IUC Tax on Leased Vehicles: Lessee vs Lessor Tax Liability in CAAD Arbitration 64/2017-T

ARBITRAL DECISION

I – REPORT

Claim

A..., S.A., a legal person no. ..., with registered office at Rua ..., ..., ...-... Lisbon, hereinafter referred to as the Claimant, presented, on 17-01-2017, pursuant to the provisions of paragraph a) of no. 1 of article 2º and article 10º of Decree-Law no. 10/2011, of 20 January, which approves the Legal Framework for Tax Arbitration (RJAT), a request for arbitral determination, in which the Tax Authority and Customs Authority (AT) is the Respondent, with a view to:

The annulment, on the grounds of violation of law, of the following Single Circulation Tax (IUC) assessment acts relating to the years 2013, 2014 and 2015, pursuant to paragraph c) of no. 1 of article 2º of the Code of the Single Circulation Tax (CIUC):

• Assessment notified through document no. 2013..., concerning the vehicle with registration number ... and the year 2013

• Assessment notified through document no. 2014..., concerning the vehicle with registration number ... and the year 2014

• Assessment notified through document no. 2015..., concerning the vehicle with registration number ... and the year 2015

• Assessment notified through document no. 2013..., concerning the vehicle with registration number ... and the year 2013

• Assessment notified through document no. 2014..., concerning the vehicle with registration number ... and the year 2014

• Assessment notified through document no. 2015..., concerning the vehicle with registration number ... and the year 2015

The condemnation of the Respondent to reimburse the sums paid relating to the assessed tax and to the payment of the corresponding compensatory interest.

Grounds of the Claim

To sustain its claim, the Claimant alleges, in summary:

• The motor vehicles on which the disputed tax assessments were levied were placed in financial leasing by the Claimant and were in force in the year (or, more specifically, in the relevant month of the year) in which the obligation to pay the IUC associated with the respective vehicle became due;

• On that date and, moreover, throughout the entire period during which the aforementioned contracts were in force – as occurs in any contract of this nature – the use of the respective motor vehicles was always exclusively the responsibility of the lessees.

• The (legal) ownership belonged, it is true, to the Claimant, as the lessor entity; however, it never enjoyed the vehicles, which were, from the moment of their acquisition, being used (solely and exclusively) by the lessees.

• It follows, therefore, without any margin for doubt, that the Claimant never enjoyed, from the outset, the motor vehicles in question. In other words, the potential for utilization of these vehicles never belonged to the Claimant.

• Consequently, and as shall be argued below, the Claimant cannot assume the capacity of taxable person for the tax levied upon it;

• In coming to demand the outstanding tax from the now Respondent, the AT acts on the basis of a foundation which, with due respect, appears to be incorrect: that the lessor of a given automobile is, in light of the Code of the Single Circulation Tax (CIUC), responsible for its payment, that is, it is the taxable person for this tax.

• Indeed, only in this way can it be understood that, even being aware of the existence of financial leasing contracts – and, indeed, of the identity of the lessees – it came to assess the due tax, by reference to the motor vehicles in question, in the sphere of the Claimant.

• The vexata quaestio underlying these proceedings essentially resides in determining who assumes the capacity of taxable person for the IUC due during the course of a financial leasing contract: whether the lessee, or the lessor entity (albeit owner).

• The IUC is the tax that seeks to burden taxpayers with the environmental and road costs associated with them, in a logic of equivalence and tax equality (cf. article 1º of the IUC Code).

• Thus, with respect to this tax, the legislator chose to burden the taxable person not in accordance with (and to the extent of) their wealth – departing from the principle of tax capacity – but rather in the fair measure of the cost to the environment and road infrastructure that that taxable person, through the use of motor vehicles, may generate.

• Underlying this incidence rule is, of course, the presumption of the potential for utilization of motor vehicles: it is precisely because one has at their disposal the right to use a vehicle – a generator of a certain level of pollution, wear on roads, etc. – that that taxable person has an increased potential to cause harm to the environment and infrastructure, harm which justifies, from an economic-legal perspective, their taxation under the IUC.

• In truth, and as is well known, the weight of the environmental component in the tax under consideration is very significant.

• This was, moreover, one of the central points of the global reform of vehicle taxation which, in 2007, promoted the replacement of the (now extinct) Vehicle Tax by the (current) IUC.

• As appears from Legislative Proposal no. 118/X, which preceded Law no. 22-A/2007, this reform was essentially marked by the necessity to subordinate vehicle taxation to the "principles and concerns of an environmental and energy nature that today characterize the discussion of vehicle taxation".

• At the time this Proposal was presented, it was assumed that "Portugal, like most European countries, [faced] grave difficulties in energy and environmental policy, resulting from the escalation of oil prices and the unstoppable increase in motorization rates. The fact that approximately 60% of the energy consumed in the Country originates from oil and the fact that more than two-thirds of that portion concerns the transport sector reveal a great energy dependency at the international level and the Country's exposure to the uncertain future of fossil fuels".

• Thus, the creation of the IUC (and, likewise, also the ISV) constituted "much more than the technical extension of the tax figures created in the 1970s and 1980s that preceded them, directed predominantly towards revenue collection, indifferent to the social cost resulting from motor circulation".

• Pursuant to the said Proposal, these taxes "constitute something different, figures already of the century in which we live, with which it is intended, certainly, to raise public revenue, but to raise it to the extent of the cost that each individual causes to the community".

• These are taxes that carry, therefore, a message of social responsibility; "beyond international commitments and the demands of energy policy which, more urgently, oblige us to undertake the present reform, it is hoped that it will contribute, in itself, to the transformation of mentalities and routines, to a clearer perception of environmental problems and to a healthier balance between the use of public transport and that of private transport".

• The determining criterion of taxation ceased to be (exclusively) engine displacement, and came instead to derive from "indicators of the polluting capacity of a vehicle", and it is certain that, "as a structuring and unifying element of these categories, the principle of equivalence is established",

• "thus making clear" – concludes the Proposal – "that the tax, as a whole, is subordinated to the idea that taxpayers should be burdened to the extent of the cost they cause to the environment and road network, and this is the raison d'être of this tax figure".

• At the time it presented it to Parliament, for it to be voted upon, the then Secretary of State for Fiscal Affairs explained that "the proposal for codification of the taxation or fiscality of motor vehicles, recently approved by the Government and sent to the National Assembly for discussion and approval, seeks to end an old legal system in its principles and formulation and to establish, at the same time, following the principles of the Government Program, the foundations for a fiscal policy on vehicles that takes into account the environmental and energy concerns of our time".

• In light of the above, there is no doubt that the tax now under consideration is strongly marked by an environmental logic, intended to be levied according to the potential for pollution to which a given motor vehicle lends itself (its "polluting capacity", as the Proposal identified above refers to).

• This concern of an environmental nature is reflected, as mentioned above, in the very configuration of the tax itself.

• Thus, as regards the rules for determining the tax base, up to the applicable rate, and even passing through the exemptions enshrined, a common thread is recognized throughout the IUC Code: the intention to tax the vehicle in the fair measure of its polluting potential.

• For, as explained by DIOGO LEITE DE CAMPOS, "the Single Circulation Tax does not have the vehicle, in itself, as the object of its incidence, but rather its use (in act or in potentiality)" (taken from an Opinion requested by 'ALF – Portuguese Association of Leasing, Factoring and Renting' (...)).

• Hence the corresponding obligation competes, in the first instance, with the person or entity that has the potential for utilization of said automobile; i.e., that has the potential for production of the pollution which it is intended, precisely, to discourage.

• In the majority of cases, it will be the owner of the automobile – who appears, for this very reason, referenced as a taxable person "of the first line" in no. 1 of article 3º of the IUC Code ("The owner is taxable person because it is to be presumed that the owner uses the asset", DIOGO LEITE DE CAMPOS in Opinion attached (...)).

• Beyond consisting, in the greater part of situations, in its principal user, the owner is, equally, the reference figure – before the Tax Authority (AT) and other public entities – for that particular motor vehicle.

• It is, so to speak, its most easily detectable user: in the measure that the ownership of a motor vehicle is subject to registration, the consideration of "ownership" as the generating fact of taxation (and, consequently, of the owner as taxable person) permits the AT to achieve a degree of control hardly replaceable,

• beyond, as mentioned above, proving itself – in the greater part of cases – entirely correct; after all, the rule is that, together with the holding of a vehicle, the individual also retains its use.

• In situations where this is not so, however, the ratio underlying the tax under consideration is violated; for in those cases, the person burdened with taxation is not the one to whom the potential for pollution is associated.

• In other words, in those cases, there is a mismatch between the behavior which consists in the "raison d'être of this tax figure" (expression taken from the Legislative Proposal identified above) – i.e., the use of the vehicle, with its potential to cause costs to the environment and road network – and the concrete reality: the owner, who bears the tax, is not the one who holds the potential for utilization of the corresponding vehicle.

• In most of these cases, there will be little that can be done: as mentioned, few indicators will permit control as effective, by the AT, as ownership.

• not only that: if the AT knows – or should know – that the owner, by force of the contract it entered into, is even prohibited from using the vehicle, since it assigned the right to its exclusive enjoyment to such a third entity.

• In essence: that the owner did not have, does not have, and will never have – while the contract is in force – the potential for utilization of that vehicle, which falls, thus, exclusively, to a third party, a third party who, moreover, is perfectly identified before the AT and other public entities.

• Not only by force of the registration, with the Motor Vehicle Registration Office, of the existence of a financial leasing contract, but also in virtue of the duty incumbent on lessor entities, pursuant to article 19º of the IUC Code, to "provide to the Directorate-General of Taxes the data relating to the tax identification of users of the leased vehicles" (cf. article 19º of the IUC Code) – such that it does not appear to be of any complexity the task of, fulfilling the purpose with which it was introduced into the national legal system, to impute to it the responsibility for the polluting capacity of the automobile and, subsequently, for its taxation.

• In those cases, there will be little sense, in light of the teleology that permeates this tax, for the owner to be burdened with the duty to pay the IUC.

• And, as taught by BAPTISTA MACHADO, "cessante ratione legis cessat eius dispositio" ("where the raison d'être of the law ends, its scope ends" – Introduction to Law and Legitimating Discourse, p. 186).

• It is therefore unsurprising that, in such cases, the legislator departed from the general rule of ownership – i.e., the rule that makes the person obliged to pay the tax coincide with the owner of the vehicle – in favor of greater adherence to the economic substance of the situation.

• I.e., chose to set aside the criterion of legal ownership – attributing relevance to mere circumstance of the holding of a motor vehicle – deciding instead to attend – and, in the opinion of the Claimant, correctly – to economic ownership, i.e., to the "complex of powers of enjoyment of an asset, which are merely, fundamentally, the powers forming part of the right of ownership, as recognized by the legal system" (Saldanha Sanches, 'The emergence of the concept of economic ownership in Tax Law: its nature and its limits (a particular case in the general problem of the relationship between Law and Economics)', The Limits of Tax Planning – Form and Substance in Portuguese, International and Community Tax Law, Coimbra, 2006, p. 29 et seq.).

• Thus, after establishing the general rule that the obligation to pay tax falls "[u]pon the owners of vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered".

• What is explained, moreover, by the reasons already put forward: the typicality of situations in which the owner is also the user, and the greater control associated with ownership – the tax legislator made them equivalent, immediately afterwards, "to financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract", thus recognizing that not always owners are the taxable persons for the IUC.

• In these cases – of financial leasing, acquisition with reservation of ownership, etc. – the legislator chose, thus, and (in the opinion of the Claimant) correctly, to burden with the tax obligation not the owners, but the individuals to whom it falls the exclusive enjoyment (potential for utilization) of the automobiles: the financial lessees, acquirers with reservation of ownership or lessees with purchase option. I.e., not their legal owners, but those to whom their economic ownership is incumbent.

• Something which, moreover, is in conformity with the presumption underlying this tax, to which reference was made above: the potential polluting capacity associated with the use of the motor vehicle on which the taxation falls.

• Now, according to no. 2 of article 3º of the IUC Code, the rule is very simple: with the exclusive enjoyment of the motor vehicle on which the contract is incumbent falling to the lessees, so too does the obligation to pay the tax.

• And this rule is, unless we are mistaken, the one which appears more consistent, precisely from the perspective of the ratio of the law, to which reference was made above: knowing in advance that the IUC seeks to impute to taxpayers the responsibility which is ascribed to them by the potential for utilization of motor vehicles – in what concerns the environmental and road costs that such utilization entails – it cannot fail to consist of the obligation of whoever actually causes such costs, and this shall not fail to be the person to whom belongs the right to use the vehicle in question.

Response

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

• (...) As is well known, it is in the text of the law that the answer to any problem should be sought; this is the starting point of the hermeneutical process and also its limit, in the measure that it is not possible to consider those meanings that do not have "(...) 'In the letter of the law a minimum of verbal correspondence, even if imperfectly expressed'."

• The tax legislator, in establishing in article 3º, no. 1 who are the taxable persons for the IUC, established expressly and intentionally that these are the owners (or in the situations provided for in no. 2, the persons enumerated there), being considered as such the persons in whose names the same are registered.

• Also the systematic element of interpretation of the law demonstrates that the solution advocated by the Claimant is untenable, finding the understanding upheld by it no support in the law.

• This follows not only from the aforesaid no. 1 of article 3º of the CIUC, but also from other norms enshrined in said Code.

• In these terms, and in the same sense, article 6º of the CIUC establishes, under the heading "Taxable Event and Exigibility", in its no. 1, that: "The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration number or entry in the national territory."

• From the articulation between the scope of the subjective incidence of the IUC and the constitutive fact of the corresponding tax obligation, it follows unequivocally that only the legal situations that are the object of registration (without prejudice to the permanence of a vehicle in the national territory for a period exceeding 183 days, provided for in no. 2 of article 6º) generate the birth of the tax obligation.

• On the other hand, no. 3 of the same article provides that "the tax is considered exigible on the first day of the taxation period referred to in no. 2 of article 4º".

• That is, the moment from which the tax obligation is constituted presents a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear (See articles 4º/2 and 6º/3 of the CIUC, article 10º/1 of Decree-Law 54/75, of 12 February, and article 42º of the Motor Vehicle Registration Regulations).

• In the same sense weighs the legislative solution adopted by the tax legislator in article 3º/2 of the CIUC in making the equivalences established there coincide with the situations in which motor vehicle registration requires its registration.

• In the absence of such registration, naturally, the owner will be notified to fulfill the corresponding tax obligation, for the Respondent, taking into account the current configuration of the legal system, will not have to proceed to assess the tax on the basis of elements that do not appear in public records and documents and, as such, are authentic.

• In these terms, the failure to update the registration, in accordance with the provisions of article 42º of the Motor Vehicle Registration Regulations, will be attributable in the legal sphere of the taxable person for the IUC and not in that of the Portuguese State, as the active subject of this Tax.

• For purposes of assessing the IUC, the Respondent proceeds to consult the databases, both of the Institute of Terrestrial Transport Mobility (IMTT), and of the Institute of Registration and Notary/Motor Vehicle Registration Office (IRN), as a way to determine the owners or financial lessees, acquirers with reservation of ownership or holders of the right of purchase option, taxable persons for the IUC in light of the provisions of article 3º of the CIUC, combined with article 6º of the same code.

• Once the taxable person for IUC is determined based on the persons in whose names the vehicle in question is registered with the Motor Vehicle Registration Office, the Respondent proceeds to assess the IUC in relation to these.

• After assessing the IUC, the taxable person in question comes to invoke on the ground of the conclusion of a contract (which, note, may even be of a merely verbal nature) that it is no longer the owner of the vehicle or that it gave the vehicle in financial leasing, but did not proceed with registration and that the taxable person is someone else.

• If one accepts the position defended by the Claimant (that article 3º of the CIUC can never be interpreted to the effect of seeking to tax only those appearing in the register as owner, since registration is mere appearance of reality), the Respondent would have to proceed to assess IUC in relation to that other person identified by the person appearing in the motor vehicle register to whom it had first assessed the IUC (or not, since it would suffice for the latter to set aside its capacity as taxable person on the date of the taxable event).

• On the other hand, after assessing IUC in relation to that other person, the latter could also allege and prove that it has meanwhile concluded a contract for sale and purchase, financial leasing, long-term rental, or another with another third party, but that this one also did not register.

• The Respondent would then have to again assess IUC against that other (presumable) taxable person

• Even placing in question the statute of limitations of the tax.

• And putting in question, unequivocally, legal security and certainty (in the measure that the institute of motor vehicle registration would cease to provide the security and certainty that constitute its main purposes), as well as the power-duty of the Respondent to assess taxes.

• Even admitting that, from the perspective of the rules of civil law and land registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real efficacy, in accordance with what is established in the CIUC (which in the matter at hand constitutes special law, which, under the general rules of law, derogates the general norm), the tax legislator expressly and intentionally wanted owners, lessees, acquirers with reservation of ownership or holders of the right of purchase option in long-term rental to be considered as persons in whose names the vehicles are registered.

• It is also important to demonstrate that in light of a teleological interpretation of the regime established throughout the CIUC, the interpretation advocated by the Claimant to the effect that the taxable person for the tax is the effective owner, regardless of whether such quality does not appear in the motor vehicle register, is manifestly wrong.

• And it is a wrong interpretation in the measure that it is the very ratio of the regime established in the CIUC that constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle register.

• Note in this regard from the outset that the cases exhaustively typified in article 3º of the CIUC, both in its no. 1 and in no. 2, correspond exactly to the cases of mandatory motor vehicle registration in accordance with the Motor Vehicle Registration Code.

• Indeed, the CIUC undertook a reform of the regime for taxation of vehicles in Portugal, substantially altering the vehicle taxation regime, with the taxable persons for the tax becoming the owners appearing in the property register, regardless of the circulation of the vehicles on public roads.

• That is, the IUC came to be owed by the persons who appear in the register as owners of the vehicles.

• In this sense, note the content of the parliamentary debates surrounding the approval of Decree-Law 20/2008, of 31 January, from which it follows unequivocally that the IUC is owed by the persons who appear in the register as owners of the vehicles.

• Indeed, the approval of said decree-law had as its objective to establish procedures intended to adapt motor vehicle registration to the new taxation regime, so as to avoid the existing problems, namely those related to the fact that there were many vehicles not registered in the name of the actual owner.

• And this precisely because the new IUC taxation regime came to substantially alter the vehicle taxation regime, with the taxable persons for the tax becoming the owners appearing in the property register, regardless of the circulation of the vehicles on public roads.

• Because the IUC came to be owed by the persons who appear in the register as owners of the vehicles.

• In light of all of the foregoing and by force of the provisions of article 3º of the CIUC and of article 6º of the same code, it was the Claimant, in its capacity as owner appearing in the Motor Vehicle Registration Office, the taxable person for the IUC.

• Hence all the reasoning advocated by the Claimant is tainted with error, and it is not possible to rebut the legal presumption established.

• However, even if it were not understood this way – which is admitted only by mere academic hypothesis – and accepting that it is admissible to rebut the presumption in light of the case law already established in this arbitration center, it will still be important to assess the documents produced by the Claimant and their probative value with a view to such rebuttal.

• Well, in order to rebut, the Claimant came to instruct its request for arbitral determination with the production of copies of the financial leasing contracts (See the documentary collection referred to as "Documents 7 to 9" attached to p.i.).

• Well, in view of what was alleged by the Claimant, the following question naturally arises: will the financial leasing contracts constitute sufficient proof to undermine the (supposed) legal presumption established in article 3º of the CIUC?

• In other words: will such contracts demonstrate that, on the date of the taxable events of IUC, the vehicles in question were (still) the subject of financial leases concluded by the Claimant?

• The answer cannot but be negative for the reasons which shall be set out, and for this reason Documents 7 to 9 attached to p.i. are impugned for all legal effects.

• Just as emerges clearly and unequivocally from the documentary collection referred to as "Documents 7 to 9", the financial leasing contract concerning the vehicle with registration number ... had its term on 2011-03-31.

• This meaning that on the date of the taxable events of IUC at issue here (i.e., 2013, 2014 and 2015) the aforementioned financial leasing contract had already ended.

• Therefore, the Claimant makes no proof regarding the effective exercise of the purchase option at the term of the financial leasing contract just mentioned, since it merely produced a mere promise-to-contract, that is, a document which merely serves as a declaration of intent, but is unfit to prove the effective purchase.

• Recall that it is the Claimant who asserts that "all acts of additional tax assessment are based on the same facts and, equally, on the same grounds of law", that is, that "(...) all of them presuppose the same tax-legal understanding: that in the pendency of the respective financial leasing contracts, the Claimant here, as lessor entity of the vehicles in question, is responsible for the payment of IUC (...)" (cf. articles 3º and 4º of p.i.).

• It further adds that if it were concluded that we were dealing with a financial leasing contract granted by the Claimant, it was still incumbent on the latter to demonstrate compliance with the ancillary obligation imposed by article 19º of the CIUC.

• Indeed, it is important to recall that the application of article 3º of the CIUC must be combined with the provisions of article 19º of the same code, in which it is established that "for purposes of article 3º of this code (...), entities that proceed to financial leasing, operational leasing or long-term rental of vehicles are obliged to provide to the Directorate-General of Taxes the data relating to the identification of users of the leased vehicles."

• In this way, if the thesis advocated by the Claimant is followed as to the fact that article 3º of the CIUC establishes a rebuttable presumption, then it is necessary to conclude that the functioning of that article (i.e., the rebuttal of the presumption) equally depends on compliance with what is established in article 19º of the CIUC, as is evident from its literal element ("for purposes of article 3º of this code (...)".

• In simpler terms, in the matter of financial leasing and for purposes of rebuttal of article 3º of the CIUC, it is necessary that financial lessors (like the Claimant) comply with the obligation inherent in article 19º of that code in order to exonerate themselves from the obligation to pay the tax.

• Now, the Claimant made no proof regarding compliance with this obligation, as was moreover incumbent on it, and therefore the intended rebuttal of article 3º at issue here will necessarily have to fail.

• Indeed, in the matter of financial leasing, the Claimant could only exonerate itself from the tax if it had complied with the specific obligation provided for in that provision of the CIUC.

• In this undertaking, that is, with the Claimant not having complied with that obligation, it is necessary to conclude that it is the taxable person for the tax.

• And do not allege to the detriment of the (necessary) application of article 19º the fact that this norm lacks supposed regulations, for this norm is self-sufficient.

• Indeed, the provision of data relating to the identification of users of the leased vehicles does not require any legal formality, and its fulfillment requires merely a communication addressed to the Respondent.

• Thus, having the Claimant not fulfilled the burden of proof incumbent on it and now finding non-compliance with the declarative obligation required by article 19º of the CIUC, two consequences (intra and extra-procedural) will necessarily have to be drawn from its omissive conduct:

• First, its responsibility for the costs of arbitration relating to this request for arbitral determination, given that the failure to provide the data inevitably gave rise to the issuance by the party of the assessments sub judice, in the terms best explained in a specific chapter.

• And secondly, to the determination of its responsibility in terms of contraventions in light of article 117º, combined with article 26º/4, both of the General Framework for Tax Infractions, punishable with a fine of €300.00 to €7,500.00 for each of the financial leasing contracts.

• In addition to all the above, it is also important to note that if the interpretation conveyed by the Claimant is accepted, then it is shown to be contrary to the Constitution, in the measure that such interpretation results in violation of the principle of trust, the principle of legal security, the principle of efficiency of the tax system and the principle of proportionality.

• In the Respondent's view, the interpretation defended by the Claimant entails a violation of the no less important principles of trust, legal security, efficiency of the tax system and proportionality.

• Indeed, the interpretation proposed by the Claimant, an interpretation that fundamentally devalues the registration reality to the detriment of an informal reality and unsusceptible to minimal control by the Respondent, is offensive to the basic principle of trust and legal security that should inform any legal relationship, here including the tax relationship.

• Parallelly, the interpretation given by the Claimant is offensive to the principle of efficiency of the tax system, in the measure that it results in an obstruction and increase in costs of the competencies assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent form part.

• In this sense, note the explanatory statement relating to Legislative Proposal no. 118/X, that is, the proposal for global reform of vehicle taxation:

• "The present legislative proposal undertakes a global reform of Portuguese vehicle taxation, approving the Code of the Vehicle Tax (ISV) and the Code of the Single Circulation Tax (IUC) and abolishing, at the same time, the vehicle tax, the municipal tax on vehicles, the circulation tax and the trucking tax.

• It thus undertakes, for the first time, a global and coherent reform of the taxes linked to the acquisition and ownership of motor vehicles, figures marked over time by a relative abandonment, governed by legal texts without secure systematics, nor evident ordering principle.

• It is also aimed at with this reform the deepening of the progress that, in recent times, has been made at the level of the tax administration, particularly with regard to the management of a complete, organized and reliable information system. With vehicle taxation now forming a coherent whole, it is important to eliminate administrative and compliance costs, betting on the prevention and control of situations of abuse and non-compliance

• Parallelly, the interpretation given by the Claimant is offensive to the principle of efficiency of the tax system, in the measure that it results in an obstruction and increase in costs of the competencies assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent form part.

• Now, the position defended by the Claimant is an understanding that is at the antipodes of that principle and of the very reform of vehicle taxation in the measure that, in seeking to disregard the registration reality, a reality that constitutes the cornerstone upon which the entire edifice of the IUC rests, it generates for the Respondent, and ultimately for the Portuguese State, additional administrative costs, obstruction of the performance of its services, absence of control of the tax and uselessness of registration information systems.

• Finally, the argumentation conveyed by the Claimant represents a violation of the principle of proportionality, in the measure that it completely disregards it in confrontation with the principle of tax capacity, when in reality the Claimant has at its disposal the legal mechanisms necessary and appropriate to safeguard that its capacity (e.g., motor vehicle registration, request for document seizure and request for cancellation of registration numbers), without, however, having exercised them in due time.

Meeting Provided for in Article 18º of the RJAT and Pleadings

With the agreement of the Parties, the Tribunal determined the exemption from holding the meeting provided for in article 18º of the RJAT.

Written pleadings were presented.

Pleadings of the Claimant

The Claimant states in its pleadings, with relevance for the decision of the case:

• Having been revoked, by the Tax Authority and Customs Authority (hereinafter, AT, or Respondent), in accordance with and for the purposes of article 13º of the RJAT, the act of assessment of IUC concerning the vehicle with registration number ..., in the global amount of €854.39, it now discusses the legality of 5 (five) acts of assessment of IUC, of 2 (two) of the vehicles better identified in Annex A of the request for arbitral determination.

• Note, however, that the only element that permits assessment of the revocation of the assessment concerning the vehicle with registration number ... is a motion filed with the case by the Respondent, in which it manifests the intention to revoke the assessment in question. In that measure, having the AT not proved that it proceeded with the revocation of such assessment, should this learned Tribunal consider that such did not occur, annulling it and noting this fact for purposes of costs.

• As regards the remaining assessment acts, the Claimant recognizes that the AT is correct in what it alleges in articles 82º and 83º of its response: the financial leasing contract concerning the vehicle with registration number ... had already ended on the date of the occurrence of the taxable event of the tax now in question. In that measure, recognizing the Claimant that only by oversight did it impugn, in the present seat, the assessments concerning such vehicle (with the numbers 2013..., 2014... and 2015..., it comes, in relation to the same – but only as to these – to withdraw from the claim.

• As to the question of who should be, in light of article 3º of the IUC Code, the taxable person for that Tax, the arbitral jurisprudence produced on the matter is uniform and peremptory to the effect that article 3º of the IUC Code establishes a rebuttable presumption and that, as such, during the course of a financial leasing contract, it will be the lessee who is the taxable person for the tax, even if the respective contract is not registered: see, for all, the arbitral decision issued in the case of process 73/2014-T (Arbitrator: José António Jesus dos Anjos), whose passages most relevant to the case at hand are taken the liberty of reproducing:

"Thus being the case, as it is, the lessor not having by legal and contractual obligation the potential for utilization of the vehicle and the lessee having exclusive enjoyment of the automobile, we reaffirm the conclusion we had already reached that, in our opinion, the ratio legis of the CIUC demands that in accordance with the referred no. 2 of article 3º of this Code it is the lessee who is responsible for the payment of the tax, since it is they who has the potential for utilization of the vehicle and causes the road and environmental costs inherent to it. (...)"

And it continues: "Having arrived here, we are of the opinion that if on the date of the occurrence of the taxable event of the tax a financial leasing contract is in force that has as its object an automobile, the taxable person for the tax is not the lessor but rather, in light of no. 2 of article 3º of the CIUC, the lessee, which, in our view, makes perfect sense, given that it is they who has the enjoyment of the vehicle and, as such, the inherent polluting potential".

• And do not say that this will only be so if the financial lease is registered with the Motor Vehicle Registration Office: that decision further refers to the responsibility for the payment of the tax being that of the lessee "regardless of whether the right of ownership registration remains in the name of the lessor".

• It is also important to stress that, contrary to what the AT argues in its response, the interpretation advocated by the Claimant and so often reviewed by the learned Arbitral Tribunal does not violate, in any way, the Constitution of the Portuguese Republic.

• Also on this matter the arbitral jurisprudence has pronounced unanimously. By way of merely exemplary, see what was decided within the scope of Process no. 372/2015-T (Arbitrator: Maria do Rosário Anjos):

"21. Thus, also the allegation of the Respondent regarding the interpretation defended by the Claimant translating a skewed reading of the law and being based on an interpretation contra legem, if it shows itself contrary to the Constitution, does not take.

Now, for all that has been set out above, it is clear that the arbitral tribunal does not accompany the Respondent in this allegation. It will, still, be important to add to all the arguments already exposed, one last one taken from the jurisprudence of the Constitutional Court (TC) itself. Thus, be it noted that, contrary to what was alleged by the Respondent, the consideration that the provision in article 3º, no. 1, of the CIUC establishes a rebuttable presumption represents the best interpretation and the one most in conformity with the Constitution, as appears from the judgment of the TC with no. 348/97, of 29.4.1997, a position reiterated in judgment no. 311/2003, of 28.4.2003, which declare the unconstitutionality of the "establishment by the tax legislator of a presumption juris et de jure since it 'completely prevents taxpayers from the possibility of contravening the presumed fact, subjecting them to a taxation which may be based on a taxable matter fixed against their will and against the principle of tax equality'. In this conformity, the allegation of the Respondent is not seen to be capable of acceptance."

• All that the Claimant has been arguing has also already been recognized by the Respondent itself, in the framework of other processes, in all respects identical to the one at hand.

• Indeed, in the case of arbitral process no. 129/2014-T, in which there was at issue a dispute in all respects identical to the present, the AT came to request the subsequent uselessness of the dispute by having revoked all of the IUC assessment acts.

• And it revoked them because, in accordance with the Legal Opinion of the Department of Legal Consulting Services and Litigation, it was not in the right:

"Thus, and with the respective lessees duly noted, the assessments now reviewed, i.e., concerning the years 2010 to 2012, should have been issued in the name of the lessees, as provided in no. 2 of article 3º of the CIUC and not in the name of the owner, as – they indeed were under no. 1 of article 3º of the CIUC".

• It is here important to highlight the fact that the AT itself has acknowledged that, even in cases where the lessees are duly "noted" in the system, the aforementioned insufficiency of means (also referred to by the Head of Finance) leads to the assessments being issued in the name of the owner, as they were in the case at hand, i.e., in the name of the Claimant.

• Now, considering that on the date when the IUC would be due, the vehicles to which the assessments refer, still in question in the present case, were covered by leasing contracts, the learned Arbitral Tribunal can never fail to consider that the taxable person for the tax in question shall be the respective lessee.

• And do not say that the mere presentation, in the arbitral seat, of a copy of the financial leasing contracts concluded is not sufficient to rebut the presumption contained in article 3º of the IUC Code.

• This is because the force and validity of the contracts in question, joined by the Claimant with its request for arbitral determination, was never put in question by the Respondent, once it did not contest or impugn, at any moment, any aspect, material or formal, of the documents in question.

• Note that, as concerns "impugning documents", the Respondent states, in article 81º of its response, that "Documents 7 to 9 attached to p.i. are impugned for all legal effects". However, such reference to impugnation of documents is of no avail, as it does not specify what impugnation is meant. What did the Respondent want to impugn? The veracity of the documents? The veracity of the signatures affixed to them? The veracity of their content? In the absence of reference, the Respondent, as regards the documents in question, impugned nothing.

• Indeed, the Respondent neither impugned the letter, nor the signature, nor the mechanical reproduction of the document in accordance with article 444º of the Code of Civil Procedure. It also did not argue the lack of authenticity of the document and not even its falsity, in accordance with article 445º of the same Code.

• That is, it did not impugn neither the genuineness of the documents nor did it even seek to rebut their authenticity (if these were authentic documents) or probative force.

• That is, in accordance with the applicable legal norms, the content of the documents in question must necessarily be considered true, by not being discredited nor impugned, thus proving that the vehicle with respect to which the IUC assessments still at issue are incident was found, on the date of the respective taxable event, subject to a financial leasing contract.

• And further be it said that the validity and efficacy of such contracts is not prejudiced by the circumstance that they may not have been duly registered with the competent Motor Vehicle Registration Office. This is because, under article 7º of the Code of Land Registration (subsidiarily applicable to Motor Vehicle Registration by referral of article 29º of Decree-Law no. 54/75, of 12 February), the registration of this type of contracts is merely declarative, not constitutive, giving rise only to a presumption that the rights exist in the terms in which they are inscribed, subject to proof to the contrary.

• In the response presented by the AT, it comes to assert that the Claimant will not have complied, regarding the vehicles in question, with the ancillary obligation incumbent on it, to communicate to the Directorate-General of Taxes the data relating to the tax identification of users of the leased vehicles and that, having failed to comply with such obligation, it would be necessary to conclude that the Claimant would be the taxable person for the respective IUC.

PLEADINGS OF THE RESPONDENT

In turn, the Respondent also presented written pleadings, in which it counter-pleaded the following:

• The Claimant at no moment gave compliance to the communication obligation provided for in article 19º of the CIUC. That is, the Claimant did not fulfill the information duty that would provide the Respondent with knowledge of the existence of the supposed financial leasing contracts, since, as was also stated in that section, the IUC is assessed in accordance with the registration information timely transmitted by the Institute of Registrations and Notary, and it is certain that this did not transmit data capable of revealing the existence of such contracts.

• Consequently, it was incumbent on the Claimant to prove compliance with that information duty, for, as a negative fact, such burden shifts from the Respondent to the Claimant.

• Now, it happens that in the present case the Claimant did not demonstrate, as was incumbent on it, the fulfillment of that duty as it seeks to make believe.

• Therefore, by not having proceeded with the care that was required of it, it inevitably led the Respondent to follow the registration information that was provided to it by the proper party, that is, the Institute of Registrations and Notary, holder of the motor vehicle registration data.

• Circumstance which cannot fail to be taken into account in the determination of responsibility for the payment of the costs of arbitration arising from this process. In this sense, see the decision issued in the process which, under no. 742/2016-T, proceeded in the CAAD.

II. PROCEDURAL MATTERS

The sole Arbitral Tribunal was regularly constituted on 28-03-2017, with the Arbitrator being designated by the Deontological Council of CAAD, with the respective legal and regulatory formalities fulfilled (articles 11º, no. 1, paragraphs a) and b) of the RJAT and 6º and 7º of the Deontological Code of the CAAD), and is competent ratione materiae, in accordance with article 2º of the RJAT.

The Parties have legal personality and capacity and are duly represented.

The joinder of claims is admissible under article 2º, no. 1 of the RJAT.

No nullities were identified in the proceedings.

III. PARTIAL WITHDRAWAL OF THE CLAIM

In its pleadings, the Claimant declares that it withdraws from the claim insofar as it concerns the assessments notified through documents 2013..., 2014... and 2015..., as there are no elements that sustain them, declaring that it was due to an initial oversight the inclusion of the same in the scope of the claim.

Thus, in view of the freedom to withdraw from the claim, in whole or in part, which prevails in procedural law, in accordance with article 283º, no. 1 of the Code of Civil Procedure, applicable to the tax arbitral process ex vi of article 29º, no. 1, paragraph e) of the RJAT, the partial withdrawal of the claim is approved.

IV. QUESTIONS TO BE DECIDED

The question to be assessed and decided is that of the subjective incidence of the Single Circulation Tax assessed in the cases at hand.

The question may be subdivided into two, in order to organize the reasoning so as to cover the range of arguments presented by the Parties:

The first question shall be that of defining, in the abstract, who is the taxable person for the tax during the course of a financial leasing contract.

The second shall be the question of knowing what formal conditions are necessary to be verified in concreto for the translation of the passive subject status of the tax from the owner to the lessee of the vehicle to occur and whether, in the concrete cases at hand, such conditions are verified.

V – PROVEN FACTS

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

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

2nd: The IUC assessments concerned vehicles whose ownership was registered in the name of the Claimant on the date of the tax events;

3rd: The Claimant concluded, in its capacity as lessor, financial leasing contracts for all of the vehicles on which the impugned assessments were levied;

5th: The financial leasing contract concerning the vehicle with registration number ... had its term on 2011-03-31;

6th: The IUC assessments concerning this vehicle refer to the years 2013, 2014 and 2015;

The proven facts were so on the basis of the documents produced in the case.

It is considered as not proven:

1st: that the assessment no. 2015..., concerning the vehicle with registration number ..., concerning the year 2015, in the amount of €854.39, was revoked, since the act of revocation does not appear in the administrative record nor any proof of that revocation was brought to the case. Indeed, the only element of proof of which the Tribunal has in relation to the revocation of the indicated assessment is a motion of the Respondent to the case on 10-12-2015, in which it is read: "The Respondent shall proceed with the revocation of the IUC assessment concerning the vehicle with registration number ..., as well as the respective interest." This document, which contains only a declaration of intent, cannot be considered proof that the said act was revoked.

2nd: That the Claimant communicated the conclusion of the financial leasing contracts in question, under article 19º of the CIUC (by then revoked but which still was in force on the date of the relevant facts).

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

VI – REASONING

Determination, in the Abstract, of the Subjective Incidence of the Single Circulation Tax During the Course of a Financial Leasing Contract

The first question which must be clarified, in the perspective of following the argument of the Parties, is that concerning the determination, in the abstract, of the subjective incidence of the Single Circulation Tax in the event of the course of a financial leasing contract of the vehicle on which the taxation falls.

On this question there already exists considerable arbitral case law which unanimously considers that, when, on the date of the occurrence of the taxable event of the tax, a financial leasing contract is in force, the taxable person for the tax is not the owner of the vehicle but rather, in light of no. 2 of article 3º of the CIUC, the lessee of the same (see the arbitral decisions issued in processes no. 14/2013-T, of 15-10-2013; no. 294/2013-T, of 2014-06-06; no. 775/2014-T of 26-11-2015; no. 136/2014-T, of 14-07-2014; no. 137/2014-T, of 2014-10-21; no. 232/2014-T, of 09-12-2014; no. 191/2015-T of 26-10-2015; and no. 169/2015-T of 30-09-2015).

For our part, this is also the position which we subscribe to, for the reasons which we shall summarily set out.

Article 3º of the IUC Code has the following wording:

Article 3º

Subjective Incidence

1 - The taxable persons for the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered.

2 - Equivalent to owners are financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract.

3 – (…)

For the question which now concerns us, the interpretation of no. 2 of the provision is relevant, namely the determination of the meaning of the equivalence which the legislator performs there. Given the systematic insertion of the legal provision, it seems to us to be beyond any doubt that the same refers to the subjective incidence of the tax. And being thus, the meaning of the norm is that "financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract" are equivalent to owners for purposes of the subjective incidence of the tax, i.e., for purposes of determining who is the taxable person for the tax.

Subjective tax liability occurs as direct taxpayers, substitutes or persons liable for third-party debt, in accordance with article 18º, no. 3 of the General Tax Law (LGT).

In the case of no. 2 of article 3º, with nothing being found in the law that permits us to speak of a situation of tax substitution or liability for third-party debt, it must be concluded that financial lessees, acquirers with reservation of ownership, and other holders of purchase option rights by force of the leasing contract are taxable persons for the tax as direct taxpayers. In this sense is clearly indicated by the very literality of the norm, when it equates these holders to the owner.

And in the same sense leans further the ratio of the provision, since the situations of financial lessee, of acquirer with reservation of ownership and of holder of purchase option right by force of the leasing contract are legal situations whose substantial content, namely in terms of the powers which fall to the holders, approximates very much to what is proper to the right of ownership.

One could, finally, question whether the legislator intended to establish a joint and several passive liability, in accordance with article 21º of the LGT.

As to this aspect we accompany the decision dictated in process 232/2014-T, of 09-12-2014: "It not being a question of a linear solution, and it being possible to elaborate arguments in either of the possible senses of response, it is understood that the response to be given should be affirmative, that is, that in the case of the existence of an "equivalent" to owner, the subjection of this (of the owner) shall be set aside, being only the "equivalent" the taxable person for the tax."

And we decide ourselves for this interpretation because, with nothing being found in the norms in question that indicates in that sense, and with passive tax joint and several liability being an exceptional situation, we do not see that there is in the situations in question any reason for the legislator to have intended to establish it. More specifically, we believe, for the reasons already mentioned above, that, being the position of the financial lessee substantially equivalent to that of the owner, and being this one deprived of all the powers which integrate ownership, only in relation to the lessee are substantially verified the presumptions of taxation.

Being thus, we conclude that, during the course of a financial leasing contract, the sole taxable person for the tax is the lessee, and not the owner.

Let us see next the second question, relating to the formal conditions on which, in concreto, depends the translation of the position of taxable person from the owner to the lessee.

Existence of Formal Conditions for the Translation, in Concreto, of the Subjective Incidence of the Owner to the Lessee of the Vehicle

Before all else, it must be reserved that, in examining the question of the translation of the subjective incidence of the IUC from the owner of the vehicle to the respective lessee, what is at issue is not any sort of rebuttal of any presumption.

Whereas, in the situation of sale of the vehicle, when the motor vehicle register is not altered, the definition of the subjective incidence is confronted with two presumptions, that contained in article 3º, no. 1 itself of the CIUC and that of the motor vehicle register, both to the effect that the owner of the vehicle is the person in whose name the same is registered, in the case of leasing of the vehicle, no presumption is called into the controversy.

Indeed, it is not put in question that the owner of the vehicle is the person in whose name the same is registered, and therefore it becomes unnecessary to rebut the presumption of the register in that sense.

It is rather only discussed whether it is necessary for the lessee of the vehicle and not its owner to be the taxable person for the tax, a question which has nothing to do with any presumption.

For the translation of the passive incidence of the tax from the owner to the lessee of the vehicle to occur, in accordance with article 3º, no. 2, it is necessary, before all else, that a valid financial leasing contract be in force at the moment of the occurrence of the tax event.

Now, this question is not even raised by the Parties, and designedly by the Respondent, which would be the one to whom it would be incumbent to raise it.

The Claimant presents copies of the financial leasing contracts. The Respondent does not question or impugn neither the formal validity of the contracts nor their content, nor does it also question the situation relating to their respective force.

The Respondent announces, it is true, an intention to impugn the probative value of the contracts, saying: "In other words: will such contracts demonstrate that, on the date of the taxable events of IUC, the vehicles in question were (still) the subject of financial leases concluded by the Claimant? The answer cannot but be negative for the reasons which shall be set out".

The truth, however, is that the Respondent does not minimally explain these reasons which it promises to set out.

Now, the Tribunal, by force of article 608º, no. 2 of the Code of Civil Procedure, applicable in the tax arbitral process by force of article 29º, no. 1, paragraph e) of the RJAT, cannot concern itself except with the questions raised by the parties, unless the law permits or imposes to it the knowledge of others ex officio, which is not the case.

Consequently, neither the existence, nor the formal or substantial validity, nor the force of the financial leasing contracts in which the Claimant bases its claim are questions which fall within the power of cognition and decision of the Tribunal, in the case.

The Respondent alleges, rather, that the leasing contracts are not to be taken into account for purposes of determining the passive incidence of the tax because the communication of the same to the Tax Authority was not effected in accordance with article 19º of the CIUC and, on the other hand, the respective registration was not effected.

Let us see:

The financial leasing contract of a motor vehicle is subject to mandatory registration, in accordance with article 5º, no. 1, paragraph d) and no. 2 of the Motor Vehicle Registration Code (Decree-Law 54/75, of 12/2).

However, as is well known, registration does not have constitutive efficacy, being intended to give publicity to the registered act, functioning as mere presumption, rebuttable (presumption "juris tantum") of the existence of the right (articles 1º, no. 1 and 7º, of the Land Registration Code, and 350º, no. 2, of the Civil Code) as well as of the respective holding.

On the other hand, also in the IUC Code no provision is found that makes the subject liability for tax of the financial lessee dependent on the registration of the respective contract.

Although the Respondent concerns itself at length to demonstrate that the management system of the IUC is based on motor vehicle registration, which is accepted, the truth is that the Respondent points to no legal provision, within the CIUC or outside of it, from which one can extract with certainty the norm: "where there is no registration, there is no passive subject status".

But there is yet another legal datum which makes the judgment lean, in our view decisively, to the effect that registration of the financial leasing contract cannot be a condition for the translation of passive subject status from the owner to the lessee. It is that the subject of the registration obligation, in the case of financial leasing, is the lessee, and solely the lessee, in accordance with article 8º-B of the Land Registration Code, applicable to motor vehicle registration by force of article 29º of the Motor Vehicle Registration Code.

Now, it is not defensible that the lessor shall see fall upon itself the subject status for tax, which in principle would not fall to it by force of article 3º no. 2 of the CIUC, by not having adopted a conduct to which it is not obliged.

Being thus, it must be concluded that the financial lessee of a motor vehicle is a taxable person for the IUC irrespective of whether the contract is or is not registered. As such, the non-existence of registration in the cases of the present case is not preventive of the subjective incidence of the IUC falling upon the lessee.

As to the fact that the Claimant did not communicate the financial leasing contracts to the Tax Authority, we also do not see it as preventive of the subjective incidence of the tax falling upon the lessee.

On this question, we maintain the position which we have already adopted in a prior decision, in process no. 655/2015-T, in which we expounded our position in the following terms:

"(...) [W]e consider that, being the subjective incidence an element of the tax obligation which cannot fail to be perfectly delimited by law (principle of tax legality, in accordance with article 103º no. 2 of the Constitution of the Portuguese Republic), and with nothing being found in the law that unequivocally leads us to conclude that the legislator intended to make the translation of the subjective incidence from the owner to the lessee dependent on compliance with the obligation provided for in the by then revoked article 19º, and configuring this obligation as an ancillary obligation, it is not legitimate to consider that the fulfillment or non-fulfillment of this ancillary obligation was determinative of the subjective incidence of the tax.

We accompany, as to this aspect, the doctrine already followed in various arbitral decisions, such as for example that issued in process no. 191/2015-T of 26-10-2015, in which it is said:

"For these cases, the legislator instituted an explicit rule, in no. 2 of article 3º of the CIUC, according to which, during the course of the leasing contract, it is the lessees who are the taxable persons for the tax. (…) It will be asked still: and as to the communication provided for in article 19º of the CIUC? Does its non-compliance contend with the conclusion contained in the previous paragraph as to the responsible party for the payment of the tax? The answer is, in our opinion, negative. Indeed, the consequence which follows from the non-compliance of that ancillary obligation is that which we witness: the AT issues the assessment notices in the name of the owner of the vehicle, by not knowing that the financial leasing contract was concluded. However, this does not prevent that same owner / lessor from making proof of the conclusion of the contract and of the period for which the same was concluded and, thus, to prevent the payment of the tax."

And a little further ahead, the same decision continues:

"It is still important not to forget that the failure of the Claimant is subject to liability for contraventions in light of article 117º, combined with article 26º no. 4, both of the General Framework for Tax Infractions, punishable with a fine of €300.00 to €7,500.00 for each of the financial leasing contracts. That is the manner found by the legislator to penalize whoever fails to comply with the information duty towards the AT."

In the same sense the decision pronounced in process no. 232/2014-T, of 09-12-2014, in which it was written:

"What is not opposed to what has just been concluded is the circumstance that the Claimant may not have given due compliance to the provision of the aforesaid article 19º of the CIUC. Indeed – and as is obvious – the sanction for non-compliance of any obligation which in that respect may fall or may have fallen to the claimant, shall always have to be sought in the Field of the Framework for Tax Infractions, and not, naturally, in the subject liability for a tax".

In the same sense still pronounced the arbitral tribunal in process no. 136/2014-T of 14-07-2014, in which it reads:

"The subjective incidence of the IUC is established, in all of its elements, in article 3º of the CIUC, and it is through the application of this normative that the taxable person shall be determined, with the failure to comply with the aforementioned ancillary obligation being irrelevant for purposes of the incidence of the tax."

It is this position which we also defend. Non-compliance with an ancillary obligation cannot determine the subjective incidence of the tax, strictly as it is subject to the principle of tax legality, unless such is clearly determined in the law."

If the legislator intended that the translation of the position of taxable person from the owner to the lessee of the vehicle be dependent on the communication of the contract, by the lessor, to the Tax Authority, it should have said so. This is because the subjective incidence of the tax is one of the elements of the tax covered within the scope of the principle of tax legality, and therefore it must be possible to determine it with security from the text of the law.

Therefore, it cannot be considered that the failure to communicate the contract, by the lessor, to the Tax Authority, in accordance with the revoked article 19º of the CIUC, implies that the lessor becomes the taxable person for the tax, instead of the lessee.

And thus, it must be concluded that neither registration nor communication in accordance with article 19º of the CIUC (by then revoked) are a condition for the translation of the position of taxable person from the owner to the lessee of the vehicle to occur.

In these terms, with neither the validity nor the force of the financial leasing contracts having been put in question, it must be concluded that it is the lessees of the vehicles who are the taxable persons for the tax and not the owner of the same.

VII. DECISION

For the reasons set out, it is decided:

1. That the claim for annulment of the assessments of Single Circulation Tax notified to the Claimant through documents no. 2013..., concerning the vehicle with registration number ... and the year 2013; no. 2014..., concerning the vehicle with registration number ... and the year 2014; and no. 2015..., concerning the vehicle with registration number ... and the year 2015, is granted;

2. That the claim for condemnation of the Respondent to reimburse the sums paid by the Claimant relating to the assessed tax and to the payment of the corresponding compensatory interest, in accordance with article 43º of the General Tax Law, is granted.

Economic Value of the Dispute

The economic value of the dispute is fixed at €1,263.17.

Costs

In accordance with article 22º, no. 4, of the RJAT, the amount of costs is fixed at €306.00, in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings.

The costs are divided into the following amounts, taking into account the terms of article 527, nos. 1 and 2 of the Code of Civil Procedure:

• €25.50 chargeable to the Claimant, relating to the claims which are the subject of withdrawal;

• €280.50 chargeable to the Respondent, relating to the remaining claims.

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

Lisbon, Administrative Arbitration Center, 26 October 2017

The Arbitrator

(Nina Aguiar)