation;

• In accordance with article 17º, paragraph 1 of the IUC Code which states "In the year of registration or registration of the vehicle in national territory, the tax is assessed by the passive subject of the tax within 30 days following the expiration of the period legally required for its registration;"

• In accordance with articles 42º, paragraphs 1 and 2 of the Motor Vehicle Registration Regulation, approved by Decree-Law no. 55/75, of February 12, registration must be requested within 60 days counted from the date of registration allocation;

• Finally, article 18º, paragraph 1 of the IUC Code stipulates that "In the absence of registration of vehicle ownership effected within the legal period, the tax due in the year of registration is assessed and demanded: a) From the passive subject of the tax on vehicles based on the customs declaration of the vehicle, or based on the complementary declaration of vehicles on which such assessment is based, even if not due; b) From the declarant of the customs declaration of vehicle when it concerns heavy vehicles".

• From the provisions cited it follows that the legislator intended to link the subjection to tax to ownership and not to registration or registration, so these are not taxable events;

• Being the passive subject the owner of the vehicle, in accordance with article 3º of the CIUC, this provision establishes a presumption that the owner is the person who as such appears in the motor vehicle register;

• In the year of registration, the passive subject of the tax is determined on the 61st day following the allocation of registration, and not on the 1st day corresponding to its allocation;

• Thus, and demonstrated that in the case at hand the vehicles identified above were sold to the Claimant's customers within that period of 60 days, it is concluded that it is not the passive subject of the IUC due in the year of registration and, as such, the decision that fell on the gracious claim is erroneous, as are the self-assessments relating to the vehicles in question, which must be annulled because they are illegal;

• Establishing article 3º of the CIUC a presumption that the owner is the person who as such appears in the motor vehicle register, such presumption is necessarily refutable by virtue of article 73º of the General Tax Law (hereinafter LGT);

• If it were understood that article 3º, paragraph 1, of the IUC Code establishes an irrefutable presumption, requiring in any case that those in whose name the vehicles are registered be considered owners of the vehicles and, consequently, passive subjects of the IUC, regardless of any proof to the contrary, this norm would suffer from material unconstitutionality due to violation of the principle of equality and tax capacity, arising from article 13º of the Constitution of the Portuguese Republic (CRP);

1. Reply

In its Reply, the Respondent AT – Tax and Customs Authority alleges, in summary:

• From the combination of article 6º with article 17º of the CIUC it follows that the legal situations that generate the birth of the tax obligation are the registration of the vehicle in national territory;

• The thesis of the Claimant that, by having the sales of the vehicles been effected before the expiration of the legal period of 60 days following the date of the registration allocation, makes it, the Claimant, not the passive subject in the year of registration, does not fit within the letter of the law;

• Article 3º establishes unequivocally that ownership determines subjection to tax;

• Article 3º, paragraph 1 of the CIUC does not contain a presumption. The tax legislator in establishing in article 3º, paragraph 1 who are the passive subjects of the IUC established express and intentionally that these are the owners (or in the situations provided for in paragraph 2, the persons there listed), considering as such the persons in whose names the same are registered;

• On the other hand, from motor vehicle registration there arises a presumption of ownership, so the rebuttal of the presumption of ownership will have to be directed at the motor vehicle registration itself;

• The consideration of the systematic element of interpretation, in the case of IUC its articulation with motor vehicle registration – which is seen in particular in article 6º of the CIUC: "the taxable event is constituted by the ownership of the vehicle, as attested by the registration in national territory" - also requires that one consider that the subjective incidence of the tax cannot be determined without connection to motor vehicle registration;

• The configuration of the IUC reveals that the legislator intended to create a tax based on the taxation of the vehicle owner as it appears in the motor vehicle register;

• The interpretation that the Claimant makes of article 3º, in the sense that it contains a refutable presumption, violates the principle of confidence and legal security, the principle of efficiency of the tax system and the principle of proportionality;

• The understanding advocated by the Claimant with a view to eliminating the subjective incidence and taxation of the IUC has no legal basis and violates the constitutional principles of legality and tax justice, of tax capacity, of equality, of certainty and of legal security.

Regarding the question of fact, the Respondent alleges:

• The dates that the Claimant indicates as being the dates of registration in the name of the purchasers do not coincide with the dates communicated to the Respondent, the entity responsible for motor vehicle registration;

• According to the Respondent's data, the following time periods elapsed between the date of registration and the registrations:

• The invoices that the Claimant attaches as evidence of the purchase and sale contract are not apt to prove the conclusion of a bilateral contract such as purchase and sale, as such documents do not reveal by themselves an essential and unequivocal declaration of will (i.e., acceptance) on the part of the presumed purchasers;

• The Claimant did not submit documentary evidence of receipt of payment when it could and should have done so, that is, in the submission of the request for arbitral decision, and is now precluded from the possibility of doing so at a later time;

• And thus, the Claimant has failed to prove the alleged transmission of the vehicles in question.

1. Meeting provided for in article 18º of the RJAT and submissions

With the agreement of the parties, the Tribunal determined the dispensation of the meeting provided for in article 18º of the RJAT.

In written submissions, the Parties reaffirmed their positions without adding anything either in terms of legal argumentation or in terms of factual argumentation.

II. SANATION

The singular Arbitral Tribunal was properly constituted on 30-11-2015, with the Arbitrator appointed by the Deontological Council of the CAAD, complying with the respective legal and regulatory formalities (articles 11º, paragraph 1, subsections a) and b) of the RJAT and articles 6º and 7º of the CAAD Deontological Code), and is competent ratione materiae, in accordance with article 2º of the RJAT.

The parties have legal personality and capacity and are properly represented.

No nullities were identified in the proceedings.

III. ISSUES TO DECIDE

The following are the issues to decide in the present arbitral proceedings:

1. Who is the passive subject of the unique vehicle circulation tax in the year of registration when the vehicle is registered within 60 days after registration;

2. The establishment, in article 3º, paragraph 1 of the CIUC, of a presumption and its rebuttability;

3. The rebuttal, in the concrete case, by the Claimant, of the presumption of ownership of the vehicles subject to tax.

IV – PROVEN FACTS

The following are the proven facts considered relevant for the decision:

1st: The Claimant was notified of the IUC assessments:

• 2010..., concerning the vehicle with registration...-...-..., year 2010;

• 2009..., concerning the vehicle with registration...-...-..., year 2009;

• 2009..., concerning the vehicle with registration...-...-..., year 2009;

• 2011..., concerning the vehicle with registration...-...-..., year 2011;

• 2010..., concerning the vehicle with registration...-...-..., year 2010;

• 2010..., concerning the vehicle with registration...-...-..., year 2010;

• 2010..., concerning the vehicle with registration...-...-..., year 2010;

• 2010..., concerning the vehicle with registration...-...-..., year 2010;

• 2011..., concerning the vehicle with registration...-...-..., year 2011;

• 2009..., concerning the vehicle with registration...-...-..., year 2009;

• 2012..., concerning the vehicle with registration...-...-..., year 2012;

• 2010..., concerning the vehicle with registration...-...-..., year 2010;

2nd: The vehicle with registration ...-...-... was registered on 30-8-2011 and registered in the name of C...– … SA on 19.10.2011;

3rd: The vehicle with registration ...-...-... was registered on 4-8-2009 and registered in the name of D... on 21.09.2009;

4th: The vehicle with registration ...-...-... was registered on 18-04-2012 and registered in the name of E... on 08.06.2012;

5th: The vehicle with registration ...-...-... was registered on 23-02-2010 and registered in the name of C...– … SA on 01.04.2010;

6th: The Claimant proceeded to pay the full amounts stated in the contested assessments;

7th: The Claimant filed a gracious claim against such assessments, with this claim being rejected on June 16, 2015;

There are no unproven facts relevant to the decision of the case.

The facts considered proven were so on the basis of documentary evidence submitted by the Parties to the proceedings.

V - GROUNDS

1. Who is the passive subject of the unique vehicle circulation tax in the year of registration when the vehicle is registered within 60 days after registration

The status of passive subject of IUC is established in article 3º of the respective code, which states:

Article 3º

Subjective incidence

1 - Passive subjects of the tax are the owners of the vehicles, considering as such the natural or legal persons, of public or private law, in whose names the same are registered.

2 - Lessees under finance leases, acquirers with retention of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are assimilated to owners.

3 - The undivided estate, represented by the head of household, is also assimilated to a passive subject.

For what is relevant to this case, it can be established from the outset that, in the absence of the situations provided for in paragraphs 2 and 3, the passive subject of the tax is the owner of the subject vehicle.

With regard to temporal incidence, article 4º of the CIUC provides:

Article 4º

Temporal incidence

1 - The unique vehicle circulation tax is of annual periodicity, being due in full in each year to which it relates.

2 - The taxation period corresponds to the year beginning on the date of registration or each of its anniversaries, with respect to vehicles in categories A, B, C, D and E, and to the calendar year, with respect to vehicles in categories F and G.

(…)

With regard to the assessment of the tax in the year of vehicle registration, article 17º provides:

Article 17º

Deadline for assessment and payment

1 - In the year of registration or registration of the vehicle in national territory, the tax is assessed by the passive subject of the tax within 30 days following the expiration of the period legally required for its registration.

2 - In subsequent years the tax must be assessed by the end of the month in which it becomes due, in accordance with paragraph 2 of article 4º.

(…)

In accordance with articles 42º, paragraphs 1 and 2 of the Motor Vehicle Registration Regulation (Decree-Law 55/75 of 12.2), registration must be requested within 60 days counted from the date of registration allocation.

The question lies in knowing, with respect to the year of vehicle registration, what is the moment at which the taxable event is considered to occur:

• If at the moment of registration, with the assessment obligation deferred only to 30 days following the expiration of the period legally required for registration (thesis defended by the Respondent);

• If at the moment when the period of 30 days following the expiration of the period legally required for registration is met.

The law is not clear on this point, as it does not say, anywhere, what is the moment at which the taxable event is considered to occur. It only says, in article 4º, that the taxation period, annual, begins at the moment of registration and what is the moment at which the assessment obligation arises for the passive subject, in article 17º.

It is certain that the extension of the period both to effect registration after registration (articles 42º, paragraphs 1 and 2 of the Motor Vehicle Registration Regulation) and to assess the tax in the year of registration must have a reason (a ratio legis).

And it appears clear that this reason is related to the period considered normal for the sale of the vehicle by the reseller. From which it can be concluded that the legislator intended that it be the purchaser of the vehicle, when registration is effected within the stated periods, who bears, in the capacity of passive subject, the tax.

We thus agree with the decision in arbitral case 43/2014-T, and we conclude that, with respect to the vehicles with registration:

• ...-...-..., registered on 30-8-2011 and registered in the name of C...– … SA on 19.10.2011;

• ...-...-..., registered on 4-8-2009 and registered in the name of D... on 21.09.2009;

• ...-...-..., registered on 18-04-2012 and registered in the name of E... on 08.06.2012; and

• ...-...-..., registered on 23-02-2010 and registered in the name of C...– … SA on 01.04.2010,

The moment of the occurrence of the taxable event is the expiration of the period for effecting registration, so the Claimant was not the passive subject of the tax in the years in which these registrations occurred, thus lacking a prerequisite of taxation.

1. On the question of the establishment, in article 3º, paragraph 1 of the CIUC, of a presumption and its rebuttability

This question has already been the subject of numerous arbitral decisions. In the sense that article 3º, paragraph 1 of the CIUC establishes a presumption, arbitral decisions rendered in cases no. 230/2014-T, no. 414/2014-T, no. 350/2014-T, 336/2014-T, no. 333/2014-T, no. 220/2014-T, no. 150/2014-T and 63/2014-T, among others, have ruled. In the same sense the Central Administrative Court of the South ruled, in judgment of 19-3-2015 (Case no. 08300/14).

In the last cited arbitral decision, whose grounds we adopt, it is stated on this question:

"Article 11º, paragraph 2 of the General Tax Law is the starting point on this question, stating that 'whenever in tax rules, terms specific to other branches of law are employed, they must be interpreted in the same sense as they have there, unless otherwise clearly follows from the law'.

It is therefore necessary to ascertain whether it unequivocally follows from the provisions of article 3º of the CIUC that the legislator intended to establish there a concept of 'vehicle owner' specific to tax law, which encompasses persons who are not holders of such a right according to the rules of civil law.

Now, can the 'freedom of legislative formulation' that the legislator enjoys, which the Respondent refers to in paragraph 17 of its Reply, go so far as to determine taxatively who is the owner of a vehicle, even if merely for tax purposes, radically dissociating that tax qualification from the qualification of civil law?

And, as a consequence of the previous question, another question arises: why would the legislator not then have simply stipulated - for it would obtain exactly the same useful effect but eliminating any margin of legal insecurity or uncertainty - that 'passive subjects of the tax are the persons in whose names the vehicles are registered, whether as owners, as lessees under finance leases, as acquirers with retention of ownership, or as other holders of purchase option rights by virtue of the leasing contract'? A question all the more pertinent, and a hypothesis all the more attractive, inasmuch as the legislator knew the negative experience, and which keeps repeating itself, of the previous Vehicle Circulation Tax?

The answer seems evident: because, in this latter hypothesis, which the legislator did not follow, the subjective incidence of the tax could remain totally disconnected from any economic substance and would depend exclusively on a legal appearance.

Now, if the legislator had, as the Respondent claims, established in the law a non-presumptive qualification about who is the owner of the vehicles (a legal fiction), it would thereby be establishing, through a different formulation, a rule entirely identical to the hypothetical rule mentioned. It would be making the subjective incidence of the tax rest on a legal fiction, in total disconnection from any economic substance as the basis of subjective incidence.

It is true that the efficiency of taxation determines the need for the IUC to rest on motor vehicle registration and, consequently, requires that the tax administration can rely on such motor vehicle registration.

But the principle of taxation efficiency cannot override absolutely the principle of tax capacity, to the point of eliminating it as a criterion of subjective incidence. And it is also true that the tax legislator would have at its disposal other means of making the seller of the vehicle responsible, failing in its duty to communicate the sale of the vehicle, for the payment of tax, without being as a direct taxpayer (configuring, for example, a case of tax liability for a third party's debt).

And, if that is so, it must also necessarily be concluded that article 3º, paragraph 1 can only establish a presumption of ownership of the vehicle, even with all the negative consequences that this conclusion will certainly entail, in terms of the efficiency of tax administration."

We thus agree with the cited decision, concluding in the sense that article 3º, paragraph 1 of the CIUC contains a presumption "juris tantum", refutable, in accordance with article 73º of the LGT.

1. The rebuttal, in the concrete case, by the Claimant, of the presumption of ownership of the vehicles subject to tax

On the question of the proof necessary to rebut the presumption of ownership, we must begin by bringing into the equation the question of the value of the presumption arising from motor vehicle registration.

The ownership of motor vehicles is subject to mandatory registration. And in accordance with article 7º of the Property Register Code, applicable to the Motor Vehicle Register by virtue of article 29º of the Motor Vehicle Register Code, the registration of the ownership of a vehicle gives rise to the presumption that the holder of the right of ownership is the entity in whose name the same right is registered.

If it is true that the presumption of article 3º, paragraph 1 of the CIUC is established with a view to the purposes of taxation, already the presumption established by registration law has in view the legal security in general, with no basis for judging that this presumption does not apply in the scope of tax law relations.

As is stated in the judgment of the Court of Appeal of Lisbon of 24-3-2011 (case no. 195/09.8TBPTS.L1-2), "the property register pursues, at once, purposes of a private nature and purposes of a characteristically public nature. It pursues purposes of a private nature, in that it guarantees security in the sphere of private rights, specifically in the plane of rights with real effectiveness – security of legal commerce (…), globally considered – facilitates traffic and exchange of goods, and ensures the fulfillment of the social function of real rights; it pursues purposes of public interest, as an instrument of legal certainty, of protection of third parties and of security of legal commerce, and as guarantor of the updating of the register with respect to the publicized fact".

Therefore, given that there is a registral presumption of ownership in favor of the Claimant, it, in order to remove its qualification as owner, must rebut the presumption arising from motor vehicle registration.

In the concrete case, in order to rebut the registral presumption that the title to the right of ownership of the vehicle is its own, the Claimant attaches invoices relating to the sale of the vehicles subject to tax.

As for invoices, a question identical to this was decided by the Central Administrative Court in the recent judgment already cited. It states:

"In these terms, it should be noted that we are dealing with mere private and unilateral documents, whose issuance does not presuppose the intervention of the counterparty in the alleged agreement, thus having reduced value to prove the existence of a bilateral contract, as is purchase and sale".

And further:

"And it should be recalled that any of the accounting documents in question does not even prove the payment of the price by the buyer. Both the invoice and the debit note constitute accounting documents prepared within the company and which are intended for external purposes. The invoice should be viewed as the accounting document through which the seller sends to the buyer the general conditions of the transaction carried out. For its part, the debit note consists of the document in which the issuer communicates to the recipient that the latter owes him a certain pecuniary amount. Both documents appear in the phase of settlement of the amount to be paid by the buyer, thus not evidencing the payment of the price by the same buyer and, consequently, proof that the purchase and sale was concluded".

Concluding the Court:

"Therefore, it must be concluded that the respondent company did not even produce evidence regarding the alleged sale of the vehicles, and would have to prove that it was not the owner of the vehicles as of the date to which the assessments refer, which would imply, in the concrete case, proving who is the current owner."

What is emphasized from the doctrine expounded is the following aspect: the Court considers, in order to rebut the registral presumption, that the one who appears as owner in the register must prove who is the current owner.

We consider the Court's position justified in that the rebuttal of the presumption of registral truth is particularly demanding.

On the subject, says Mouteira Guerreiro (Mouteira Guerreiro, J. A., Notions of Registration Law, 2nd ed. Coimbra, 1994, p. 70): "The protection conferred by the register is expressed in our system, in a refutable presumption. But, we cannot forget it, it is a legal presumption. (…) What the register reveals cannot be impugned, even in court, without simultaneously requesting its cancellation".

The same author (Ibidem, p. 71) adds: "It follows from the principle of the presumption of truth or the exactness the rule provided for in article 8º of the CRP. If the definitive register gives rise to the presumption that the right exists and belongs to the registered holder 'in the precise terms in which the register defines it', it would not make sense to judicially attack this publicized truth, without simultaneously attacking the register itself. Therefore, whoever wishes to contest the veracity of the facts tabularly recorded must also request the cancellation of the register. If they do not do so, the action will not proceed after the pleadings, because there would be a risk of reaching an actual contradiction: on one hand, having a judgment declaring certain facts legally irrelevant or untrue and, on the other, a register existing to presume erga omnes the truthfulness and validity of those same facts".

The understanding expounded is sanctioned by the jurisprudence of the superior courts. See the previously cited judgments, in which it is stated that, to rebut the presumption of ownership arising from the Motor Vehicle Register, it is necessary to prove that the title of the inscribed right belongs to another, but that not being sufficient, it being also necessary to simultaneously request its cancellation (see judgment of the Court of Appeal of Coimbra of 22-01-2013, case no. 3654/03.2TBLRA.C1; judgment of the Court of Appeal of Coimbra of 3-06-2008, case no. 245-B/2002.C1).

Now, the argumentation expounded applies to all the evidence offered by the Claimant.

Everything that was said for the invoice applies to the accounting extracts. An accounting extract is, also itself, a private (non-authentic) and unilateral document, whose issuance does not presuppose the intervention of the counterparty in the alleged contract.

With the evidence presented, the Claimant merely shows as probable facts that, if they had occurred, would in turn make it probable that ownership did not belong to the Claimant. However, the rebuttal of a legal presumption is not sufficient with elements that cast doubt, that show probability of contrary facts. The rebuttal of a legal presumption can only be effected with clear proof, and this would have to bear on the legal situation of the vehicle at the moment of the taxable event.

This tribunal considers that such proof was not made.

Indeed, the presumption of the register aims, as already mentioned, to give security to legal relations, both of private law and of public law. The rebuttal of such presumption should only be considered effected when the proof that serves as the basis for the rebuttal of the presumption is sufficient to alter the register. Otherwise, if a court considered rebutted the presumption arising from the register without the proof elements necessary to alter the register being gathered, it would thereby be annihilating the function of legal security which is the primary function of the register.

For that reason the Court of Appeal of Coimbra, in the two cited judgments, considered that, to rebut the presumption of ownership arising from the register, it is necessary to prove that the title of the inscribed right belongs to another, but that not being sufficient, it being also necessary to simultaneously request its cancellation.

As is stated in the judgment of the Court of Appeal of Lisbon of 24-3-2011 previously cited (case no. 195/09.8TBPTS.L1-2), the guarantee of updating of the register with respect to the publicized fact is part of the function of legal security that the same register performs.

Furthermore, there is a logical non-coincidence between the fact that the Claimant intends to prove – sale of the vehicle – and the fact that needs to be proved – the vehicle does not belong to the Claimant, at a moment after the sale. So proving that a sale was effected – which was not proved – can never rebut the presumption of ownership, except on the basis of a judgment of probability which, however, cannot be sufficient to rebut the registral presumption.

VI. DECISION

For the grounds set out, this Tribunal decides:

I. To declare well-founded the requests for annulment, and consequently to annul, the assessment acts no. 2011..., concerning the vehicle with registration...-...-..., and the year 2011; no. 2009..., concerning the vehicle with registration...-...-..., and the year 2009; no. 2012..., concerning the vehicle with registration...-...-..., and the year 2012; no. 2010..., concerning the vehicle with registration...-...-..., and the year 2010;

II. To condemn the Respondent AT – Tax and Customs Authority to reimburse the amounts relating to the annulled assessments, plus the respective indemnificatory interest;

III. To declare the remaining requests ill-founded.

Economic utility value of the proceedings: The economic utility value of the proceedings is fixed at 1,685.08 euros.

Costs: Pursuant to article 22º, paragraph 4, of the RJAT, the amount of costs is fixed at 306.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by:

• The Respondent, in the amount of 137.58 euros

• The Claimant, in the amount of 168.42 euros

Let this arbitral decision be registered and notified to the parties.

Lisbon, Administrative Arbitration Center, May 31, 2016

The Arbitrator

(Nina Aguiar)