IUC Vehicle Tax Subjective Incidence and Legal Presumption – CAAD Arbitration 643/2014-T

ARBITRAL TAX JURISPRUDENCE

Case No. 643/2014-T

Date of Decision: 2020-01-23

Amount of Claim: €843.44

Subject Matter: IUC (Single Circulation Tax) – Subjective Incidence, Legal Presumption, Compensatory Interest, Bad Faith Litigation – Amendment of Arbitral Decision (attached to decision)

• Replaces the arbitral decision of 30 April 2015

ARBITRAL DECISION

The Arbitrator Paulino Brilhante Santos, appointed by the Deontological Council of the Administrative Arbitration Center (CAAD) to form the Single Arbitral Tribunal, constituted on 30 October 2014 (order of the President of the Deontological Council of the CAAD of 30 October 2014), hereby transmits the following:

I. REPORT

1. On 29 August 2014, the company A..., S.A., with collective person number ..., with registered address at Rua ..., n.º..., ...-... Lisbon (hereinafter abbreviated and identified as the Claimant) requested the constitution of the Single Arbitral Tribunal in tax matters, in accordance with the provisions of Articles 2(1)(a) and 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as RJAT), in conjunction with Articles 1(a), 2, and 3 of Ordinance No. 112-A/2011, of 22 March.

2. In the request for constitution of the Single Arbitral Tribunal, the Claimant sought to have the said Tribunal declare the illegality and consequent annulment of the official assessment acts relating to the Single Circulation Tax (IUC) regarding 9 vehicles effected by the Tax and Customs Authority (hereinafter abbreviated as the Respondent Authority).

3. The request for constitution of the Single Arbitral Tribunal was accepted on 01 September 2014 by the President of the CAAD, and the Parties were notified on 02 September 2014.

4. The Claimant did not appoint an arbitrator, so, pursuant to Article 6(1) of the RJAT, the undersigned was appointed by the President of the Deontological Council of the CAAD to form this Single Arbitral Tribunal, with the appointment accepted as legally provided, and the Parties notified of such appointment on 15 October 2014. The Tribunal was constituted pursuant to Article 11 of the RJAT on 30 October 2014.

5. On 03 December 2014, the Respondent Authority filed its Defence raising a dilatory plea of partial lack of standing.

6. On 06 January 2015, the Claimant filed a reply to the Respondent Authority's Defence regarding the dilatory plea raised by the Respondent Authority.

7. On 03 March 2015 [note: document states "2014"], the First Meeting referred to in Article 18 of the RJAT took place with the Parties, and the corresponding minutes were drawn up, attached to the case file, and the full contents thereof are hereby deemed fully incorporated herein.

8. Within the scope of this First Meeting (hereinafter "the Meeting"), the Arbitral Tribunal decided:

8.1 The suspension of the Meeting so that the Claimant would attach to the case file a commercial certificate of company B..., with a period for the Respondent Authority to comment, if it so wished;

8.2 The notification to the Respondent Authority of the Claimant's Reply to the dilatory plea, with a 10-day period for the Respondent Authority to comment;

8.3 And finally, the date of 24.03.2015 was set for continuation of the Meeting.

1. On 05.03.2015, the Respondent Authority commented on the Claimant's Reply to the dilatory plea raised by the Respondent Authority in its Defence.

2. On 06.03.2015, the Claimant attached to the case file the commercial certificate of company B.... The Respondent Authority commented on the attachment on 13.03.2015.

3. In the Meeting held on 24.03.2015:

11.1 The witness called by the Claimant was examined;

11.2 The Parties expressed preference for submitting their arguments in writing, so a period was set for the parties to present their arguments.

11.3 At the closure of the Meeting, the date of 30.04.2015 was set for rendering the Arbitral Decision.

1. The Parties submitted their arguments in writing within the set periods, maintaining, in substance, albeit with further considerations and developments, the positions assumed in their respective Initial Request and Defence.

2. It should be noted that the Respondent Authority raised in its Final Arguments the issue of bad faith litigation on the part of the Claimant, with the essential argument that the Claimant had shifted from an initial procedural position according to which B... – in whose universality of legal position the Claimant succeeded – would have had no assets or liabilities to come to arbitral judgment to sustain that, in fact, B... always had various motor vehicles in its assets.

3. Thus, it is important to note that the Claimant supported its claim in summary as follows:

14.1 The Claimant (and, before it, B..., whose asset portfolio was assumed by the Claimant) is a credit institution that, among other activities, offers customers financing in the automobile sector;

14.2 In the exercise of its activity, the Claimant enters into financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles;

14.3 The present request for arbitral decision is deduced by reference to 11 (eleven) acts of additional IUC assessment relating to the years 2013 and 2014, concerning 9 (nine) vehicles, which are identified in Annex A forming part of the request for arbitral decision, which is hereby deemed fully incorporated;

14.4 The Claimant raised a preliminary issue referring to the fact that one of the acts of IUC assessment (the last one identified in Annex A) was addressed to the company "B..., SA", a company currently closed, previously owned exclusively by the Claimant;

14.5 The Claimant refers that the motor vehicle referred to under number 11 of Annex A, with registration number ..., was the subject of a financial leasing contract entered into by B...;

14.6 In this contract, B... assumed the position of lessor entity, which, with its extinction, was assumed by the Claimant as the controlling company of B... and responsible for its dissolution and liquidation;

14.7 The Claimant also refers that, in 2014, the year to which the IUC in question relates, it was already the Claimant that appeared as lessor of the respective vehicle;

14.8 Accordingly, the Claimant considers that it has procedural standing to present the request for arbitral decision regarding the assessment act referred to;

14.9 The Claimant declares that the motor vehicles identified in Annex A were given in financial leasing;

14.10 And that at the end of these Contracts, the lessees of the respective vehicles exercised their purchase option and became owners of these vehicles;

14.11 The Claimant was notified to proceed with payment of the IUC relating to the assessment acts identified in Annex A;

14.12 Following the notifications, the Claimant proceeded with the respective payment, although it alleges that the Respondent Authority, in light of prior consultations, should have known that the motor vehicles in question were no longer its property at the moment when the tax should have been paid;

14.13 "In fact, in the years (and, a fortiori, in the months of those years) to which the said assessments relate, the vehicles to which they correspond had already left the legal sphere of the Claimant, with the respective ownership belonging to another";

14.14 "Therefore, as of the dates to which the tax facts giving rise to the IUC assessments at issue here relate, the Claimant was no longer the owner of the vehicles to which they refer";

14.15 The Claimant thus alleges that, consequently, it cannot assume the status of passive subject of the tax that was assessed to it and cannot therefore be responsible for its payment;

14.16 "(...) even though in the year (or in the month) to which the IUC at issue relates, the transfer of the said vehicles was not duly registered at the Motor Vehicle Registry Office";

14.17 Subsidiarily, the Claimant alleges that even before selling the respective vehicles, it could not be considered a passive subject of the corresponding IUC because financial leasing contracts fell on such vehicles and the responsibility for payment of the IUC fell on the lessees;

14.18 Making reference to the illustrious jurist Agostinho Cardoso Guedes, the Claimant concludes that the absence of registration of motor vehicle ownership is not a condition of validity of the purchase and sale contract nor a condition for production of the transferential effect thereof;

14.19 The Respondent Authority cannot therefore use the argument of lack of transfer registration to demand payment of the outstanding tax from the Claimant;

14.20 Fully subscribing to the considerations of the said illustrious jurist, the Claimant alleges that once the vehicle is sold to the lessee, the latter becomes the owner thereof, with Article 3 of the Code of the Single Automobile Tax (CIUC) being applicable;

14.21 The Claimant further alleges that, through the said considerations, pursuant to Articles 874, 879, and 408(1) of the Civil Code (CC), the legal fact that determines the transfer of ownership is solely the contract and no other subsequent fact;

14.22 Continuing, the Claimant refers that, in accordance with Article 29 of Decree-Law No. 54/75, of 12 February, the provisions relating to land registration are applicable to motor vehicle registration, with the necessary adaptations, to the extent indispensable to fill gaps in the specific regulation thereof;

14.23 Referring thus to Articles 1 and 7 of the Land Registration Code (CRP), the primary function of registration is to give publicity to the legal situation of goods and the inscription in the registry of a certain good constitutes a double presumption, it being presumed that the right exists in the precise terms in which the registry defines it and that the right belongs to the registered owner in the precise terms defined in the registry;

14.24 Concluding that these presumptions are rebuttable through proof to the contrary pursuant to Article 350(2) of the CC;

14.25 Continuing, the Claimant alleges that although the absence of registration does not affect the acquisition of the status of owner, "it is true that it does, however, prevent the full efficacy of the purchase and sale contract; but not as to all entities";

14.26 The Claimant relies on the considerations of the illustrious jurist who, making reference to Articles 4(4) and 6(1) of the CRP and Article 892, second part of the CC, considers that "where the payment of IUC is at issue, and the Tax Administration does not fall within the concept of third party for purposes of registration, since it does not acquire from the same transferor rights wholly or partially incompatible with those of the buyer, one can conclude readily that the former cannot shield itself behind the absence of registration of the transfer to demand payment of the tax due by the previous owner, whether the latter is a lessor or any other person or entity";

14.27 Concluding that "the Tax Administration does not meet the legal requirements of the concept of third party for purposes of registration (provided for in Article 5(4) of the CRP), reason for which it cannot demand from the seller payment of the tax due by the buyer (owner) from the moment the presumption in Article 7 is rebutted through proof of the respective sale";

14.28 And further making reference to the considerations of the illustrious jurist, the proof referred to above may be made by any means, since the law does not require written form;

14.29 "The Tax Administration cannot refuse or ignore the proof produced, unless it has well-founded reasons to question the authenticity or veracity of the document";

14.30 Concluding that the assessments made in the sphere of the Claimant should be considered illegal and consequently annulled;

14.31 To defend its understanding, the Claimant further resorts to various arbitral decisions, alleging that Article 3(1) of the CIUC enshrines a rebuttable presumption by always admitting proof to the contrary pursuant to Article 73 of the General Tax Law (LGT);

14.32 Resorting further to various arbitral decisions, the Claimant understands that sales invoices are sufficient proof to demonstrate unequivocally the transfer of the motor vehicles and are apt to rebut the presumption based on registration all the more so because they are documents that enjoy the presumption of veracity pursuant to Article 75 of the LGT;

14.33 Accordingly, the Claimant considers that the invoices attached to the present request for arbitral decision are fully sufficient to prove the transfer of the motor vehicles in question, enjoying the presumption of veracity of Article 75 of the LGT;

14.34 The Claimant further considers that there remain no doubts whatsoever that the transfer of ownership of the said vehicles occurred before the IUC to whose assessment is being contested were due;

14.35 Since the maturity of the IUC occurs on the anniversary of the months of registration of the respective vehicles as per Article 6(3) and Article 4(2) of the CIUC;

14.36 Subsidiarily, the Claimant alleges that even if there were doubts as to the sale of the vehicles in question, the circumstance that financial leasing contracts fell on the same would have required that a similar decision be reached;

14.37 Referring to the rationale underlying the IUC, the Claimant alleges that "the tax under consideration is strongly marked by environmental logic, intended to be charged based on the potential to which a certain motor vehicle lends itself";

14.38 Concluding that the IUC has as the object of its incidence the use of the vehicle and not the vehicle in itself, hence the charge corresponds in the first place to the person who uses the said automobile, presumed to be its owner, pursuant to Article 3(1) of the CIUC;

14.39 Now, the Claimant refers that in accordance with Article 3(2) of the CIUC, the lessees have exclusive enjoyment of the motor vehicle subject to the contract as well as the obligation to pay the tax;

14.40 Continuing, the Claimant refers that in a financial leasing, the lessee, as user of the leased vehicle, pursuant to Article 19 of the IUC, must be responsible "for reimbursing the costs (environmental and road) associated with the potential use of the respective vehicle";

14.41 Concluding further and consequently that it is on the basis of the law, properly interpreted, that the subjection to tax of the lessee is established;

14.42 And that the identity of the lessees is within the full knowledge of the Tax Administration, since pursuant to Article 19 of the CIUC, the Tax Administration is timely informed of the said leasing contracts as well as of the identity of the users of the vehicles;

14.43 The Claimant concludes by referring that it is evident that the Claimant as lessor entity was not a passive subject of IUC in the context of the financial leasing contracts of which it was a party;

14.44 All the more so since in those cases, those lessees had already become owners in the years whose IUC was being demanded;

14.45 Finally, the Claimant petitions for the declaration of illegality and consequent annulment of the 11 (eleven) acts of assessment relating to the IUC concerning the 9 (nine) vehicles in question as well as the restitution of the tax and respective compensatory interest wrongly paid increased by compensatory interest provided for in Articles 43 of the LGT;

1. In its Defence, the Respondent Authority alleged, in summary, the following:

15.1 The Respondent Authority begins its defence by exception alleging partial lack of standing of the Claimant;

15.2 The Respondent Authority refers that, among the tax acts challenged by the Claimant, there appears the assessment embodied in Document 9 attached to the request for arbitral decision concerning the motor vehicle with registration number …;

15.3 This assessment was sent to company B... S.A., an entity now extinct;

15.4 Notwithstanding the Claimant's allegation that the set of assets and liabilities of B..., S.A., were incorporated into its sphere, in particular the leasing contract relating to the vehicle mentioned here, the dissolution and liquidation report of the company refers to the fact that the latter no longer had any assets or liabilities;

15.5 Accordingly, one should conclude that the Claimant lacks procedural standing regarding the said tax act;

15.6 Subsequently, it presented its defence by challenge beginning by defending itself against the alleged lack of grounds for the tax acts in question, referring that no argument was offered to substantiate such allegation;

15.7 Nevertheless, the Respondent Authority alleges that "the grounding of the act is a relative concept that varies depending on the type of act and circumstances of the specific case, with grounding being sufficient when it allows a normal recipient to understand the cognitive and evaluative journey followed by the author of the act, that is, when the recipient may know the reasons that led the author of the act to decide in that manner and not another";

15.8 The Respondent Authority continues by highlighting the nature of "mass process" that IUC assessment represents;

15.9 "A nature that is reflected in the form of notifications, in particular in the enshrinement of a standardized and computerized grounding, but which still does not fail to observe the provisions of Article 77 of the General Tax Law nor does it call into question the protective purposes of the right to grounding";

15.10 It further refers that if a situation of lack or insufficiency of grounding were to be verified, it was incumbent on the Claimant to request the issuance of the certificate provided for in Article 37 of the CPPT;

15.11 In the present case, the Respondent Authority considers that "the grounding is sufficiently clear and unequivocal, all the more so since the Claimant, via the present request for arbitral decision and in light of the arguments explained throughout its pleading, demonstrates to have fully understood the factual and legal framework on which the Respondent's decision was based, as it attempts to refute point by point all of its conduct";

15.12 As to the error regarding the presuppositions of the tax acts alleged by the Claimant, insofar as it was no longer the owner of the vehicles in question at the moment when the obligation to assess the respective IUC became due, the Respondent Authority understands that such allegations "cannot possibly hold, as they make an interpretation and application of the legal norms subsumable to the case sub judice notoriously wrong";

15.13 According to the Respondent Authority, the understanding advocated by the Claimant is flawed not only by a skewed reading of the letter of the law, but also by the adoption of an interpretation that does not attend to the systematic element, violating the unity of the regime enshrined throughout the IUC and, more broadly, throughout the entire legal-tax system, and further stems from an interpretation that ignores the ratio of the regime enshrined in the article in question and likewise throughout the entire CIUC;

15.14 Developing its position, the Respondent Authority states that the tax legislator, in establishing in Article 3(1) who are the passive subjects of the IUC, expressly and intentionally established that these are the owners, being considered as such the persons in whose names the same are registered;

15.15 In defense of its point of view, the Respondent Authority refers that the legislator did not use the expression "presumed to be", as it could have done, and that "the tax regulation is full of provisions analogous to that enshrined in the final part of Article 3(1), in which the tax legislator expressly and intentionally enshrines what should be legally considered for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others";

15.16 As an example, among others, it refers to Article 2 of the Code of Municipal Tax on Onerous Transfers of Real Property (CIMT), in which the tax legislator does not presume that "there is onerous transfer for purposes of Article 2(1), in the execution of contract-promise of acquisition and sale of real property in which it is provided in the contract or subsequently that the promisee buyer may assign his contractual position" to a third party. In this case, the legislator expressly and intentionally assimilates this contract to an onerous transfer of goods for purposes of IMT;

15.17 It also refers to Article 17 of the Code of Tax on Income of Legal Persons (CIRC), in which the legislator likewise does not establish that the net surpluses of cooperatives are presumed to be the net result of the period, but rather that they are considered to be such;

15.18 It adds that most of the rules of incidence in the field of IRC have as their underlying ratio the determination of what should be considered as income for purposes of this tax, so that if one were to understand that by using the expression "is considered" the tax legislator would have enshrined a presumption, practically all rules of incidence in the field of IRC would be cast aside because accounting prescribes solutions different from those of the CIRC, being exactly the legislator's aim to distance the accounting rules;

15.19 In sequence, the Respondent Authority concludes that in the case of the present arbitral decision proceedings, the legislator established expressly and intentionally that those in whose names the vehicles are registered are to be considered as owners, or in the situations provided for in Article 3(2), because it is the interpretation that preserves the unity of the legal-tax system. Wherefore, to understand that the legislator enshrined a presumption there would be to effect an interpretation contra legem;

15.20 The Respondent Authority refers that this is the understanding of the case law, making reference to a decision of the Administrative and Tax Court of Penafiel that endorsed the position held by the Tax Authority;

15.21 It further refers that if the Claimant wishes to react against the presumption of ownership attributed to it, then it will necessarily have to react through the proper means provided for in the Motor Vehicle Registration Regulation and in the registration laws secondarily applicable and against the very contents of the motor vehicle registration, but it is not through the challenge of IUC assessments that the registration information is rebutted;

15.22 Considering that "the presumption of motor vehicle ownership stems solely, directly and exclusively from the motor vehicle registration regime itself, and not from the tax legislation on automobiles which constitutes a collateral aspect of that regime.";

15.23 On the other hand, appealing to the systematic element, the Respondent Authority understands that the solution advocated by the Claimant is intolerable and finds no support whatsoever in the law;

15.24 This is because, in the same sense as Article 3(1) of the CIUC provides, Article 6 of the CIUC, under the heading "Taxable Event and Enforceability", in its Article 6(1), establishes that "The taxable event of the tax is constituted by the ownership of the vehicle, as evidenced by the registration or registration in the national territory";

15.25 That is, the moment from which the tax obligation becomes established presents a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear (Articles 4(2) and 6(3), both of the CIUC, Article 10(1) of Decree-Law No. 54/75, of 12 February, and Article 42 of the Motor Vehicle Registration Regulation);

15.26 In the same sense, the legislative solution adopted by the tax legislator in Article 3(2) of the CIUC militate, by making the equivalences enshrined there coincide with the situations in which the motor vehicle registration obliges the respective registration;

15.27 The Respondent Authority further sustains that such position is evident in the circumstance that the Motor Vehicle Registry to which the Tax Administration has or may have access, and the certificate in which the acts subject to registration must appear, whose exhibition may be required by the same Administration to the interested party, contain all the elements intended for the determination of the passive subject, without the need for access to contracts of a private nature that confer such rights, enumerated by the CIUC as constitutive of the legal situation of passive subject of this tax;

15.28 The Respondent Authority further alleges that "in the absence of such registration, the owner must be notified to comply with the corresponding tax obligation, as the Tax Administration, taking into account the current configuration of the Legal System, will not have to proceed with the assessment of the Tax based on elements not appearing in public records and documents and, as such, authentic";

15.29 Thus, the non-updating of the registration, pursuant to Article 42 of the Motor Vehicle Registration Regulation, shall be attributable within the legal sphere of the IUC Passive Subject and not within that of the State as the active subject of this tax;

15.30 The Respondent Authority concluded by alleging that the CIUC proceeded with a reform of the regime of taxation of vehicles in Portugal, substantially altering the vehicle taxation regime, with the passive subjects of the tax becoming the owners appearing in the property registry, regardless of the circulation of vehicles on public roads. That is, despite one of the ratios underlying the reform of vehicle taxation being the concern for the environment, the legislator intended to create an IUC based on the taxation of the owner, regardless of the circulation of vehicles;

15.31 Referring to the documents attached by the Claimant in the request for arbitral decision, notwithstanding the Respondent Authority considers that Article 3 of the CIUC does not establish any presumption, it considers that the Claimant's documents are not sufficient proof to rebut the (supposed) legal presumption established in Article 3 of the CIUC;

15.32 The Respondent Authority considers that invoices are not apt to prove the execution of a synallagmatic contract, such as purchase and sale, since they do not prove acceptance by the purchaser;

15.33 In this sense, the Respondent Authority relies on various arbitral decisions (Cases Nos. 63/2014-T, 150/2014-T, and 220/2014-T) that consider invoices unilateral and internal private documents, with very limited probative value insufficient to rebut the presumption regarding the ownership of vehicles;

15.34 It defends that a unilaterally issued invoice from the Claimant cannot replace the motor vehicle registration application, a document approved by official model;

15.35 In the Respondent Authority's understanding, the Claimant should have presented copies of the said official model for motor vehicle ownership registration as it is a document signed by both parties involved as well as documentary proof of receipt of payment;

15.36 The Respondent Authority further refers that the invoices presented by the Claimant are non-conforming and therefore may never benefit from the presumption of truth to which Article 75 of the LGT refers;

15.37 Regarding the subsidiary argument regarding the validity of financial leasing contracts, the Respondent Authority considers that these are no longer in force;

15.38 Beyond the substantiation set forth, the Respondent Authority considers it necessary to refer that the interpretation conveyed by the Claimant appears contrary to the Constitution, insofar as such interpretation translates into the violation of the principle of trust and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality;

15.39 Concluding that "the interpretation proposed by the Claimant, an interpretation that essentially devalues registration reality in detriment of an 'informal reality' and unsusceptible to minimal control by the Respondent, is offensive to the fundamental principle of trust and legal certainty that should govern any legal relationship, here included the tax relationship";

15.40 Finally, and making reference to responsibility for payment of arbitration costs and the payment of compensatory interest, the Respondent Authority refers that the IUC aims to tax the owner of the automobile revealed through its registration;

15.41 The Respondent Authority asserts that the Claimant did not proceed with the diligence that was required of it regarding the updating of the motor vehicle registration, as it could and was incumbent upon it pursuant to Article 5(1) of Decree-Law 54/75, of 12 February, and Article 118(4) of the Traffic Code, and did not order the cancellation of the registrations of the vehicles in question;

15.42 The Respondent Authority further asserts that it merely complied with the legal obligations to which it is bound and followed the registration information provided to it by the proper party;

15.43 Accordingly, the Respondent Authority considers that it was the Claimant who gave rise to the presentation of the request for arbitral decision, and should therefore be condemned to payment of arbitration costs;

15.44 The Respondent Authority further considers that the same reasoning should be applied to the request for condemnation to payment of compensatory interest formulated by the Claimant in light of Articles 43 of the LGT and 61 of the CPPT;

15.45 The Respondent Authority concluded by requesting the granting of the exception raised, giving place to the dismissal of the case and the dismissal of the present request for arbitral decision, absolution of the Respondent Authority from the claim, and further requesting in its Final Arguments the condemnation of the Claimant as a party in bad faith litigation.

II. PRELIMINARY ISSUE

Of the alleged partial lack of standing of the Claimant

1. Having summarized the relevant factual elements and the position of the Parties, it is necessary, first and foremost, to analyze and decide the preliminary issue raised by the Respondent Authority which, as mentioned above, relates to the alleged partial lack of standing of the Claimant.

2. In the Defence presented in the present arbitral proceeding, the Respondent Authority came to defend itself by exception, raising the partial lack of standing of the Claimant to request the declaration of illegality of one of the assessments now being challenged, for having been addressed to another entity other than the Claimant.

3. This assessment was sent to company B... S.A., an entity now extinct.

4. Notwithstanding the Claimant's allegation that the set of assets and liabilities of B..., S.A., were incorporated into its sphere, in particular the leasing contract relating to the vehicle mentioned here, the Respondent Authority alleges that the Claimant failed to demonstrate this minimally, so it must be concluded that it lacks procedural standing regarding the said tax act.

5. The Claimant then came to present a reply to such exception referring that it assumed as its own the responsibilities and fiscal contingencies of Company B... since B... was held, prior to its dissolution, exclusively and solely by the Claimant.

6. Being held at 100% by the Claimant, any leasing contracts found in the "portfolio" of B... were transferred to the Claimant upon the dissolution of the latter.

7. The Claimant further alleges that by virtue of the legislation applicable to relations of control between commercial companies pursuant to Articles 491 and 501 of the Commercial Companies Code (CSC), the Claimant would always be responsible for the debts of company B... and is therefore a party with standing in this arbitral proceeding.

8. The Claimant further alleges that pursuant to Article 163 of the CSC, "once liquidation is concluded and the company is extinct, the former shareholders are responsible for unsatisfied or uncovered social liabilities".

9. And further pursuant to Article 147(2) of the same Code, "fiscal debts not yet demanded as of the date of dissolution do not prevent division pursuant to the preceding number, but for those debts all shareholders remain unlimited and jointly liable".

10. The Claimant also alleges that from the moment it bore the tax assessed by the Respondent Authority, it is the holder of a legitimate interest in discussing its legality pursuant to Article 9 of the CPPT.

11. In Reply to the Reply to the exception raised by the Respondent Authority, the latter referred that in the matter of tax debts, the responsibility of third parties for their payment arises from the activation of the fiscal reversal institute and not from the application of corporate law norms relating to a supposed relation of control between commercial companies.

12. The Respondent Authority further sustains that the Claimant is not the direct contributor nor the substitute or responsible party for the debts of B....

13. The circumstance of having paid does not make it a party with standing in the present proceedings in light of Article 41 of the LGT.

14. Now, considering the facts and legal provisions presented by the Claimant, this Tribunal does not consider the exception raised by the Respondent Authority to be well-founded, thus considering the Claimant as a party with standing in the present arbitral proceeding.

15. B... was held at 100% by the Claimant and, in accordance with the minutes attached to the request for arbitral decision (Annex B) and with the Certificate from the Commercial Registry of B..., the Claimant as sole shareholder, resolved on 31 December 2008 to proceed with its dissolution and immediate liquidation, with the shareholder, the Claimant, being appointed as depositary of the extinct company.

16. Being the sole shareholder of B... and having been appointed depositary upon the extinction thereof, this Tribunal considers that the Claimant assumed the leasing contracts of B....

17. Pursuant to Article 147(2) of the CSC, "fiscal debts not yet due as of the date of dissolution do not prevent division pursuant to the preceding number, but for those debts all shareholders remain unlimited and jointly liable".

18. Article 163 of the same statute further provides that "once liquidation is concluded and the company is extinct, the former shareholders are responsible for unsatisfied or uncovered social liabilities".

19. Also in accordance with Articles 491 and 501 of the CSC, the Arbitral Tribunal understands that the Claimant would always be considered responsible for the debts of company B....

20. The Arbitral Tribunal also understands that the Claimant has standing in the tax proceeding, pursuant to Article 9 of the CPPT, in that it provides that parties with standing in the tax proceeding are contributors, including substitutes and responsible parties.

21. The Claimant proceeded with payment of the IUC assessments in the capacity of former sole shareholder and responsible for the dissolution and liquidation of B....

22. The Arbitral Tribunal thus understands that the Claimant has standing to contest the act of IUC assessment corresponding to company B..., and the exception raised by the Respondent Authority should not be considered well-founded.

III. SANATIVE RULING

1. The Tribunal is competent and is regularly constituted, pursuant to Articles 2(1)(a), 5, and 6, all of the RJAT.

2. The Parties have legal personality and capacity, have standing, and are represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March.

3. No nullities and preliminary issues affecting the entire proceeding exist, so it is now necessary to address the merits of the claim.

IV. CUMULATION OF CLAIMS

1. Considering the high number of vehicles, as well as the volume of documentation necessary to prove the alleged facts, the Claimant, invoking the principle of procedural economy, requested joint consideration of the tax acts in question.

2. Considering the identity of the tax fact, of the arbitral tribunal competent to decide, and of the grounds of fact and law invoked, nothing prevents, in light of the provisions of Articles 104 of the CPPT and 3 of the RJAT, the requested cumulation of claims.

V. OBJECT OF THE ARBITRAL DECISION

1. The following questions are placed before the Arbitral Tribunal in accordance with the terms described above:

43.1 Does the rule of subjective incidence contained in Article 3 of the CIUC enshrine a presumption of ownership that is rebuttable or not?

43.2 Understanding that the said rule enshrines a rebuttable presumption, do the documents presented by the Claimant constitute elements of proof sufficient to rebut the aforementioned legal presumption?

43.3 Should the Claimant be condemned for bad faith litigation?

VI. FACTUAL MATTERS

1. To prove the alleged facts, the Claimant presented the following documentary evidence:

44.1 A table with a list of the registrations of all the vehicles in question, invoice numbers, and corresponding IUC amounts (Annex A);

44.2 Copy of Minutes No. 30 of "B..." (Annex B);

44.3 Photocopies of the assessment notices subject to this request and respective payments (Docs. 1 to 9);

44.4 Photocopies of the Vehicle Rental Contracts without Driver for the 9 (nine) vehicles subject to this request (Docs. 10 to 18);

44.5 Photocopies of 9 (nine) invoices relating to the 9 (nine) vehicles sold;

44.6 Minutes of dissolution and liquidation of B... (Annex B);

44.7 Certificate from the Registry Office for Commercial Registration of ... relating to company B....

1. The Claimant further presented the following testimonial evidence:

45.1 C..., operations technician at A..., S.A., who testified regarding the circumstance of the Claimant having succeeded to the contractual position that B... held in the leasing contracts it had entered into with the lessees. Very briefly, the witness stated the following:

45.1.1 The witness assists with operations relating to the Claimant's financial leasing contracts;

45.1.2 In 2008, the Claimant absorbed the asset portfolio of B...;

45.1.3 The invoices referred to in the description as "sale of goods" are issued when a customer advances payment and settles the financial leasing contract before its term in order to acquire the vehicle subject to the contract;

45.1.4 The invoices referred to in the description as "residual value" are issued at the end of the contract in order for the customer to acquire the vehicle definitively;

45.1.5 When vehicles are sold, it is the customers who proceed with the purchase and sale registration;

45.1.6 Document No. 27 attached to the file is a second copy that does not have the Claimant's logo since the first copy was issued by B..., the entity that proceeded with the sale of the vehicle.

1. The Respondent Authority attached the administrative file.

2. The following facts with relevance for the Arbitral Decision to be rendered are deemed proven, based on the documentary evidence attached to the file:

47.1 The Claimant is a credit institution that, in the exercise of its activity, enters into financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles;

47.2 The present request for arbitral decision is deduced by reference to 11 (eleven) acts of additional IUC assessment relating to the years 2013 and 2014, concerning 9 (nine) vehicles (Annex A and Docs. 1 to 9);

47.3 Assessment act No. 2014... was addressed to company B...;

47.4 Company B... is dissolved and liquidated (Annex B and Certificate from the Commercial Registry of B...);

47.5 The motor vehicle with registration number ... was the subject of financial leasing agreed by B... (Doc. 18 and Certificate from the Commercial Registry of B...);

47.6 The position of lessor entity of the motor vehicle with registration number ... was assumed by the Claimant as the sole shareholder of B... (Annex B and Certificate from the Commercial Registry and statement of the witness called);

47.7 The motor vehicles subject to the present arbitral proceeding were given in financial leasing (Docs. 10 to 18);

47.8 At the end of the Financial Leasing Contracts, all vehicles except the vehicle with registration number ... were sold to the lessees or to third parties (Docs. 19 to 26);

47.9 The Claimant was notified to proceed with payment of the IUC to which the official assessment acts identified in Annex A relate in cases 1 to 9 (Docs. 1 to 8);

47.10 Following the notifications, it proceeded with payment of all the assessment acts in question in the present proceeding (Docs. 1 to 9);

47.11 All vehicles except the vehicle with registration number …, were sold on a date prior to the date of enforceability of the tax (Docs. 19 to 26);

47.12 The vehicles appearing in the IUCs in question were still inscribed in the Motor Vehicle Registry Office in the name of the Claimant at the moment of the respective IUC assessment (cf. Administrative File).

1. The Arbitral Tribunal understands that invoices issued in accordance with commercial and tax legislation constitute a means of proof with sufficient strength to rebut the presumption of Article 3 of the CIUC.

2. Accordingly, the Arbitral Tribunal understands that only the invoices attached to the Initial Pleading in the form of Documents 19 to 26, were issued with all the requirements demanded by Article 36 of the CIVA and therefore constitute a means of proof with sufficient strength to rebut the presumption of Article 3 of the CIUC.

3. The following facts with relevance for the arbitral decision to be rendered are deemed not proven:

50.1 The invoice attached to the Initial Pleading in the form of document 27 does not constitute a means of proof to rebut the said presumption because it does not meet all the legal requirements referred to in Article 36 of the CIVA, namely the name, business name or legal designation and the address or domicile of the supplier of goods or service provider and the corresponding tax identification number;

50.2 Accordingly, although the Arbitral Tribunal understands that the Claimant has standing to contest the act of IUC assessment corresponding to company B..., relating to the vehicle with registration number ..., it cannot consider as proven the sale of the said vehicle based on the respective invoice attached to the file (Doc. 27).

50.3 Although the testimonial evidence stated that the said invoice, being a second copy, does not have the Claimant's logo because the first copy was issued by B..., it was incumbent to attach to the file a copy of the said first copy of the invoice in order to comply with all the requirements demanded by the said Article 36 of the CIVA.

50.4 The Tribunal also cannot accept the Vehicle Rental Contract without Driver, attached to the Initial Pleading in the form of document 18, as it had its term on 14.03.2004, thus not being in force on the date of enforceability of the corresponding IUC being discussed here (Doc. 9).

50.5 In these terms, the sale of the vehicle with registration number ... is not deemed proven.

VII. APPLICABLE LAW

1. Regarding the issue of lack of grounds for the tax acts in question, although it is raised by the Claimant, no arguments were offered to substantiate it, which means that the Tribunal cannot rule on it, so it declares it unfounded as not proven.

(i) Does the rule of subjective incidence contained in Article 3(1) of the CIUC enshrine a rebuttable presumption of ownership?

1. As we have seen, the main issue at the heart of the present decision concerns the interpretation of Article 3(1) of the CIUC, specifically whether the same provides for a rebuttable presumption that the passive subjects of the tax are the owners of vehicles, being considered as such, definitively or not, the persons in whose names the vehicles are registered.

2. Article 3(1) of the said CIUC provides that "Passive subjects of 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."

3. The expression used in the said article, "being considered as," raises the question of whether to the same can be attributed a presumptive sense, equating it with the expression "being presumed to be."

4. First and foremost, reference must be made to Article 11(1) of the LGT which establishes that "In determining the sense of tax norms and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

5. In this context, Article 9 of the CC should likewise be considered as a precept that provides the rules and fundamental elements for the correct and adequate interpretation of legal norms, including tax norms which, in this regard, present no special feature that should be appreciated or weighed, except a particular care in observing the principle of legality, non-retroactivity of tax law in certain cases, and adherence to the principle of prevalence of material truth over form.

6. The text of Article 9(1) of the said CC begins by stating that interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative thought, taking into account especially the unity of the legal system, the circumstances in which the law was elaborated, and the specific conditions of the time when it is applied.

7. Starting with the literal tenor of Article 3(1) of the IUC, it is necessary to find the legislative thought underlying the provision to ascertain whether or not it provides for the presumption that the passive subjects are the owners of the vehicles, being considered as such, definitively or not, the persons in whose names the vehicles are registered.

8. As mentioned, the expression used in the said article "being considered as" thus raises the question of whether to such expression can be attributed a presumptive sense, equating it with the expression "being presumed to be".

9. Indeed, from analysis of our legal system, these are expressions frequently used with equivalent senses, whether at the level of rebuttable or irrebuttable presumptions.

10. By way of mere example, in the field of Civil Law, we find, among others, Article 243(3) of the Civil Code when it provides that: "The third party who acquired the right after the registration of the action of simulation is always deemed to be in bad faith, when such registration has taken place", or Article 314 of the same code when it provides that: "The debt is deemed to be confessed if the debtor refuses to testify or to take an oath in court, or to perform acts in court incompatible with the presumption of performance".

11. By way equally exemplifying, it can also be referred to, in the field of industrial property law, the provision of Article 59(5) of the Industrial Property Code, where it is established that "Inventions whose patent has been applied for during the year following the date on which the inventor leaves the company are deemed to be made during the performance of the employment contract" as well as Article 98 of the same code where the term "being deemed" is also used in a presumptive context.

12. Also in the tax legal system we find various legal norms that enshrine presumptions using the verb "consider".

13. As referred to by Diogo Leite Campos, Benjamim Silva Rodrigues, and Jorge Lopes de Sousa in General Tax Law, Annotated and Commented, 4th Edition 2012, Writing Encounter, Lda, Lisbon, in annotation no. 3 to Article 73: "Presumptions in tax incidence matters can be explicit, revealed by the use of the expression 'presumed to be' or similar (…). However, presumptions can also be implicit in incidence norms, specifically in objective incidence norms, when certain values of movable or immovable goods are considered as constituting taxable matter, in situations where it is not viable to ascertain the real value (…)" referring as examples, among others, Articles 45(2) and 46(2) of the CIRS, Articles 21(2) and 58(4) of the CIRC.

14. One can likewise refer to the provision in Article 45(6) of the LGT when, for purposes of notification of tax assessments, it is established that "(…) notifications by registered mail are deemed to be validly made on the 3rd day following registration or on the 1st business day following such day, when that day is not a business day", as well as Article 89-A(4) of the same Law, where a presumption is likewise enshrined, when it establishes that in situations where the passive subject does not make the proof referred to in Article 89-A(3) of the same article, it is deemed as taxable income under IRS, the income that results from the table that appears in Article 89-A(4) of the said article.

15. Citing further Diogo Leite Campos, Benjamim Silva Rodrigues, and Jorge Lopes de Sousa, it is "[...] imposed on the taxpayer the burden of proving that the declared income corresponds to reality (Article 89-A(3)) and, if such proof is not made, it is presumed that the income is that which results from the table that appears in Article 89-A(4) of the same article.". To this effect, and in this same sense, it is important to refer to the Decision of the STA of 02-05-2012, Case 0381/12, and of 17-04-2013, Case 0433/13.

16. Given the above, it should be concluded that it is not only when the term "presume" is used that we are dealing with a presumption. The verb "consider" is recurrently used with an equivalent purpose and meaning, which, in the understanding of this Tribunal, is precisely the case of Article 3(1) of the CIUC, it being an understanding that is in full harmony with the provision of Article 9(2) of the CC, which requires that the legislative thought have in the letter of the law a minimum of verbal correspondence.

17. One must also take into account the rational or teleological element. To this effect, Article 1 of the CIUC under the heading "principle of equivalence" provides that "The Single Circulation Tax obeys the principle of equivalence seeking to burden contributors in the measure of the environmental and road cost that they cause, in implementation of a general rule of tax equality".

18. To this effect, it is worth recalling the preamble of Bill No. 118/X of 07 March 2007, which carried out the overall reform of vehicle taxation, approving the Code of Tax on Vehicles (ISV) and the IUC, when it mentions that the said reform results from the need not only to bring clarity and coherence to this area of the tax system, but above all from the need to subordinate it to principles and concerns of environmental and energy order.

19. Indeed, the reform of vehicle taxation is implemented through the displacement of part of the tax burden from the moment of acquisition of vehicles to the phase of circulation thereof.

20. The same Bill further refers that the two new taxes certainly aim to collect public revenue, but collect it in the measure of the cost that each individual causes to the community, adding in Annex II, regarding the IUC, that "as a structuring and unifying element (…) the principle of equivalence is enshrined, thus making clear that the tax, as a whole, is subordinated to the idea that contributors should be burdened in the measure of the cost they cause to the environment and the road network, this being the reason for existence of this tax figure".

21. It is thus a structuring principle of the IUC that should be taken into account in the interpretation of Article 3 of the IUC relating to subjective incidence, insofar as it intends to tax the passive subject owner of the vehicle on the presumption of being the real and effective subject causing road and environmental damages.

22. Looking now to the historical element in the interpretation of Article 3 of the IUC, the Respondent Authority alleges in its Defence that the tax legislator determined that those in whose names the vehicles are registered are to be considered as owners, not using the expression "presumed to be" as it could have done.

23. Indeed, from the birth of the tax created by Decree-Law No. 599/72, of 30 December, until the last statute in force before the entry of the current regime, a presumption was enshrined regarding the passive subjects of the tax, these being the owners of the vehicles, being presumed to be those in whose names the same were registered.

24. The legislator subsequently chose to use the expression "being considered as" instead of the expression "being presumed to be".

25. Now, as has already been referred, and given various examples, in our legal system, namely in the tax legal system, the said expressions are frequently used with equivalent senses, whether at the level of rebuttable or irrebuttable presumptions.

26. Thus occurred in Article 3(1) of the CIUC in which a presumption was enshrined revealed by the expression "being considered as" and contrary to the position expressed by the Tax Authority, this Tribunal understands that it is a mere matter of semantics that does not alter the content of the norm in question.

27. Taking into account the various elements of interpretation set forth, all point to the sense that the expression "being considered as" has an equivalent meaning to the expression "being presumed to be", and it should thus be understood that Article 3(1) of the CIUC enshrines a legal presumption which, in light of Article 73 of the LGT, should be considered a rebuttable presumption, and one cannot accept, as the Tax Authority wishes, that the passive subjects of the IUC are only those appearing in the motor vehicle registry as owners of the vehicles.

28. Moreover, Decree-Law No. 54/75, of 12 February, relating to the registration of motor vehicles (CRA), not providing any norm of constitutive character regarding motor vehicle ownership registration, merely establishes in Article 1(1) that "The registration of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and respective trailers, in view of the safety of legal commerce".

29. And, in accordance with Article 7 of the CRP applicable supplementarily to motor vehicle registration by reference from Article 29 of the CRA, it provides that the registration only "(...) constitutes a presumption that the right exists and belongs to the registered owner, in the precise terms in which the registry defines it".

30. To this effect, the Supreme Court of Justice (STJ) ruled in Decisions of 19/02/2004 and 29/01/2008, rendered in Cases Nos. 03B4369 and 07B4528 respectively, concluding that definitive registration constitutes a mere rebuttable presumption that the right exists and belongs to the registered owner, thus allowing proof to the contrary.

31. In these terms, it should be concluded for the situation under analysis that the function of registration is to give publicity to the legal situation of vehicles, with the presumption being that they belong to the registered owner in the terms the registry defines, with registration not constituting a condition of validity of the transfer of the vehicle from seller to buyer.

32. Buyers thus become owners of vehicles through the execution of purchase and sale contracts, regardless of registration.

33. It is also important to note in this regard Article 408(1) of the CC which establishes that the transfer of real rights over things, in this case motor vehicles, is determined by the mere effect of the contract.

34. Thus, given what has been stated, one cannot fail to consider that the provision of Article 3(1) of the CIUC constitutes a legal presumption rebuttable by virtue of Article 73 of the LGT, thus allowing the person inscribed in the registry as owner of the vehicle to present elements of proof to demonstrate that he is no longer the owner because ownership of the vehicle in question has been transferred to another person.

35. It should be that other person, duly identified by the presumed owner, to whom the Tax Authority should direct itself to effect the assessment of the IUC that is shown to be due whenever the person indicated in the registry as owner of the vehicle succeeds in making sufficient proof of not being and/or no longer being, as of the date of occurrence of the taxable event, the owner of the vehicle subject to such tax.

36. Thus, pursuant to subparagraph (a) of Article 60(1) of the LGT, the tax relationship may be reconfigured, if the taxpayer comes to demonstrate in prior consultation, gracious claim, and/or other appropriate tax procedure that he is not the true owner of the vehicle, redirecting the competent tax procedure to whoever is the true passive subject of the tax in question.

37. Thus, when the Tax Authority considers that the passive subjects of the IUC are only the persons in whose names the motor vehicles are registered, without taking into account the elements of proof presented to it, it is proceeding with an undue assessment of the tax based on an erroneous and mistaken interpretation of the provision of Article 3(1) of the CIUC.

38. It can, naturally, be admitted that the expression "presumed to be" is clearer and more taxative than the expression "considered as"; but from this neither logically nor teleologically does it follow that both expressions must necessarily have a divergent or even different sense.

39. The example given by the Respondent Authority, based on Article 17 – we suppose referring to its Article 17(2) – of the CIRC, is a typical case of such an error of law that leads, in this case, to the invalidity of the IUC assessments in dispute.

40. Let us see: the aforementioned legal provision of Article 17(2) of the CIRC determines exactly the following: "For purposes of the provision of the preceding number, the net surpluses of cooperatives are considered to be the net result of the fiscal year." (emphasis ours)

41. Read merely this norm, the same could be a norm of objective incidence pure and simple or a norm enshrining a mere legal presumption, rebuttable or not.

42. In reality, it is clearly and unequivocally a norm of objective incidence pure and simple.

43. This is because the rule of said Article 17(2) of the CIRC begins by referring to the preceding Article 17(1) of the same article which, in turn, refers us to subparagraph (a) of Article 3(1) of the same CIRC.

44. This last provision, using, it may be said, en passant, a debatable legislative technique, establishes that the base of this tax – the IRC – is constituted by the "(...) profit of commercial companies or civil companies in commercial form, of cooperatives (...)." (emphasis ours)

45. Now, in all rigor, cooperatives do not give nor can they even give profit in the juridically applicable sense of the term, so neither can their results be expressed, contrary to those of commercial companies and/or civil companies in commercial form, as net results of the fiscal year, in the strict accounting and tax sense of the term.

46. Thus, only from the conjunction of these two legal provisions of the CIRC – Article 3(1)(a) and Article 17, numbers 1 and 2 – can the true economic nature of the surpluses of cooperatives be reached, which constitute taxable base in IRC.

47. Reason for which, in an interpretation not only with literal correspondence, but also teleological and systematic of the said legal provisions of the IRC, one can decisively and unquestionably conclude that the expression "are considered to be" enshrined in the aforementioned Article 17(2) of the CIRC cannot, under any circumstances, be taken as a presumption, rebuttable or not, but rather and solely as part of a norm, all of it, absolutely prescriptive and imperative.

48. Nor does it seem pertinent, for purposes of understanding the norm of Article 3(1) of the CIUC as a prescriptive or imperative provision, its confrontation with the provision of Article 6(1) of the same legal diploma, contrary to what was sustained by the Respondent Authority.

49. In truth, whereas in the example given by the Respondent Authority herself – Articles 3(1)(a) and 17(2) of the CIRC – which we analyzed and confronted, in order to determine the nature of this last legal provision, concluding that they are norms of objective incidence in both cases –, in the situation of the norms of Article 3(1) of the CIUC and Article 6(1) of the same legal diploma, the Respondent Authority seeks to elucidate the sense of the first rule – norm of subjective incidence – by confrontation with the second – norm of territorial incidence and intended to determine the taxable event.

50. That is, the Respondent Authority seeks to justify its thesis regarding the prescriptive or imperative character, rather than presumptive, of the norm of subjective incidence of Article 3(1) of the CIUC – which determines only the passive subject of the tax, in our understanding, the owner of the vehicle, presumed to be the one appearing in the motor vehicle registry, a presumption, in our view, rebuttable – with a norm of a completely different nature that does not allow either to elucidate or clarify the sense of the first – the norm of territorial incidence and definer of the taxable event – which, by definition, clarifies the field of application and the fact that determines the assessment of the tax but not even remotely and/or implicitly the respective passive subject.

51. This is why the Respondent Authority, in our understanding, has no legal support either for the comparison it seeks to make with the referred norm of Article 17(2) of the CIRC – and, be it added, with the other norms of the CIRC cited in its, moreover, learned Defence – nor with the systematic analysis it sought to make of the CIUC by applying the norm of Article 3(1) in confrontation with Article 6(1) of that same legal diploma.

52. It is, moreover, illuminating that the Respondent Authority, in its learned Defence, makes only reference to norms of objective incidence and no reference to norms of subjective incidence, we suppose because no comparison or analogy relevant in this last and decisive domain for the question of the present proceedings has occurred to it.

53. Now, it is well known that income and/or valuations or determinations of taxable matter in taxes can, in the absence or in the extreme difficulty, for reasons of proof and/or tax administration, be fixed according to objective criteria determined by tax law, and that tax law can and should determine objective criteria as to the verification of taxable events of taxes and the date or moment of such verification and also objective criteria – albeit these latter can be subject to application of conventions to avoid double taxation in certain cases – for the territorial incidence of taxes.

54. But it would already seem abusive that tax law could set irrebuttable presumptions or, worse still, prescriptive norms, about who is a passive subject of a tax based on a mere registration of ownership of a good, it being known that such a registration is itself a mere rebuttable presumption of such a title of ownership.

55. We think that it may have been for these and other well-founded reasons that it has been settled understanding in arbitral decisions in the sense of concluding, just as this Tribunal now concludes, that Article 3(1) of the CIUC enshrines a rebuttable presumption, thus allowing that, notwithstanding the registration of ownership of the vehicle is still in the name of the passive subject, this party may demonstrate not being the owner as of the date of assessment of the tax and, as such, not being responsible for payment thereof.

(ii) Rebuttal of the Presumption

1. To rebut the presumption arising from the inscription of the motor vehicle registry, the Claimant presented as proof copies of various sales invoices for the vehicles appearing in the IUCs in question, which demonstrate being dated prior to the tax obligation demanded and therefore the Claimant should not bear the tax relating to the circulation of such vehicles.

2. As referred in points 47 and 48 of this Decision, regarding proven facts, and in accordance with the requirements of tax law, only invoices issued and attached to this file by the Claimant found to comply with the legal requirements established in Article 36(5) of the CIVA were accepted by this Arbitral Tribunal.

3. It is now important to assess whether the copies of invoices presented embody means of proof with sufficient strength to rebut the presumption based on registration.

4. The Respondent Authority alleges that a unilaterally issued invoice is a private and internal document, with diminished probative value, and therefore cannot replace the motor vehicle registration application, a document approved by official model.

5. Now, without prejudice to respect for contrary opinion, the Arbitral Tribunal understands that invoices issued in accordance with commercial and tax legislation constitute a means of proof with sufficient strength to rebut the presumption of Article 3 of the CIUC.

6. To the contrary, those invoices that were not issued with all the requirements demanded by Article 36 of the CIVA cannot be accepted as a means of proof.

7. Within the scope of the principle of material truth, a principle governing the tax proceeding, the Arbitral Tribunal is obliged to call into question, if not the suitability, certainly the validity as a means of proof of invoices not issued with all legal requirements.

8. However, on the other hand, the Arbitral Tribunal understands that the Tax Administration cannot fail to give weight to invoices regularly issued by a passive subject.

9. Indeed, in accordance with civil law, Article 219 of the CC, in the situation in question, we are dealing with purchase and sale contracts of movable things that are not subject to any special formalism.

10. Notwithstanding we are dealing with situations in which registration is mandatory, we cannot conclude that only the motor vehicle registration model is the sole and exclusive means of proof to rebut the presumption of ownership as referred to by the Respondent Authority.

11. In fact, the Tribunal understands that private documents, unilateral or bilateral, do not have diminished probative value. They only do not make full proof against authentic documents.

12. There is nothing in civil law that leads us to affirm that private documents have diminished probative value for purposes of rebutting a legal presumption or for any other probative purpose against authentic documents or documents extracted from public registries.

13. A different understanding would lead to a public registry, such as motor vehicle registration, instead of establishing a mere rebuttable presumption regarding facts subject to it, in practice, given the foreseeable scarcity of means of proof to the contrary that would be admitted, to establish a presumption that would be, in practice and in almost all cases, irrebuttable, which would be contrary to the legal nature of any public registry, especially of a registry of movable goods as motor vehicle registration is.

14. The Arbitral Tribunal further understands that once the Tax Administration considers invoices to be relevant documents, for example in determining the assessment of taxes, it cannot now refuse to accept these same invoices for evidentiary purposes, alleging that they are private and unilateral documents, unless it alleged their falsity, which it did not do.

15. Indeed, the Claimant, being a company, obeys rigorous legal rules of a commercial, accounting, and tax nature, namely with respect to invoicing, citing as examples Articles 19(2), 29(1)(b), and 36 of the CIVA and Articles 23(6) and 123(2) of the CIRC.

16. Now, pursuant to the said Article 75(1) of the LGT, it would be incumbent on the Respondent Authority to present and demonstrate concrete and well-founded indications that the invoices presented by the Claimant did not correspond to reality.

17. This is because, in the Arbitral Tribunal's understanding, if it falls to the Claimant to rebut the presumption established in Article 3(1) of the CIUC, with the corresponding burden of proof – which we consider it to have done with the presentation of invoices issued in the legally prescribed manner – it would fall to the Respondent Authority the burden of reversing such rebuttal of the presumption carried out by the Claimant by demonstrating the falsity or, at least, the lack of suitability and/or the irregularity of the invoices issued by the Respondent in the legally prescribed manner.

18. Which the Respondent Authority did not do.

19. As established, the Respondent Authority presented no proof; it limited itself to conjecturing and/or speculating, before documents that the Arbitral Tribunal considers to have probative value and all the requirements of invoices regularly issued in the legally prescribed manner, that the same might not correspond to true and effective transactions.

20. Reason for which this Arbitral Tribunal cannot consider this burden of proof that would fall to the Respondent Authority as having been met, based on unsubstantiated allegations and/or mere suspicions and conjectures.

21. For the foregoing, the Arbitral Tribunal considers that the said means of proof presented by the Claimant, as long as issued in accordance with tax and commercial legislation, a matter which the Respondent Authority does not raise and does not call into question, enjoy the presumption of veracity conferred on them by Article 75(1) of the LGT, appearing thus with sufficient strength to rebut the presumption based on registration, as enshrined in Article 3(1) of the CIUC.

(iii) Request for Condemnation of the Claimant for Bad Faith Litigation

Preliminary Issue:

1. It is important to note from the outset that this issue was not addressed in the Arbitral Decision issued on 30 April 2015 in the context of the arbitral proceeding in question.

2. Considering that there was an omission of ruling in the said decision, the Respondent Authority, pursuant to Articles 26 and 17 of Decree-Law No. 10/2011, of 20 January, RJAT, submitted an appeal of such decision.

3. The Respondent Authority requested that the said Arbitral Decision be declared null pursuant to subparagraph (c) of Article 28(1) of the RJAT, since it did not rule on the request for condemnation of the Claimant for bad faith litigation, a request raised by the Respondent Authority in its Final Arguments in the context of the present arbitral proceeding.

4. Now, regarding the alleged omission of ruling – "request for condemnation of the Claimant for bad faith litigation" – the Venerable Central Administrative Court South (hereinafter abbreviated as TCA South), in its learned Decision, dated 22/05/2019, Case No. 8755/15, to which we refer, concluded in favor of its acceptance, considering that the Arbitral Decision did not rule on the said issue, with a resulting nullity of the Arbitral Decision (partial nullity) that affects it in the corresponding part.

5. Now, pursuant to Article 27 of the RJAT, the challenge of an arbitral decision on the grounds of subparagraph (c) of Article 28 of the RJAT corresponds to the vices of judgments of Tax Courts pursuant to Article 125(1) of the Code of Procedure and Tax Procedure (hereinafter designated CPPT), with correspondence to the provisions of subparagraphs (b), (c), and (d) of Article 615(1) of the Code of Civil Procedure.

6. Pursuant to the mentioned Article 125(1) of the CPPT, causes of nullity of the judgment include, among others, failure to rule on questions that the judge should consider.

7. In these terms, and in accordance with the learned Decision of the Venerable TCA South, we are dealing with a partial nullity of the Arbitral Decision issued on 22/05/2019, and the present Single Arbitral Tribunal must thus rule on the request for condemnation of the Claimant for bad faith litigation, raised by the Respondent Authority in its Final Arguments presented in the arbitral proceeding, which is done in the terms that follow.

Assessment:

1. The Respondent Authority raised in its Final Arguments the issue of bad faith litigation on the part of the Claimant with the essential argument that the Claimant had shifted from an initial procedural position according to which B... – company in whose universality of legal position the Claimant succeeded – would have no assets or liabilities, to come to arbitral judgment to sustain that, in fact, B... always had various motor vehicles in its assets.

2. The Respondent Authority asserted that "one who has nothing can give nothing."

3. The Arbitral Tribunal always understood that the allegations of the Respondent Authority of bad faith procedural conduct by the Claimant constituted a mere dilatory expedient and simple argument or reason to support the thesis – considered and rebutted by the arbitral decision – of partial procedural lack of standing of the Claimant and apportionment of costs.

4. In that sense and these two issues being analyzed and decided in detail and sufficiently substantiated, the Single Arbitral Tribunal understood that the allegation of bad faith by the Claimant was, by definition, also resolved.

5. As referred to in the learned Decision of the Venerable TCA South citing the masterly teaching of Alberto dos Reis, the court need not rule on all arguments and reasons and on all minor and lateral incidents raised by the parties but must rule only on the true questions of fact and law with true and real interest for the merits of the case and for the proper administration of justice.

6. Having analyzed the procedural conduct of the parties, we can conclude that the Claimant did not intend to present minutes evidencing its procedural lack of standing as a starting point for its position in an arbitral proceeding aimed at challenging IUC assessments to which it was subjected.

7. The Claimant collaborated with the Arbitral Tribunal to clarify this lapse in the minutes during the arbitral hearing in a manner that generated the conviction that it was indeed a mere lapse.

8. As to the Respondent Authority, one of two things: either it concludes that the Claimant lacks procedural standing and in that case it would also never have actual tax-paying capacity nor would it be responsible for payment of the IUC assessments made to it – "one who has nothing can give nothing" – or it would have to conform to the Claimant's procedural standing.

9. The commercial registry itself does not make full proof, creating only a rebuttable legal presumption as to rights and facts subject to it.

10. Thus, mere minutes – a private document – are subject to free appraisal by the judge and in this case, the Arbitral Tribunal understood that such minutes contained, in light of other evidence, including testimonial, a lapse.

11. Venire contra factum proprium could in the abstract configure conduct of bad faith, but only if the Claimant could extract some advantage from such censurable conduct.

12. Now, what advantage could reasonably be extracted by the Claimant from the presentation of minutes that would deprive it of procedural standing in its own claim?

13. Additionally and decisively, the Claimant never denied ownership of the automobiles in terms of their motor vehicle registration.

14. The crux of the Claimant's argument was always in the sense of alleging that motor vehicle registration constitutes a mere rebuttable legal presumption of ownership of vehicles which admits proof to the contrary, by definition, with the impugned Arbitral Decision considering that the Claimant succeeded in producing such proof partially.

15. There is thus no discernible contradiction or inconsistency in the position adopted by the Claimant in its initial pleading against its Final Arguments.

16. Thus, the allegation of bad faith litigation raised by the Respondent Authority against the Claimant in this proceeding fails.

(iv) Of the Right to Compensatory Interest

1. The Claimant requests reimbursement of the amounts wrongly paid increased by compensatory interest counted from the date of payment until actual and complete reimbursement.

2. Pursuant to Article 24(5) of the RJAT, the right to the mentioned compensatory interest can, moreover, be recognized in the arbitral proceeding.

3. Article 24(1)(b) of the RJAT further establishes that the request for compensatory interest should be understood as a claim relating to tax acts, which aims to realize the content of the duty to "restore the situation that would exist if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for that effect".

4. Article 43(1) of the LGT establishes that compensatory interest shall be due "when it is determined, in gracious claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due".

5. Now, the case in question raises the question of determining whether there was or was not error attributable to the Tax Authority.

6. By considering that Article 3(1) of the CIUC enshrines a rebuttable presumption, the presumed owner may rebut that presumption by demonstrating not to be already the owner of the vehicle in question.

7. The Tax Authority should thus, before effecting the assessment of the tax, direct itself to the other passive subject identified as the true owner of the vehicle.

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