IUC Subjective Incidence: Vehicle Tax Liability After Sale – CAAD Decision 635/2015-T

ARBITRAL DECISION

I – Report

1. On 12.10.2015, the Claimant, A…, LDA., a company with registered office at Avenue…, no.…, in Lisbon, with the unique registration number and collective person number…, following the decisions of dismissal that fell upon the administrative appeals no. …2015…, no. …2015…, no. …2015… and no. …2015…, filed against the self-assessments of Single Vehicle Circulation Tax (IUC) relating to the years 2013, 2014 and 2015, increased by compensatory interest, came, pursuant to the provisions of articles 2.º, no. 1, paragraph a), 5.º, no. 2, paragraph a), 6.º, no. 1, 10.º, no. 1, paragraph a) and no. 2, all of Decree-Law no. 10/2011, of 20 January, to request the CONSTITUTION OF A SINGULAR ARBITRAL TRIBUNAL with a view to annulling the aforementioned decisions and declaring the illegality of the tax acts better identified in the tables that follow:

Table I – Sales – Administrative Appeal no. …2015…

Table II – Sales – Administrative Appeal no. …2015…

Table III – Thefts – Administrative Appeal no. …2015…

Table IV – Claims – Administrative Appeal no. …2015…

The Claimant further petitions for recognition of the right to reimbursement of the amounts it considers to have been unduly paid with respect to the assessments, increased by compensatory interest.

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

Pursuant to and for the purposes of the provisions in no. 1 of article 6.º of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable periods, the undersigned was designated as arbitrator, and communicated to the Deontological Council and the Administrative Arbitration Centre the acceptance of the assignment within the regularly applicable period.

The Arbitral Tribunal was constituted on 5.01.2016.

1. Given that there was no circumstance foreseen in article 18.º, no. 1 of the RJAT that would have made necessary the arbitral meeting provided therein, the holding of the same was dispensed with, on the basis of the prohibition of the performance of unnecessary acts.

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

a. The Claimant is a commercial company that engages in the activity of motor vehicle rental and the provision of related services.

b. Within the scope of its activity, the Claimant enters into vehicle rental contracts and, at the end of the contract, proceeds on several occasions to sell them to customers.

c. The vehicles indicated in "Table I" and "Table II" above were subject to sale to Claimant's customers.

d. Such sales took place on a date prior to the date of the tax event in the years 2013 to 2015.

e. For its part, with respect to the vehicles indicated in "Table III", they were subject to thefts during the currency of the vehicle rental contracts, having been considered by the insurers as "Total Loss", as per copies of the respective invoices and correspondence attached.

f. The vehicles indicated in "Table IV" were subject to claims (accidents) during the currency of the vehicle rental contracts, having been considered by the insurers as "Total Loss" and the respective "salvage" sold to them, as per copies of the invoices and correspondence from the insurers attached.

g. Upon receipt of the aforementioned communications by the insurers, the Claimant proceeded to deliver all necessary legal documentation for cancellation by them of the vehicle registrations with the competent road authorities, pursuant to the provisions of article 41.º, no. 5 of Decree-Law no. 291/2007 of 21 August and article 119.º, no. 8 of the Road Code.

h. The situations in question also occurred on a date prior to the date of the tax event in the years 2013 to 2015.

i. During the course of the years 2012, 2013 and 2014 the Claimant was notified of various additional IUC assessments relating to vehicles which it had sold to customers before the date of the respective tax event.

j. At the root of the aforementioned additional assessments was the understanding of the tax administration that the now Claimant was registered in the Vehicle Register as owner of the vehicles in question, which, for the tax administration services, is sufficient for the Claimant to be considered the owner of the vehicles and, as such, the taxpayer of the IUC.

k. Confronted with the situation described, notwithstanding disagreeing with the understanding of the tax administration in that it was not the taxpayer of the IUC due and anticipating the issuance of future additional IUC assessments, the Claimant proceeded, as a precaution, to self-assess and pay to the State the IUC relating to the vehicles above identified.

1. The ATA – Tax and Customs Authority, called upon to respond, contested the Claimant's claim, defending itself, in summary, with the following grounds:

BY WAY OF EXCEPTION

Of the Illegal Cumulation of Claims

a. Within the scope of the request for arbitral pronouncement the Claimant comes to cumulate the claims in question alleging that the merit of these depends essentially on the assessment of the same circumstances of fact and the interpretation and application of the legal norms concerning the subjective incidence of the IUC.

b. Unless we are to be corrected, we cannot agree with the thesis sustained by the Claimant, inasmuch as article 3.º/1 of the RJAT provides that "the cumulation of claims even if relating to different acts and the joinder of plaintiffs are permissible when the merit of the claims depends essentially on the assessment of the same circumstances of fact and the interpretation and application of the same principles or rules of law."

c. However, in the case at hand the existence of the same circumstances of fact is not verified given that, although it may be suggested that the factual procedures may be transversal to all assessments, what is certain is that we are dealing with different vehicles, with different transmission dates, to totally different owners, by completely differentiated values and, above all, with different grounds for transmission (sales versus thefts versus accident vehicles).

d. Consequently, the cumulation effected by the Claimant is illegal, and the same should not be admitted by the Arbitral Tribunal, which should notify the Claimant pursuant to and for the purposes of article 47.º/5 of the Code of Procedure in Administrative Courts, under threat of dismissal of the proceedings.

Without prejudice, and saving all rights,

Of the Partial Lack of Timeliness of the Request for Arbitral Pronouncement

e. There is also raised the exception of lack of timeliness of the request for arbitral pronouncement filed by the Claimant with respect to one of the administrative appeal procedures, namely Administrative Appeal no. …2015… .

f. Effectively, in that administrative proceeding the Respondent proceeded to notify the Claimant of the decision to dismiss by letter dated 2015-07-02 (cf. pages 159 of the Administrative Proceeding relating to Administrative Appeal no. …2015…) and such notification was received by the Claimant on 2015-07-10.

g. Pursuant to article 10.º/1-a) of the RJAT, the request for arbitral pronouncement must be presented within a period of 90 days from the notification of the decision to dismiss the Administrative Appeal.

h. Considering that, pursuant to law, the period commenced on the day following notification (i.e., on 2015-07-11), it must be concluded that the request for arbitral pronouncement should have been presented by 2015-10-08.

i. However, this did not occur with respect to Administrative Appeal no. …2015…, as the request for arbitral pronouncement was only presented at the Administrative Arbitration Centre ("CAAD") on 2015-10-12.

j. Thus, not having the Claimant filed the request for arbitral pronouncement in a timely manner with respect to that Administrative Appeal, the definitive consolidation in the legal order of the respective decision to dismiss was generated, for 'tempus regit actum'.

k. As such, it is now barred to the Claimant the possibility of seeing the legality of the tax acts underlying that appeal examined in these proceedings, and now put in question by it, under penalty of fraud on the law.

Without prejudice,

BY WAY OF REBUTTAL,

l. Unless due respect is given, we consider that the allegations of the Claimant cannot proceed at all, as it makes an interpretation and application of the legal norms subsumable to the case sub judice notoriously wrong.

m. Effectively, the understanding proposed by the Claimant suffers not only from a biased reading of the letter of the law, but also from the adoption of an interpretation that does not attend to the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire tax-legal system and further results from an interpretation that ignores the ratio of the regime established in the article in question, as well as throughout the entire CIUC.

n. Effectively, no. 1 of article 3.º of the CIUC provides that "The taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in the name of which the same are registered".

o. In these terms, it is imperative to conclude that, in the case of the present arbitral pronouncement proceedings, the legislator expressly and intentionally established that those [as proprietors or in the situations foreseen in no. 2, the persons therein enumerated] are considered as such the persons in the name of which the same [the vehicles] are registered, for this is the interpretation that preserves the unity of the tax-legal system.

p. However, even if this were not the case – which is only admitted by way of mere academic hypothesis – and accepting it to be permissible to rebut the presumption in light of the jurisprudence already established in this arbitration centre, the fact is that the documents in the case file and attached by the Claimant do not result in proof of the facts alleged tending to rebut the presumption.

1. Following the exceptions raised by the Respondent the Claimant responded in writing, in summary, as follows:

a. With respect to the exception of illegal cumulation of claims it is invoked in the learned Response that the request for arbitral pronouncement does not meet the requirements established in article 3.º, no. 1 of the RJAT, as the "(...) the existence of the same circumstances of fact is not verified (...)" (cf. article 8.º of the Response) but, unless due respect is given, the Respondent is not correct.

b. From the outset, article 3.º of the RJAT does not require, contrary to what is alleged, the existence of the same circumstances of fact.

c. Effectively, the norm in question admits the cumulation of claims whenever "(...) the merit of the claims depends essentially on the assessment of the same circumstances of fact and the interpretation and application of the same principles or rules of law" (our emphasis).

d. In this respect, JORGE LOPES DE SOUSA states that "It is not necessary, for the cumulation of claims and the joinder of plaintiffs to be viable, that there be an absolute identity of the factual situations, it being sufficient that the tax-legal question to be assessed be essentially identical and that the factual situation be similar in the points that are relevant to the decision" (cf. Guide to Tax Arbitration, Almedina, 2013, p. 147).

e. Thus, for the cumulation of claims to be admitted, it is sufficient that the tax-legal question to be assessed be the same, as well as similar the factual situation relevant to the decision and these requirements are verified in the case sub judice in that in any one of the situations presented in the case file, the tax-legal question to be decided is whether, the IUC impacting on the owners of the vehicle at the date of the tax event and given that the rule provided in article 3.º, no. 1 of the IUC Code is a rebuttable legal presumption through evidence to the contrary, the demonstration by the Claimant that it is no longer the owner of the vehicles in question from a date prior to the occurrence of the tax event in the years in question is sufficient to conclude that it is not the taxpayer of the tax.

f. There is not, therefore, contrary to what is alleged by the Respondent, any illegal cumulation of claims.

g. For which reason the invoked exception of illegal cumulation of claims should be judged unfounded.

h. It is further invoked in the learned Response the partial lack of timeliness of the request for arbitral pronouncement filed with respect to the contestation of the decision and respective tax acts object of the administrative appeal procedure no. …2015… .

i. According to the Respondent entity, the Claimant was notified on 10.07.2015 of the decision to dismiss said administrative appeal, and therefore the request for arbitral pronouncement, presented on 12.10.2015, should be judged untimely with respect to the contestation of the legality of the decision and respective tax acts, pursuant to the provisions of paragraph a) of no. 1 of article 10.º of the RJAT (cf. articles 14.º to 17.º of the Response).

j. Unless due respect is given, in view of what is alleged and specifically evidenced by the Respondent, the Claimant cannot agree with the exception argued.

k. Effectively, upon examination of the administrative proceeding file joined to the case file, it appears that the same does not contain any copy of the proof of receipt that must have been signed and, on the other hand, the copy of the postal record available on the Internet that the Respondent attaches to its Response is not clarifying as to the identity of who signed the proof of receipt – such copy refers only to receipt by "B…".

l. While the lack of attachment to the case file of a copy of the aforementioned proof of receipt remains, and given that the copy of the postal record available on the Internet which the Respondent attaches to its Response does not clarify the identity of who signed the proof of receipt – such copy refers only to receipt by "B…".

1. The parties were notified to that effect and the Respondent presented written allegations, in which it maintained, in essence, what was alleged in its response.

The Claimant did not present allegations.

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

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

The proceedings do not suffer from defects that would render it invalid.

1. It is necessary to resolve the following issues:

a) Exception of illegal cumulation of claims

b) Exception of partial lack of timeliness of the request for arbitral pronouncement

c) Whether the assessments that are the subject of these proceedings are illegal and consequently should be annulled.

d) Whether the Respondent should be condemned to reimburse to the Claimant the sums paid, corresponding to the assessments that are the subject of these proceedings.

e) Whether the Respondent should be condemned to pay to the Claimant compensatory interest.

II. Dismissal of Exceptions

1. Exception of illegal cumulation of claims

Article 3.º of the RJAT admits the cumulation of claims whenever "(...) the merit of the claims depends essentially on the assessment of the same circumstances of fact and the interpretation and application of the same principles or rules of law".

In this respect, JORGE LOPES DE SOUSA states that "It is not necessary, for the cumulation of claims and the joinder of plaintiffs to be viable, that there be an absolute identity of the factual situations, it being sufficient that the tax-legal question to be assessed be essentially identical and that the factual situation be similar in the points that are relevant to the decision" (cf. Guide to Tax Arbitration, Almedina, 2013, p. 147).

Also in the decision of proceeding 3/2015-T that took place in this Arbitration Centre one can read that:

"According to the understanding of the respondent, the cumulation of claims has a limited scope presupposing identity of circumstances of fact.

This is not, however, the spirit of the norm in question, which appears from the outset from the expression "essentially" to which that precept resorts, from which it follows that what is required is that there be similarity of the factual points of the tax-legal question to be assessed."

According to the Decision of the Supreme Administrative Court of 06-03-2013 – Proceeding 0327/12, regarding the joinder of claims in judicial challenge they are: "requirements of rationality of means, of celerity of decision and even to avoid contradictory decisions, all of which also points to the assessments in question being analyzed in the same action, and article 104.º of the CPPT should be interpreted in light of the principle pro actione, as a corollary of the right to effective judicial protection".

In the case at hand, the tax-legal question to be assessed is the same, in essence, namely, to ascertain the scope of the application of no. 1 of art. 3.º of the IUC Code, in the event of loss of ownership of motor vehicles by the owner registered in the vehicle register, without the corresponding vehicle registration.

It is, therefore, legal, the cumulation of claims effected by the claimant, and the exception invoked by the respondent is therefore unfounded.

1. Exception of partial lack of timeliness of the request for arbitral pronouncement

The Respondent raises the exception of lack of timeliness of the request for arbitral pronouncement filed by the Claimant with respect to Administrative Appeal no. …2015… alleging that the notification to the Claimant of the decision to dismiss was made by letter dated 2015-07-02 and that notification was received by the Claimant on 2015-07-10.

Pursuant to article 10.º/1-a) of the RJAT, in conjunction with article 102.º, no. 2 of the CPPT, the request for arbitral pronouncement must be presented within a period of 90 days from the notification of the decision to dismiss the Administrative Appeal.

The Respondent submits, considering that, pursuant to law, the period commenced on the day following notification (2015-07-11) and that the request for arbitral pronouncement should have been presented within 90 days from the notification of the decision to dismiss the Administrative Appeal, that it must be concluded that the request for arbitral pronouncement should have been presented by 2015-10-08 (Thursday), which did not occur, as the request for arbitral pronouncement was only presented at the Administrative Arbitration Centre ("CAAD") on 2015-10-12.

However, as the Claimant rightly points out, upon examination of the administrative proceeding file joined to the case file, it appears that the same does not contain any copy of the proof of receipt that must have been signed and, on the other hand, the copy of the postal record available on the Internet that the Respondent attaches to its Response is not clarifying as to the identity of who signed the proof of receipt – such copy refers only to receipt by "B…".

Now, as Jorge Lopes de Sousa refers "The notification of the company by registered letter, with or without proof of receipt, must be made in the name of the company itself, but has to be made to certain natural persons"[1].

Now, notification to the claimant cannot be deemed to have been proven when the only document in the case file in that respect mentions that receipt was made by another legal entity, in this case "B…".

Moreover, it follows from no. 4 of article 39.º of the CPPT that in notifications with proof of receipt the postal service distributor shall proceed to notify the persons referred to in the preceding number by notation of the identity card or other official document, which is not demonstrated to have occurred in the case at hand, quite the contrary.

Under these circumstances the notification in question cannot be deemed to have been validly effected on 10.07.2015 and therefore, in consequence, the exception of expiration of the right of action raised by the Respondent is unfounded.

III – The Relevant Factual Matter

1. The following facts are considered proven:

a) The Claimant is a commercial company that engages in the activity of motor vehicle rental and the provision of related services.

b) Within the scope of its activity, the Claimant enters into vehicle rental contracts and, at the end of the contract, proceeds on several occasions to sell them to customers.

c) The Respondent effected the assessments indicated in tables I, II, III and IV, above described, having as the taxpayer the Claimant:

d) The assessments contained in table I were the subject of Administrative Appeal no. …2015…, filed by the Claimant.

e) The assessments contained in table II were the subject of Administrative Appeal no. …2015…, filed by the Claimant.

f) The assessments contained in table III were the subject of Administrative Appeal no. …2015…, filed by the Claimant.

g) The assessments contained in table IV were the subject of Administrative Appeal no. …2015…, filed by the Claimant.

h) At the date of the tax events in question the motor vehicles identified in the tables above mentioned were registered in the vehicle register in the name of the Claimant.

i) The assessments that are the subject of these proceedings were paid by the Claimant.

FACTS NOT PROVEN

1. With relevance to the decision of the case the following facts were not proven:

• That the vehicles indicated in "Table I" and "Table II" were the subject of sale to Claimant's customers, on dates prior to those of the corresponding tax events.

• That the vehicles indicated in "Table III" were subject to thefts during the currency of the vehicle rental contracts having been considered by the insurers as "Total Loss" on dates prior to those of the corresponding tax events to which the assessments relate and that the Claimant received indemnification.

• That the vehicles indicated in "Table IV" were subject to claims (accidents) during the currency of the vehicle rental contracts, having been considered by the insurers as "Total Loss" and the respective "salvage" sold to them.

• That upon receipt of the communications by the insurers, the Claimant proceeded to deliver all necessary legal documentation for cancellation by them of the vehicle registrations with the competent road authorities.

REASONING OF THE DECISION ON FACTUAL MATTERS

1. With respect to the factual matter deemed proven the conviction of the Tribunal was founded on the documents in the proceeding and not challenged by the parties, it being noted that there is no controversy regarding the occurrence of the same.

With respect to the factual matter deemed not proven, regarding the motor vehicles identified in tables I and II, the decision on factual matters is based, regarding the generality of the alleged invoices presented as proof of the alleged transactions, on the circumstance that they make reference to Decree-Law no. 102/2008 and to "Software in the process of certification by the AT", when such invoices were supposedly issued on dates prior to the approval of the Decree-Law in question, and to the entry into force of the software certification process by the AT and regarding all the invoices presented on the circumstance that all mention "document valid after good collection", without any proof having been made of the collection of the sums inscribed therein, a fact in itself sufficient to exclude the production of proof of the sale, by the invoices.

Thus being, although in theory it is not excluded that the invoice may be an appropriate document to prove the occurrence of the sale of a motor vehicle, in the concrete case, such is not verified, for the reasons pointed out.

Regarding the vehicles indicated in table III, the Tribunal understands that the evidence in the case file is not sufficient to create the conviction of the occurrence of the same. Namely, the Claimant did not attach any invoice or receipt relating to the alleged indemnifications received, but only "internal movements" and a "credit note", directed to the insurers but without indication of issuer. Added to this is that, although communications from insurance companies are in the case file, there is no document representing the effective realization of indemnification agreements with such companies, nor any documents relating to the scrapping of the vehicles pursuant to law.

Regarding the assessments contained in table IV, both make reference to Decree-Law no. 102/2008, and the invoice relating to the vehicle …-…-… , dated 01.01.2005, refers in details "salvage value indemnification total loss", also stating "document valid after good collection. Immediate payment by cheque" and "Software in the process of certification by the AT".

Regarding the vehicle …-…-… , the invoice is dated 01.04.2011, also stating in details "salvage value indemnification total loss", also stating "document valid after good collection. Immediate payment by cheque".

Also regarding these vehicles no proof was made of good collection of the sum mentioned nor, regarding the vehicle …-…-…, the fact that the supposed invoice mentions a Decree-Law that was only approved much later than its date, which would have deprived it of any credibility.

In any case, none of the invoices would be suitable to prove the transaction in question since no proof was made of payment which, pursuant to the same, was a condition of their own validity. Added to this is that, neither was any proof produced that the Claimant proceeded to deliver all necessary legal documentation for cancellation by the insurers of the vehicle registrations with the competent road authorities.

IV – The Applicable Law

1. Pursuant to article 3.º, no. 1 of the IUC Code, "the taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in the name of which the same are registered."[2]

The issue that arises in view of this precept concerns the question of whether the person in the name of whom the ownership of the vehicles is registered may prove, despite such circumstance, that he was not the owner thereof at the date of the tax event, for purposes of removing the quality of taxpayer of the tax.

1. Tax arbitral jurisprudence is unanimous in the sense that article 3.º, no. 1 of the IUC Code establishes a rebuttable presumption, a position which we follow.

In this sense, among many others, were the decisions rendered in arbitral proceedings numbers 26/2013-T, 27/2013-T, 14/2013-T, 170/2013-T, 256/2013-T, 286/2013-T and 289/2013-T, 140/2014-T, 228/2014-T, 230/2014-T, 333/2014-T, 366/2014-T, 350/2014-T and 680/2014-T[3]

1. In the case at hand, the self-assessments were made, taking into account the factual basis of the presumption.

The Claimant undertook to rebut the same, with the demonstration that it would no longer be the owner of the motor vehicles in question at the date of the tax events. It happens, however, that such proof was not made, as results from the decision rendered on the factual matter.

Thus being, not having the presumption established in article 3.º, no. 1 of the IUC Code been rebutted, the ground invoked in the request for arbitral pronouncement for the annulment of the assessment acts in question does not exist, which necessarily entails the unfoundedness of the further claims of the Claimant.

V – Decision

Thus, the arbitral tribunal decides not to decree the annulment of the assessments challenged and, in consequence, judges the request for arbitral pronouncement to be entirely unfounded.

Value of the action: € 2,725.56 (Two thousand, seven hundred and twenty-five euros and fifty-six cents), pursuant to the provisions of article 306.º, no. 2 of the CPC and 97.º-A, no. 1, paragraph a) of the CPPT and 3.º, no. 2 of the Regulation of Costs in Arbitration Proceedings.

Costs charged to the Claimant in the amount of €612 (six hundred and twelve euros) pursuant to no. 4 of article 22.º of the RJAT.

Let notice be given.

Lisbon, CAAD, 2 May 2016

The Arbitrator

Marcolino Pisão Pedreiro

[1] Code of Tax Procedure and Process annotated, 4th Ed., Vislis, 2003, p. 234.

[2] Article 2 of the same article further provides that "Finance lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract are equated to owners".

[3] Accessible at https://www.caad.pt/tributario/tributario-jurisprudencia.