IUC Subjective Incidence: CAAD Arbitral Decision 656/2017-T on Vehicle Circulation Tax Liability

ARBITRAL DECISION

I – REPORT

The A..., SA., collective person no. ..., with registered office at Street ..., no. ..., ...-... Lisbon (hereinafter referred to as the Claimant), submitted on 18.12.2017, a request for arbitral determination, pursuant to subparagraph a) of paragraph 1 of article 2, and paragraphs 1 and 2 of article 10 of the Legal Framework for Tax Arbitration, approved by Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December (hereinafter referred to as LFTA), and articles 1 and 2 of Order no. 112-A/2011, of 22 March.

The Claimant seeks the determination of the Arbitral Court with a view to declaring the illegality of five acts of assessment of Unique Circulation Tax (IUC) relating to the year 2015, in the total amount of € 736.83, plus compensatory interest in the amount of € 7.74, totaling € 744.57, whose assessment acts are identified below:

The Claimant also requests the declaration of illegality of the acts of rejection of the hierarchical appeals and the amicable claims presented against the IUC assessment acts and compensatory interest above identified, which were respectively rejected by decision of the Director of the Directorate of Services for Municipal Tax on Onerous Property Transfers, Stamp Duty, Unique Circulation Tax and Special Contributions (DSIMT) and the Head of Division of the Large Taxpayers Unit (UGC), all by delegation of competence, and the Claimant further seeks the restitution of the amount unduly paid, plus the payment of compensatory interest, in accordance with article 43 of the General Tax Law (LGT).

The aforementioned IUC assessment acts and compensatory interest were effected and notified to the Claimant by the services of the Tax and Customs Authority, the Defendant entity in the present arbitral process and hereinafter referred to as the Defendant.

The request for constitution of the Arbitral Court was accepted by the President of CAAD on 19 December 2017 and automatically notified to the Tax Authority.

In accordance with the provisions of paragraph 1 of article 6 and subparagraph a) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, the Ethics Council of the Administrative Arbitration Centre (CAAD) appointed the undersigned as arbitrator, who immediately accepted the assignment. The Parties, duly notified, raised no opposition to the appointment of the arbitrator.

In accordance with the provisions of subparagraph c) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of 20 January, as amended by article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 27 February 2018.

On 14 March 2018, the Director-General of the Tax and Customs Authority (AT) was notified in accordance with the terms and for the purposes provided in article 17 of the LFTA.

On 19 April 2018, the Defendant submitted its reply and, in accordance with paragraph 2 of article 17 of the LFTA, submitted the administrative file to be attached to the case.

On 20 June 2018, an arbitral order was issued determining the waiver of the hearing provided for in article 18 of the LFTA, as well as the witness evidence indicated by the Claimant, and determining the notification of the parties for submission of arguments.

The Claimant submitted its arguments on 06 July 2018 and the Defendant's arguments were submitted on 09 July 2018.

In light of the controversy generated by the norms of article 3 of the Unique Circulation Tax Code (CIUC), specifically, whether the provision of paragraph 1 of article 3 implicitly contains a legal presumption or not, the doctrinal positions and, in particular, the divergent arbitral and judicial decisions on similar controversial matters, the single arbitral tribunal deemed it appropriate to develop a thorough study of the subject matter of the present arbitral process. Accordingly, in accordance with article 21 of the LFTA, orders extending the time limit for issuing the arbitral decision were issued, which are recorded in the history of the arbitral process contained in the CAAD application system.

II - PRELIMINARY RULING

In light of subparagraph a) of paragraph 1 of article 29 of the LFTA, article 104 of the Tax Procedure and Process Code (CPPT) is subsidiarily applicable to tax arbitration processes, so it is legitimate and legal for the Claimant to cumulate requests in the arbitral determination request that gave rise to the present tax arbitration process.

The arbitral tribunal is materially competent, in accordance with the provision of article 2, paragraph 1, subparagraph a) of the LFTA.

The Parties enjoy legal personality and capacity and have standing in accordance with articles 4 and 10, paragraph 2 of the LFTA and article 1 of Order no. 112-A/2011, of 22 March.

No exceptions were invoked and the process does not suffer from any nullities.

In light of the provisions of subparagraph a) of paragraph 1 of article 10 of Decree-Law no. 10/2011, of 20 January, the request for arbitral determination was submitted within the time limit.

There are no circumstances that prevent the tribunal from considering the merits of the case or prevent the tribunal from appreciating and deciding upon it.

III - CAUSE OF ACTION AND REQUEST

The decisions rejecting hierarchical appeals nos. ...2016..., ...2017..., ...2017..., ...2017... and ...2017..., and the decisions rejecting amicable claims nos. ...2016..., ...2016..., ...2016..., ...2016... and ...2016.... These tax procedures are all identified in the administrative file presented by the Defendant and referenced in the arbitral determination request filed by the Claimant.

The hierarchical appeals were submitted against the decisions rejecting the amicable claims, which had as their object the IUC assessment acts and respective compensatory interest for the year 2015, and relate to vehicles identified by registration numbers ..., ..., ..., ... and ....

The Claimant invokes the illegality of the decisions rejecting the hierarchical appeals and the amicable claims, as well as the IUC assessment acts that were the object of such tax procedures, alleging that on the date of occurrence of the taxable event and of tax exigibility, it was not the owner of the aforementioned vehicles.

The Claimant requests the annulment of the aforementioned IUC assessment acts for the year 2015, as well as the compensatory interest assessments, and the restitution of the amount unduly paid, with the payment of compensatory interest in accordance with article 43 of the General Tax Law (LGT) and article 61 of the Tax Procedure and Process Code (CPPT).

IV - POSITION OF THE DEFENDANT

Article 3 of the CIUC does not contain any legal presumption. The legislator expressly and intentionally established that the taxpayers of the IUC are the owners of vehicles and these are the persons in whose name the vehicles are registered at the Motor Vehicle Registry Office.

The Defendant assesses the IUC by consulting registration data provided to it by the Institute of Registries and Notary and, on the date of the taxable event and of tax exigibility for the year 2015, the registration of the vehicles in question was registered in the name of the Claimant, in its capacity as owner.

The IUC assessment acts for the year 2015 challenged by the Claimant were made in accordance with the provisions of the CIUC, so they do not suffer from any defect of law.

The documents presented by the Claimant to rebut the (supposed) legal presumption contained in article 3 of the CIUC are not suitable evidence.

The facts that gave rise to the request for arbitral determination are due to the lack of diligence and care of the Claimant which, contrary to what it could do under the law, did not promote the updating of the motor vehicle registration.

In performing the IUC assessment acts, there is no error attributable to the AT services, so no compensatory interest is due and the Defendant did not cause the arbitral process.

V - QUESTIONS FOR DECISION

The single arbitral tribunal must decide on:

1. The existence or non-existence of a legal presumption in paragraph 1 of article 3 of the Unique Circulation Tax Code, in the wording at the date of the facts, and on the possibility of the presumption being or not rebutted.

2. Whether the evidential elements (documentary evidence) presented by the Claimant are suitable to rebut the legal presumption inherent in paragraph 1 of article 3 of the Unique Circulation Tax Code.

3. On the illegality of the decisions issued in the hierarchical appeals and amicable claims submitted by the Claimant against the IUC assessment acts and compensatory interest, which are the object of the present arbitral process.

4. On the illegality of the IUC assessment acts and compensatory interest relating to the year 2015, above identified.

5. Whether there is error attributable to the AT services in performing the IUC assessments for the year 2015, in order to decide on the duty to pay compensatory interest.

VI - RELEVANT FRAMEWORK

VI – 1 – FRAMEWORK PRESENTED BY THE CLAIMANT

1. The Claimant alleges that a substantial part of its activity is reducible to the conclusion – among others – of financial leasing or ALD contracts, an activity that has special relevance in financing the automobile sector.

2. The Claimant alleges that, as a result of the aforementioned contracts, after being contacted by the customer – who, at that stage, has already chosen the type of vehicle it intends to acquire, its characteristics (brand, model, accessories, etc.), as well as price – it acquires the vehicle from the supplier indicated to it by the customer and proceeds, next, to deliver it to the customer, thus assuming the quality of lessor.

3. From the financial leasing contract it follows that the financing granted to the lessee by the Claimant is repaid in monthly installments, and that, once these are fully paid, and thus reaching the end of the contract, the lessee has the right to acquire the leased asset for the residual value, plus expenses and VAT.

4. The Claimant alleges that all motor vehicles on which the IUC assessment was based were given in lease by it to the customers identified in the file and that, at the end of the contracts, the customers acquired the respective motor vehicle, by payment of the corresponding residual value, in accordance with invoices which it attached to the arbitral determination request, and which had already been attached to the hierarchical appeal and amicable claim procedures.

5. The Claimant alleges that when the Tax and Customs Authority (AT) notified it of the IUC assessments for the year 2015 and demanded payment, it was no longer the owner of the motor vehicles that motivated the tax assessment, so it cannot be the taxpayer or responsible for payment of the aforementioned tax.

6. The Claimant, although acknowledging that on the date of the taxable event and of tax exigibility the vehicles were registered in its name at the Motor Vehicle Registry Office, considers this fact irrelevant, since the transfer of the aforementioned vehicles had already taken place, and on the date of the arbitral determination request, it was promoting the registration of the motor vehicles in the name of the actual owners.

7. The Claimant alleges that the failure to register in favor of the new owners and the circumstance that it figures in the register as owner of the vehicles cannot determine its tax liability for payment of the tax, so the assessments are illegal.

8. The Claimant alleges that, in accordance with the law, not even during the financial leasing contract is the lessor entity a taxpayer of the IUC, so, a fortiori, less so will it be after the end of the contract and the lessee has exercised the right to acquire the vehicle.

9. And that having the lessee acquired the vehicle, it is only to it, as the owner thereof, that, in accordance with paragraph 1 of article 3 of the Unique Circulation Tax Code, the duty to pay the IUC and other legal charges falls.

10. The Claimant attached to the arbitral determination request an opinion from jurist B..., discussing the legal value of registration, that is, on the declarative or constitutive nature thereof and its effects on the validity and efficacy of the transferring act emerging from the sales contract.

11. The part of the opinion transcribed in the arbitral determination request is hereby reproduced, which in terms of conclusion states that "(…), the registration of the purchase of the vehicle in the register by the new owner is not a condition of validity nor of the production of the transferring effect typical of the sales contract, therefore, the buyer becomes the owner of the sold vehicle by mere conclusion of the sales contract, regardless of its registration. (…)"

12. The Claimant then raises the question of the full efficacy of the contract vis-à-vis third parties and states that this question is also resolved in the aforementioned legal opinion and that the Tax and Customs Authority is not, for the purposes in question, a third party.

13. To that end, the Claimant, relying on the aforementioned legal opinion, invokes that "(…) if the owner does not immediately proceed to register the property in its favor, it is presumed that the property continues to belong to the seller (art. 7 of the CRP), but this presumption is relative, that is, it can be overridden by proof to the contrary. Only third parties for purposes of registration who act in good faith can avail themselves of the absence of registration to (attempt to) acquire rights over the unregistered asset."

14. In this line of reasoning, the Claimant alleges that the Tax and Customs Authority does not meet the legal requirements of the concept of third party for purposes of registration (provided for in art. 5, paragraph 4, of the CRP), for which reason it cannot demand from the seller the payment of the tax due by the buyer (owner) from the moment the presumption of article 7 is overcome by proof of the respective sale.

15. And, thus, concludes that the registration of the acquisition of motor vehicles at the Motor Vehicle Registry Office is not a condition for the transfer of ownership, nor does it affect its validity, so the IUC assessments made in the sphere of the Claimant should be considered illegal and consequently annulled.

16. The Claimant also alleges that, since the Tax and Customs Authority already had the opportunity to revoke the IUC assessment acts, it should bear the costs of the arbitral process and should be ordered to pay compensatory interest.

VI – 2 – FRAMEWORK PRESENTED BY THE DEFENDANT

The Defendant, in its reply, by way of challenge, presents the following framework:

1. The Claimant bases its claim on the ground that on the dates to which the facts that originated the IUC assessments for the year 2015 that are the object of the present arbitral process refer, it was no longer the owner of the vehicles that motivated the tax assessments.

2. The Claimant alleges the illegality of the IUC assessments; however, it is not correct, since, even if we concluded that we were dealing with financial leasing contracts granted by it, it still had the duty to demonstrate that it had complied with the accessory obligation imposed by article 19 of the Unique Circulation Tax Code, which it did not do.

3. Following the Claimant's thesis that article 3 of the CIUC establishes a rebuttable presumption, it is necessary to conclude that the functioning of that article with regard to the rebuttal of the presumption also depends on compliance with the provisions of article 19 of the CIUC.

4. From the registration data contained in the Motor Vehicle Registry Office, it is verified that the Claimant is listed as the owner of the motor vehicles, a fact which, moreover, the Claimant assumes in accordance with article 38 of the arbitral request.

5. In matters of financial leasing, the Claimant could only exonerate itself from the tax if it had complied with the specific obligation provided for in article 19 of the CIUC, not having done so, it is necessary to conclude that the Claimant is the taxpayer of the tax.

6. The Defendant, in challenging the Claimant's claim, develops some considerations regarding arbitral case law, alleging that it does not agree with it and that it constitutes only a merely persuasive precedent.

7. The legislator, in establishing in article 3, paragraph 1, of the CIUC who the taxpayers of the IUC are, expressly and intentionally established that these are the owners, or in the situations provided for in paragraph 2, the persons enumerated therein, considering as such the persons in whose name the vehicles are registered.

8. If one were to understand that by using the expression "are considered" the legislator would have established a presumption, practically all rules of tax incidence in the context of Corporation Income Tax would be eliminated precisely because accounting prescribes solutions different from those of the Corporation Tax Code, which is exactly the purpose of the legislator to discard such accounting rules.

9. If one were to understand that the legislator established in paragraph 1 of article 3 of the CIUC a presumption, one would be, unequivocally, carrying out an interpretation contrary to law.

10. Article 3 of the CIUC does not establish a presumption; on the contrary, this rule evidences a clear choice of legislative policy adopted by the legislator, whose intention, within its freedom of legislative configuration, was that those registered as such in the motor vehicle register be considered owners.

11. The Claimant did not attach any document proving the transfer of ownership of the vehicle, limiting itself to attaching a copy of the financial leasing contracts, with no knowledge of whether they were complied with or whether there are breaches.

12. The Defendant makes reference to the decision issued in case no. 210/13.0BEPNF, of the Administrative and Tax Court of Penafiel and concludes that article 3 of the CIUC does not contain any legal presumption.

13. The Defendant invokes the provisions of articles 4, paragraph 2, and 6, paragraph 3 of the CIUC, article 10, paragraph 1 of Decree-Law no. 54/75, of 12 February, and article 42 of the Motor Vehicle Registration Regulation, and argues that the moment from which the tax obligation is constituted has a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear.

14. The registration certificate contains all the elements necessary for the determination of the taxpayer, without the need to access private contracts that confer such rights, enumerated by the CIUC as constitutive of the legal situation of taxpayer of the tax.

15. The Defendant, taking into account the current configuration of the legal system, will not have to proceed with the assessment of the tax on the basis of elements that do not appear in registers and public documents, and as such, authentic documents.

16. The failure to update the register, in accordance with article 42 of the Motor Vehicle Registration Regulation, must be imputed in the legal sphere of the taxpayer of the IUC and not in that of the Portuguese State, as the subject active of the tax.

17. In accordance with articles 3 and 6 of the CIUC, the Defendant proceeds with the assessment of the IUC in accordance with the persons in whose name the vehicle in question is registered with the Motor Vehicle Registry Office; any other procedure would jeopardize the period of limitation of the tax and legal certainty and security, in that the institute of motor vehicle registration would cease to provide the security and certainty that are its purposes, as well as the power-duty of the Defendant to assess taxes.

18. The CIUC carried out a reform of the tax regime for vehicles in Portugal, substantially altering the regime of vehicle taxation, with the taxpayers of the tax becoming the owners listed in the property register, regardless of the circulation of the vehicles on the public highway.

19. The IUC is due by the persons who appear in the register as owners of the vehicles, so the tax acts in question do not suffer from any defect of violation of law, since in light of the provisions of article 3, paragraphs 1 and 2, and article 6 of the CIUC, it was the Claimant, in its capacity as owner, the taxpayer of the IUC.

20. The Defendant challenges the documents (leasing contracts and second copies of invoices) attached by the Claimant to the arbitral determination request with a view to rebutting the (supposed) legal presumption established in article 3 of the CIUC.

21. The Claimant did not attach a single bank statement or check proving that the leasing contract was performed and the second copies of the invoices are also not suitable to prove the conclusion of a bilateral contract such as a sales transaction.

22. The transfer of ownership of motor vehicles is not susceptible to being controlled by the Defendant, since there is no accessory obligation declaratory in this matter, contrary to the control that is capable of being carried out, via the prior payment of IMT, in matters of transfer of real property.

23. The IUC is assessed in accordance with registration information that is transmitted to the Defendant by the Institute of Registries and Notary.

24. In light of the legal provisions, the Claimant did not act with the diligence that was required of it, and the Defendant limits itself to complying with the legal obligations to which it is bound, with no error attributable to the AT services, so it cannot be assigned the duty to pay procedural costs or the payment of compensatory interest, since no error attributable to the AT services occurred.

VII - PROCEDURAL MEASURES

1. With a view to forming the tribunal's free conviction, in light of the provision of subparagraph e) of article 16 of the LFTA, relating to free appreciation of the facts and free determination of evidentiary measures, articulated with the inquisitorial principle provided for in article 99 of the LGT, applicable by referral of subparagraph a) of paragraph 1 of article 29 of the LFTA, the arbitral tribunal took into consideration all evidence presented by the Claimant and the Defendant.

2. The tribunal took into consideration the arbitral decisions issued on matters similar to the controversy that is the object of the present arbitral process, namely those invoked by the Claimant and the Defendant, of which the following stand out: arbitral decisions relating to cases nos. 14/2013-T, 26/2013-T, 27/2013-T, 72/2013-T, 63/2014-T, 126/2014-T, 130/2014-T, 150/2014-T, 212/2014-T, 220/2014-T, 227/2014-T, 339/2014-T, 655/2015-T, 748/2016-T, 145/2017-T, 258/2017-T, 376/2017-T, 515/2017-T, 534/2017-T, the tribunal being aware that in its analysis it did not exhaust all arbitral decisions already issued on the matter relating to the subjective incidence of the IUC.

3. The arbitral tribunal further took into consideration the case law of the judicial tax courts, notably the judgment of the Central Administrative Court of the North (TCAN), issued in case no. 00358/14.4BEVIS, dated 07.12.2017, the judgment of the Central Administrative Court of the South (TCAS), issued in case no. 08300/14, dated 19.03.2015, and also the judgment of the Supreme Administrative Court (STA), issued in case no. 0589/16, dated 25.01.2017.

4. Having weighed everything, it is necessary to assess the merits of the Claimant's claim.

VIII - ON THE MERITS

VIII -1 - THE FACTS

VIII -1.1 - FACTS ESTABLISHED

1. With regard to the factual matter, the Tribunal does not have to pronounce on everything that was alleged by the Parties; it is incumbent upon it, in accordance with paragraph 2 of article 123 of the CPPT and paragraph 3 of article 607 of the Code of Civil Procedure (CPC), applicable by force of article 29 of the LFTA, to select the facts that matter for the decision and to discriminate between the facts considered established and those not established. The tribunal considers the following facts as established and relevant for the arbitral decision:

78.1 The Claimant was notified of the five IUC assessments and compensatory interest, relating to the year 2015, and above identified.

78.2 The Claimant proceeded to pay the IUC assessments, in accordance with documents attached to the file.

78.3 On the date of the taxable event and of tax exigibility, the Claimant was listed in the register as the owner of the vehicles.

78.4 The vehicles that motivated the IUC assessment were the subject of a financial leasing contract in which the Claimant was the lessor.

78.5 At the end of the financial leasing contract, the lessees exercised the purchase option and the lessor proceeded to issue the invoices and gave the due accounting relevance to the operations carried out.

78.6 The Defendant proceeded with the assessment of the IUC for the year 2015, in accordance with the provisions of articles 3, 4 and 6 of the CIUC.

VIII -1.2 - FACTS NOT ESTABLISHED

1. There are no essential facts with relevance for the assessment of the merits of the case that have not been established.

VIII -2 - MATTER OF LAW

1. In order to decide on the questions to be decided, it is important to enumerate and scrutinize the applicable law.

2. The legal regime of the financial leasing contract is contained in Decree-Law no. 149/95, of 24 June, subject to various legislative amendments, the most recent being that introduced by Decree-Law no. 30/2008, of 25 February, with article 1 of this regime establishing that "Financial leasing is the contract by which one of the parties undertakes, in return for consideration, to grant to the other the temporary enjoyment of a thing, movable or immovable, acquired or built by indication of the latter, and which the lessee may purchase, after the agreed period, for a price determined therein or determinable by mere application of the criteria fixed therein."

3. Within the scope of this legal regime, specifically in accordance with the provisions of subparagraphs b) and c) of paragraph 1 of its article 9, the obligations of the lessor include granting the lessee the enjoyment of the asset for the purposes to which it is intended and, at the end of the contract, selling the asset if the lessee so wishes, it being possible to consider that the ownership of the lessor is instrumental, given that during the financial leasing contract the lessor assumes the legal ownership of the asset, while the lessee holds its economic ownership. At the end of the leasing contract, once the purchase option right is exercised, the ownership right, in its fullness, passes to the lessee, with the transfer of the ownership right taking place in accordance with the contractual terms.

4. Under Decree-Law no. 54/75, of 12 February, the ownership of motor vehicles is subject to mandatory registration, as follows from the provisions of paragraphs 1 and 2 of this decree-law. The obligation to register falls on the buyer – the active subject of the fact subject to registration, which is, in this case, the ownership of the vehicle, as provided for in paragraph 1 of article 8-B of the Land Registration Code, applicable to motor vehicle registration under article 29 of Decree-Law no. 54/75, of 12 February.

5. The regulation of motor vehicle registration is contained in Decree-Law no. 55/75, of 12 February, the registration of the ownership of the vehicle acquired as a result of a sales contract being capable of being made on the basis of a request signed by the buyer and confirmed by the seller, through a sales declaration presented with the registration request (subparagraph a) of paragraph 1 of art. 25 of Decree-Law no. 55/75). However, it must be noted that since 2008 there has been a special registration regime for entities engaged in the commercial activity of selling motor vehicles. Indeed, in accordance with subparagraphs c) and d) of paragraph 1 of article 25 of the motor vehicle registration regulation, registration may be promoted by the seller, through a request signed only by the seller. A similar regime is provided for in subparagraph e) of paragraph 1 of that article 25 for the acquisition of ownership arising from a financial leasing contract, as the aforementioned rule establishes that ownership registration may be made in the case of "request signed by the seller, following the exercise of the purchase right at the end of the registered financial leasing or long-term rental contract, accompanied by the invoice corresponding to the respective sale or a receipt document."

6. In light of this legal regime, it is important to note that, once the purchase right was exercised by the lessee, the Claimant could have promoted the registration of the ownership in favor of the vehicle acquirer, the updating of the vehicle ownership registration not depending necessarily on the initiative of the buyer (former lessee). The provision of paragraph 1 of article 42 of the Motor Vehicle Registration Regulation (Decree-Law no. 55/75) establishes that registration must be requested within 60 days from the date of the fact that gives rise to it.

7. It is also important to note that, in accordance with paragraph 4 of article 118 of the Highway Code, the Claimant, as the seller, could have promoted the updating of the motor vehicle ownership register, since that provision provides that "the seller or the person who, under any legal title, transfers to another the ownership of the vehicle must notify the competent authority for registration, in accordance with the terms and time limits referred to in the previous number, identifying the acquirer or the person in whose favor the right is constituted."

8. It is thus found that, in accordance with the law, the Claimant, once it sold the motor vehicles to the former lessees, could have immediately promoted the registration of the ownership of the vehicles in the name of the acquirers, thereby freeing itself from any burdens arising from the ownership right of the vehicles.

9. However, it must be noted that, in view of the purpose of motor vehicle ownership registration established in article 1 of Decree-Law no. 54/75, of 12 February (The registration of vehicles is primarily intended to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce), the acquirers (buyers) of the vehicles have a direct and essential interest in the registration of the ownership, under penalty of their right being voided in the face of the rights of third parties.

10. Following the request for motor vehicle ownership registration, a registration certificate is issued by the competent authority for each vehicle, which attests to the identity of the vehicle owner and other elements relevant to publicizing the legal situation of the vehicle.

11. The Unique Circulation Tax is designed to function in integration with the motor vehicle register, the latter constituting the suitable and legal source of information used by the Tax and Customs Authority to feed the assessment procedure and to proceed with the assessment and notification of IUC taxpayers.

12. On the date of the facts – the taxation period of the year 2015 – article 3 of the Unique Circulation Tax Code established that:

"Subjective incidence

The taxpayers of the tax are the owners of the vehicles, considered as such the natural or legal persons, of public or private law, in whose name the same are registered.

Financially leased vehicles, reserve of ownership acquirers, as well as other holders of purchase option rights by virtue of a leasing contract are equivalent to owners."

1. Furthermore, the IUC is an annual tax, being due in full in each taxation period corresponding to the year that begins on the date of registration or on each of its anniversaries, and is exigible on the first day of the taxation period. The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration in the national territory (articles 4 and 6 of the CIUC).

2. In light of the legal commands establishing the subjective incidence of the IUC, as well as its exigibility, it must be acknowledged that the Tax and Customs Authority, when it proceeded with the assessment acts above identified and challenged by the Claimant, merely applied the law strictly, in that the IUC is assessed on the basis of data contained in the motor vehicle registration information system, and the motor vehicles on which the IUC was assessed were registered in the name of the Claimant, which held, on the date of the IUC assessment for the year 2015, the quality of owner thereof.

3. Apart from the motor vehicle register, the Tax and Customs Authority, unlike what happens with real property, does not have any other source of information that allows it to know of the transfer or transmission of ownership of motor vehicles, hence the direct and close functional articulation between the motor vehicle ownership register and the IUC assessment procedures.

4. In order to decide on the legality of the IUC assessments that are the object of the arbitral determination request, it is important to assess whether the rule of paragraph 1 of article 3 of the Unique Circulation Tax Code contains a legal presumption capable of being rebutted or, conversely, a legal fiction.

5. Since this matter has already been the subject of countless arbitral determinations, we will not address semantic aspects arising from the letter of the law, assuming from the outset that paragraph 1 of article 3 of the Unique Circulation Tax Code, in the wording in effect on the date of the facts (2015), contemplates a legal presumption (juris tantum) that may be rebutted.

6. Presumption is an inference that the law or the court draws from a known fact to assert an unknown fact (article 349 of the Civil Code), and whoever has a legal presumption in their favor is relieved of the burden of proving the fact to which it leads (article 350 of the Civil Code).

7. Accordingly, being a taxpayer of the IUC the owner of the vehicle, and appearing in the motor vehicle register as the owner of the vehicles the Claimant, the Tax and Customs Authority could only proceed with the assessment of the IUC in the exact terms in which it did, with no error attributable to the services in the assessment of the IUC for the year 2015.

8. However, it is important to note that presumptions, except in cases where the law prohibits it, may be rebutted by proof to the contrary (paragraph 2 of article 350 of the Civil Code). Furthermore, in accordance with article 73 of the General Tax Law, the presumptions established in the rules of tax incidence always admit proof to the contrary.

9. To rebut the presumptions contained in the rules of tax incidence, the taxpayer in the tax legal relationship may have recourse to the specific contradictory procedure provided for in article 64 of the CPPT or, alternatively, may use the amicable claim procedure or judicial challenge. In this way, the arbitral process is also a suitable procedural means for rebutting the presumptions contained in the rules of tax incidence.

10. It is important to note that for the controversial matter – the legality of the IUC assessment acts – what is relevant is the substantive presumption inherent in the rule of incidence of paragraph 1 of article 3 of the Unique Circulation Tax Code and not the procedural presumption contained in article 7 of the Land Registration Code, applicable to the motor vehicle register, under article 29 of the motor vehicle registration regime (Decree-Law no. 54/75, of 12 February).

11. It is important to note that the Defendant initially does not admit that the rule of paragraph 1 of article 3 of the Unique Circulation Tax Code establishes a legal presumption; however, it ends up accepting such possibility, discoursing at length on the unsuitability of the documents presented by the Claimant to rebut the aforementioned presumption.

12. It should be noted that, regarding the circumstance of the rule of paragraph 1 of article 3 of the IUC establishing a legal presumption, it is stated that we adhere to the lengthy explanation on this subject provided in the arbitral determination relating to arbitral case no. 27/2013-T, further emphasizing that for us the existence of such legal presumption is unquestionable, since, if this were not the case, and considering the interpretative elements of the law, namely the historical element, the grammatical element and the logical element, the legislator would not have chosen to alter the letter of the rule of paragraph 1 of article 3 of the CIUC, introducing new wording through Decree-Law no. 41/2016, of 01 August. This legislative choice only confirms that that rule established a legal presumption capable of being rebutted by proof to the contrary.

13. To rebut the legal presumption, the Claimant presented with the arbitral determination request the financial leasing contracts and invoices evidencing the vehicle sales operations to the lessees of the financial leasing contracts. It should be noted that, previously, the Claimant sought to achieve this objective in the amicable claim procedure and, as a result of the rejection thereof, through hierarchical appeals subsequently presented as a means of reacting to the rejection of the amicable claims.

14. It is important to emphasize that the amicable claim is a procedurally suitable means to react against the illegality of the tax assessment made on the basis of a legal presumption contained in a rule of tax incidence, with a view to the rebuttal of the presumption.

15. The Defendant considered that the Claimant, as claimant at that time, had not presented suitable and sufficient evidence to rebut the legal presumption. It should therefore be noted that the amicable claim procedure, as a modality or form of tax procedure, is subject to the inquisitorial principle (article 58 of the LGT), as well as there should be a duty of mutual cooperation between the subjects of the tax legal relationship, so the organ competent to decide the amicable claim could (should) have promoted all the necessary measures for ascertaining the material truth about the facts and, consequently, could have asked the claimant to present other evidence or, then, could have obtained them on its own initiative and, in this way, could have been convinced that, on the date of tax exigibility, the owner of each of the motor vehicles was the former lessee and not the Claimant.

16. The Tax and Customs Authority had the opportunity to admit the rebuttal of the legal presumption established in paragraph 1 of article 3 of the Unique Circulation Tax Code in the amicable claim procedure and subsequently in the hierarchical appeal procedure; however, it chose to consider the evidence as insufficient and not suitable to rebut the presumption.

17. We do not accept the perspective that the invoices issued by the Claimant are not a suitable means of proof to prove the transfer of ownership of motor vehicles, that is, to prove the veracity of the sales contract, a bilateral contract, underlying the transfer of ownership of motor vehicles.

18. Similarly, we do not accept the line of reasoning expounded in various arbitral determinations that have invoked various judicial decisions to the effect of demonstrating the unsuitability of invoices to prove the materiality of the sales contract that allowed the completion of the transfer of vehicle ownership. It is true that the sales contract took place within a private law legal relationship – a contract – between the Claimant and the lessees; however, what is at issue in the present case is a controversy within a tax legal relationship, being consequently applicable thereto the principles and rules of tax law, which for this purpose are self-sufficient.

19. The invoices issued by the Claimant are not intended exclusively to prove accounting movements; they also serve the function of proving the substance of the operations carried out, so that, having the Claimant recorded such invoices in its accounting records, the invoices and correlatively the operations to which they pertain benefit from a presumption of truth (article 75 of the LGT), and the Tax Administration may, in accordance with the law, destroy such presumption through evidence that the operations were not carried out, as well as could carry out appropriate measures to refute their performance (subparagraph e) of article 69 of the CPPT and subparagraph a) of paragraph 2 of article 111 of the CPPT).

20. In light of all the evidential elements, both those attached to the arbitral determination request and those contained in the administrative file submitted by the Defendant to the case, it is found that on the date of tax exigibility of the IUC for the year 2015, in relation to each motor vehicle subject to the incidence of the tax assessment above identified, the ownership of the vehicle did not belong to the Claimant but rather to the former lessee, since the respective purchase option right was exercised in accordance with the contractual terms.

21. The presumption inherent in paragraph 1 of article 3 of the Unique Circulation Tax Code is thus considered rebutted, and consequently the IUC assessments for the year 2015 challenged in the present arbitral process should be annulled, with the subsequent production of legal effects.

22. Since the taxable event of the tax is constituted by the ownership of the motor vehicle (article 6 of the CIUC), the Tax and Customs Authority should proceed with the performance of new IUC assessments for the year 2015 and demand payment of the tax from the taxpayer who, on the date of tax exigibility (article 4 of the CIUC), held the substantive ownership of the motor vehicles.

IX - COMPENSATORY INTEREST

1. Compensatory interest is due when it is determined, in an amicable claim or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount higher than that legally due (paragraph 1 of article 43 of the LGT). In accordance with paragraph 5 of article 24 of the LFTA, the right to payment of compensatory interest may be recognized in the arbitral process.

2. The payment of compensatory interest presupposes that the tax that is the subject of the assessments challenged be paid, which is confirmed with regard to the IUC assessments for the year 2015 above identified.

3. However, it is important to emphasize that the Tax and Customs Authority, when it proceeded with the assessment of the IUC for the year 2015 above identified, did not commit any error, since it merely observed the rules of subjective incidence (article 3 of the CIUC) in articulation with the rule establishing the taxable event of the tax (article 6 of the CIUC), so that, in light of the legal basis and the facts known and emerging from the motor vehicle ownership register, the tax assessments were correctly and legally carried out, with no error of fact or law existing.

4. However, following the filing of the amicable claims against the IUC assessments for the year 2015, now the object of the present arbitral process, in light of the allegations made in the amicable claim procedures by the Claimant, the Tax and Customs Authority had the opportunity to ascertain that the ownership of the motor vehicles did not belong to it but rather to the former lessees, so that, from that point on, it could have effected the annulment of the aforementioned assessments and promoted the exigibility of the tax from the persons who, on the date of tax exigibility for the year 2015, held ownership of the motor vehicles, so it is only from the date of the decision of each amicable claim that there is room for imputation of error to the AT.

5. Accordingly, and in line with the case law contained in the judgments of the Supreme Administrative Court (STA) issued in case no. 0926/17, of 06.12.2017, and in case no. 0250/17, of 03.05.2018, the Tax and Customs Authority must, in accordance with article 43 of the LGT and article 61 of the CPPT, proceed with the payment of compensatory interest to the Claimant, in relation to each of the IUC assessments for the year 2015, from the date of the order rejecting the respective amicable claim until the date of processing of the respective credit note (paragraph 5 of article 61 of the CPPT).

X - DECISION

On the basis and with the grounds set out above, the Arbitral Tribunal decides:

To uphold the arbitral determination request with regard to the rebuttal of the presumption of subjective incidence of the IUC;

To uphold the request for declaration of illegality of the five IUC assessments and compensatory interest relating to the year 2015, above identified;

To uphold the request for the condemnation of the Tax and Customs Authority to restitution of the amounts unduly paid by the Claimant and connected with the IUC assessments now declared illegal.

To uphold the request for the condemnation of the Tax and Customs Authority to payment of compensatory interest from the date of the order rejecting the amicable claim relating to each IUC assessment until the date of processing of the respective credit note.

XI – 1 - VALUE OF THE CASE

The value of the case is fixed at € 744.57 (seven hundred and forty-four euros and fifty-seven cents), in accordance with the provisions of articles 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Processes (RCPAT), article 97-A, paragraph 1, subparagraph a) of the CPPT and article 306 of the Code of Civil Procedure (CPC).

XI - 2 - COSTS

The value of costs is fixed at € 306 (three hundred and six euros) under article 22, paragraph 4 of the LFTA and Table I attached to the RCPAT, to be borne by the Defendant, in accordance with the provisions of articles 12, paragraph 2 of the LFTA and 4, paragraph 4 of the RCPAT.

Let it be notified.

Lisbon, 25 February 2019

The Arbitrator

Jesuíno Alcântara Martins

Text prepared by computer, in accordance with article 131, paragraph 5 of the Code of Civil Procedure, applicable by referral of article 29, paragraph 1, subparagraph e) of the LFTA.