IUC Subjective Incidence in Financial Leasing: Legal Presumptions in CAAD Process 657/2017-T

ARBITRAL DECISION[1]

Dr. Sílvia Oliveira, Arbitrator, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 27 February 2018 with respect to the above-identified case, decided as follows:

REPORT

A..., S.A. (hereinafter referred to as "Claimant"), legal entity no. ..., with registered office at ... Street, no. ..., in Lisbon, filed a request for arbitral decision and constitution of a Singular Arbitral Tribunal on 18 December 2017, under the provisions of article 4 and article 10, no. 2 of Decree-Law no. 10/2011 of 20 January [Legal Framework for Arbitration in Tax Matters (RJAT)], wherein the Tax and Customs Authority (hereinafter referred to as "Respondent") is the respondent.

The Claimant seeks that the Arbitral Tribunal conclude with "(…) a declaration of illegality of the 6 assessment acts relating to IUC (…) concerning the 6 vehicles (…) identified (…) and, likewise, of the acts dismissing the hierarchical appeals aimed at annulling the acts dismissing the gracious complaints relating to the aforementioned assessment acts", further requesting "(…) the reimbursement of the amount of € 362.90, relating to the tax and compensatory interest unduly paid (…), as well as the payment of indemnity interest (…)".

1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 19 December 2017 and notified, on the same date, to the Respondent.

1.4. Given that the Claimant did not proceed to appoint an arbitrator, pursuant to article 6, no. 2, subparagraph a) of RJAT, the undersigned was appointed as arbitrator on 7 February 2018 by the President of the Ethics Council of CAAD, the appointment having been accepted within the legal timeframe and terms.

1.5. On the same date, the Parties were duly notified of this appointment and did not manifest the will to refuse it, in accordance with article 11, no. 1, subparagraphs a) and b) of RJAT and articles 6 and 7 of the Ethics Code.

1.6. Thus, in conformity with the provisions of subparagraph c) of no. 1 of article 11 of RJAT, the Arbitral Tribunal was constituted on 27 February 2018, an arbitral order having been issued on 28 February 2018, notifying the Respondent to, pursuant to article 17, no. 1 of RJAT, file a Response within a maximum period of 30 days and, if it so wished, request the production of additional evidence.

1.7. Additionally, it was further stated in that arbitral order that the Respondent should send to the Arbitral Tribunal, within the Response deadline, a copy of the administrative file.

On 6 April 2018, the Respondent filed its Response, defending itself by way of denial, concluding that "the Claimant failed to provide proof of the sale of the vehicles through the documents it attached to the case", "to which is added the fact that the Claimant violated the law by failing to update, in defence of its claim, the elements contained in the motor vehicle register", petitioning that "(…) the present request for arbitral decision should be judged unfounded, the tax assessment acts challenged being maintained in the legal order and the Respondent being accordingly absolved of the request".

By arbitral order of 6 April 2018, the Claimant was notified to, "having regard to the Response filed by the Respondent (…) and the request contained therein relating to the request for dispensing with the holding of the meeting provided for in article 18 of (…) (RJAT), as well as the request for dispensing with the filing of arguments (…), within a period of five days, state its position regarding the content of what was petitioned by the Respondent and to state its position on the possibility of dispensing with the examination of the two witnesses indicated in the request" and that, should it not forego such examination, it would be forthwith notified to, within the same period, indicate the facts on which it intended the witness evidence to bear.

On 17 April 2017, the Claimant filed a request to (i) request that the Arbitral Tribunal notify the Respondent to attach to the case the documents proving the (non-)compliance with the obligation imposed by article 19 of the IUC Code and (ii) clarify that it had nothing to object to regarding the dispensing with the holding of the meeting provided for in article 18 of RJAT, nor regarding the dispensing with the filing of arguments by the Parties, having neither stated its position on the maintenance of its interest in the examination of the witnesses indicated in the request nor, consequently, indicated the facts on which it should bear.

By arbitral order of 19 April 2018, the Respondent was notified to, within a period of five days, attach to the case the documentation requested by the Claimant in the request identified in the previous point.

On the same date, the Respondent attached to the case a copy of the administrative file.

The Respondent filed, on 23 April 2018, a request to state that (i) not only does it understand that the Claimant exceeded, in the request filed, the scope of its decision, (ii) but also that it attached to the case no document providing proof of compliance with the obligation imposed by article 19 of the IUC Code, in accordance with what had been requested by the Claimant in its request of 17 April 2018.

On 26 April 2018, a new arbitral order was issued notifying the Respondent to, within a period of five days, attach a copy of the electronic receipt relating to compliance by the Claimant with the ancillary obligation provided for in article 19 of the IUC Code, concerning the vehicles identified in the arbitral request, in light of the arguments set forth in the said order.

After the deadline had elapsed, considering the silence of the Respondent, it was decided by this Arbitral Tribunal, by order dated 10 May 2018, in consonance with the procedural principles set out in article 16 of RJAT, the autonomy of the Arbitral Tribunal in the conduct of the proceedings and in the determination of the rules to be observed [subparagraph c)], cooperation and procedural good faith [subparagraph f)] and the free conduct of the proceedings set out in articles 19 and 29, no. 2 of RJAT, as well as taking into account the principle of limitation of useless acts, provided for in article 130 of the Code of Civil Procedure (CPC), applicable by virtue of the provisions of article 29, no. 1, subparagraph e) of RJAT:

To dispense with the holding of the meeting referred to in article 18 of RJAT;

To dispense with the examination of witnesses;

To dispense with the filing of arguments by the Parties;

To set 24 May 2018 as the date for the delivery of the arbitral decision.

In the same order, the Claimant was further warned that "by the date of delivery of the arbitral decision, it should proceed with payment of the subsequent arbitration fee, pursuant to article 4, no. 3 of the Regulations of Costs in Tax Arbitration Proceedings and communicate such payment to CAAD".

GROUNDS OF CLAIM

From the identification of the acts that are the subject of this request for Arbitral Decision

2.1. The Claimant begins by clarifying that the Request for Arbitral Decision relates to "(…) the legality of the 6 assessment acts of Unique Vehicle Tax (…) identified (…), issued by the Tax and Customs Authority (…) concerning the 6 (…) motor vehicles identified (…), relating to the year 2015, in the amount of € 362.90, and, likewise, the illegality of the acts dismissing hierarchical appeals (…) filed against the acts which dismissed the gracious complaints presented by the Claimant concerning the various IUC assessment acts in question (…)".

2.2. The Claimant sustains that "(…) all these additional tax assessment acts are based on the same facts and (…) on the same legal grounds" inasmuch as "(…) they all presuppose the same tax-legal understanding: that, during the pendency of the respective financial leasing contracts, the Claimant here, the lessor entity of the vehicles in question, is responsible for the payment of IUC, instead of the corresponding lessee", being that "such understanding is likewise embodied in the acts dismissing hierarchical appeals concerning which this request for arbitral decision is presented" (emphasis added by the Claimant).

2.3. Thus, the Claimant understands that "(…) determining the (il)legality of the aforementioned assessments and acts dismissing hierarchical appeals requires the analysis of the same grounds of fact and the interpretation and application of the same rules and principles of Law", "(…) requesting (…) from the (…) Arbitral Tribunal that (…) it issue (…) a judgment of illegality regarding the 6 tax assessment acts here in question, as well as the respective 6 acts dismissing hierarchical appeal (…)" (emphasis and underlining by the Claimant).

Relevant factual matters

2.4. The Claimant proceeds by stating that "(…) it is a credit institution (…)", being that "(…) among its areas of activity, financing of the automotive sector assumes special relevance (…)", inasmuch as "a substantial part of its activity is based on the conclusion (…) of financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles".

2.5. The Claimant clarifies that "during the period that may be stipulated in the contract (…)" the "lessee maintains temporary enjoyment of the vehicle - which remains the property of the Claimant, by means of remuneration (…) in the form of rental payments; and may acquire the vehicle at the end of the contract by payment of a residual value".

2.6. Thus, the Claimant states that, in the situations underlying the said assessments:

"The motor vehicles identified (…) were given in financial lease (…) to the customers also identified (…) therein";

The "lease (…) was in effect in the year (…) in which the obligation to pay the IUC associated (…) became due" and,

"The potential for use of these vehicles never belonged to the (…) Claimant".

However, "(…) the Claimant was notified to proceed with payment of the IUC to which the additional assessment acts identified (…) relate", "which it duly did, as attested by the payment receipts attached (…)".

Indeed, "through the aforementioned additional assessment acts, the Tax and Customs Authority (…) came to demand payment of the missing IUC (…) even knowing – or ought to know that, on these motor vehicles (…), financial leasing contracts were in effect, and knowing (…) the identity of the lessees".

Thus, the Claimant argues that "(…) as will be argued (…), it cannot (…) assume the status of passive subject of the tax that was assessed against it", inasmuch as "it happens that, in all these cases, at the month of registration, the aforementioned lease contract was in effect", "whereby it is all too evident that the Claimant could no longer be responsible for payment of the corresponding IUC (…)".

In fact, according to the Claimant, "in all of them (…), a financial lease contract was in effect at the moment in which the IUC here in question became exigible (…)", reason for which it understands that it could not "(...) be considered its respective passive subject (…)".

The Tax Authority's Legal Arguments

The Claimant does not agree with the Respondent's understanding that "(…) the lessor entity of a given motor vehicle is, in light of the Unique Vehicle Tax Code (…) responsible for its payment, that is, it is the passive subject of this tax", arguing that such understanding is "(…) absolutely illegal".

On the Law – The underlying rationale for IUC

The Claimant argues that underlying the incidence rule of this tax "is (…) the presupposition of the potential for use of motor vehicles (…) precisely because it has at its disposal the right to use a vehicle – generator of a certain level of pollution, wear of roads (…), which that passive subject in an increased potential for causing damage to the environment and infrastructure, damage that justifies (…) its taxation under IUC", arguing that "the weight of the environmental component" was "one of the central points of the comprehensive reform of automotive taxation" carried out in 2007.[2]

To this extent, "the determining criterion of taxation ceased to be (exclusively) engine displacement, and came to be based (…) on indicators of the polluting capacity of a vehicle, it being certain that as a structuring and unifying element of these categories, the principle of equivalence is established, thus making clear (…) that the tax (…) is subordinate to the idea that taxpayers should be burdened in proportion to the cost they cause to the environment and the road network, being this the reason for being of this tax figure" (underlining ours).[3]

In this connection, and also quoting Diogo de Leite Campos[4], the Claimant argues that "Unique Vehicle Tax does not have the vehicle, in itself, as the object of its incidence, but rather its use (in act or in potency)", concluding that the Claimant that the burden associated with IUC is incumbent "in the first place, on the person or entity that has the potential for use of the said motor vehicle; i.e., that has the potential for production of the pollution that it is sought (…) to discourage", which will be, "in the majority of cases, (…) the owner of the motor vehicle (…)", for being its "(…) user par excellence (…)" that is to say "(…) its most easily detectable user (…)" (bold and underlining by the Claimant).

In these terms, the Claimant understands that in cases where there exists "a mismatch between the behaviour that constitutes the reason for being of this tax figure (…) and concrete reality (…)", "the underlying rationale of the tax under consideration is violated (…)".

In fact, for the Claimant, in cases in which "the owner did not have, does not have, and will never have (…) the potential for use" of a vehicle, it will not make sense "(…) that the owner be burdened with the duty to pay IUC".[5]

On the Law – The substantive legitimacy of the lessee

In this connection, the Claimant states that in cases of financial leasing, "the legislator chose (…) to burden with the tax obligation not the owners, but the individuals to whom falls the exclusive enjoyment (…) of the motor vehicles", that is to say, "financial lessees (…) or lessee with option to purchase".[6]

On the Law – The financial leasing contract

In this respect, the Claimant states that "in a financial leasing contract, there is no doubt that the right to use the asset is removed from its respective owner (…) to be integrated into the sphere of the lessee" inasmuch as, in accordance with the definition presented by Diogo de Leite Campos, "financial leasing may be defined as a medium or long-term contract intended to finance someone, not through the provision of a sum of money, but through the use of an asset" providing "the lessee not so much with the ownership of certain assets, but with their possession and use for certain purposes (…)".[7]

On the Law – The illegitimacy of lessors to pay IUC

Thus, in this connection, the Claimant reiterates that "when a financial lease contract is in effect at the moment in which IUC becomes exigible, it is to the lessee, and not to the lessor (…) that it falls to settle it", whereby it is not "the Claimant the passive subject of IUC concerning the financial lease contracts of which it is a party (…)" (bold and underlining by the Claimant).[8]

On the Law – Arbitral jurisprudence

In this matter, the Claimant states that it has been in line with its understanding that "it has been decided" in the matter of "arbitral decisions rendered (…) on this topic, within the framework of tax arbitration".[9]

On the costs of this arbitral proceeding and indemnity interest

In this respect, the Claimant understands that, not being responsible for the IUC assessments (inasmuch as it understands these are "the exclusive and sole responsibility of the TA"), it is to the Respondent that one should seek responsibility "for payment of indemnity interest and for bearing the arbitration costs".

RESPONSE OF THE RESPONDENT

3.1. The Respondent in its Response defended itself by way of denial, having, in summary, presented the following arguments:

Regarding the alleged error on the factual presuppositions

3.2. In this connection, the Respondent argues that "(…) even if it were concluded that we are dealing with financial leasing contracts granted by the Claimant, the latter was always required to demonstrate having complied with the ancillary obligation imposed by article 19 of CIUC" inasmuch as it understands that "(…) following the thesis advocated by the Claimant regarding the fact that article 3 of CIUC establishes a rebuttable presumption, then it is unavoidable to conclude that the functioning of that article (…) equally depends on compliance with what is provided in article 19 of CIUC (…)" (bold by the Respondent).

3.3. The Respondent understands that "the Claimant provided no proof as to compliance with this obligation with respect to the motor vehicles now under analysis", "(…) whereby it is necessarily the case that the intended rebuttal of article 3 here in question must fail" (bold and underlining by the Respondent).

3.4. Now, the Respondent reiterates that "(…) the Claimant having failed to comply with that obligation, it is unavoidable to conclude that it is the passive subject of the tax", emphasizing that "(…) after submission of the request for arbitral decision, the Claimant became barred, from presenting further documentary evidence (…)"(bold and underlining by the Respondent).

3.5. Proceeding, the Respondent states that "the Claimant having not discharged the burden of proof that was incumbent upon it (…) it is necessarily the case that the following must be derived from its omissive conduct: (…) its responsibility for arbitration costs (…)" and the "(…) determination of its responsibility in terms of contraventions (…)".

On the value of arbitral jurisprudence

In this matter, the Respondent states that "(…) it does not overlook the existence of established jurisprudence in the Arbitration Centre (…) concerning the matter in question (…), however it does not follow it".

On the subjective incidence of IUC

In this respect, the Respondent argues that "the first error underlying the interpretation defended by the Claimant relates to a biased reading of the letter of the law" (…) inasmuch as "it is imperative to conclude that (…) the legislator expressly and intentionally established that the following are to be considered as (…) owners (…), the persons in whose names the (…) vehicles are registered (…)", thus defending the exclusion of the establishment of a presumption by the legislator.

Thus, the Respondent understands that "in view of this wording it is manifestly not possible to invoke that it is a presumption, as the Claimant argues (…) it being (…) a clear legislative policy choice embraced by the legislator, whose intention (…) was that, for purposes of IUC, those who appear as such in the motor vehicle register be considered owners".[10]

In this connection, the Respondent concludes that "article 3 of CIUC does not contain any legal presumption (…)".

On the interpretation that does not heed the systematic element, violating the unity of the regime

In this respect, the Respondent understands that "from the coordination between the scope of subjective incidence of IUC and the constitutive fact of the corresponding tax obligation, it follows unequivocally that only the legal situations subject to registration (…) give rise to the birth of the tax obligation (…)" and that this is "deemed exigible on the first day of the taxation period (…)", that is to say, "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" being that "in the absence of such registration (…) the owner will be notified to discharge the corresponding tax obligation (…)".

The Respondent further argues that, "if one were to accept the position defended by the Claimant (…) the Respondent would have to proceed with the assessment of IUC concerning that other person identified by the person in the motor vehicle register to whom it had first assessed the IUC (…)" and, "in turn, after assessing IUC concerning that other person, this person could also claim and prove that in the meantime it has already entered into (…) a financial lease (…) with another third party, but that this person also did not register (…)", "(…) and so on successively (…)", "thereby placing (…) in doubt the statute of limitations period for the tax".

Thus, in the Respondent's view, "one cannot at all follow such an interpretation".

On the interpretation that ignores the teleological element of statutory interpretation

In this connection, the Respondent understands that it was the intention of the tax legislator "(…) to create a tax based on taxation of the vehicle owner as it appears in the motor vehicle register", with IUC becoming "(…) due by the persons who appear in the register as owners of the vehicles" (bold by the Respondent).[11]

In these terms, the Respondent reiterates that "the new regime for taxation of IUC substantially altered the regime for automotive taxation, with the passive subjects of the tax becoming the owners appearing in the register of ownership (…)".

Thus, according to the Respondent, "it is clear that the tax acts under challenge do not suffer from any defect constituting a violation of law", insofar as in light of the provisions of applicable legislation, "it was the Claimant, in its capacity as owner, that was the passive subject of IUC" (bold by the Respondent).

Regarding the documents attached for purposes of rebutting the presumption

Finally, and with respect to the copies of the leasing contracts attached by the Claimant with the arbitral request, the Respondent questions whether "the leasing contracts will constitute sufficient proof to undermine the (supposed) legal presumption established in article 3 of CIUC", understanding that the Respondent that "(…) no (…)" inasmuch as "the leasing contracts do not prove that ownership of the motor vehicle was transferred" (bold and underlining by the Respondent).[12]

Thus, the Respondent concludes that what the Claimant "(…) presents is insufficient to rebut a legal presumption arising from the registration of the vehicles in its name on the dates on which the taxes became exigible".

On the payment of indemnity interest and responsibility for payment of arbitration costs

In this respect, the Respondent argues that "the register of ownership constitutes an essential element in the system of information between the Respondent and other public entities (…) and with the forces of authority (…) with a view to the exchange of information necessary for the assessment and inspection of (…) IUC".

On the other hand, it states that "the transfer of ownership of motor vehicles is not capable of being monitored by the Respondent (…)", being that "(…) IUC is assessed in accordance with the registral information (…) transmitted by the Institute of Registers and Notaries".

In summary, the Respondent argues that "IUC is not assessed in accordance with information generated by the Respondent itself (…)" whereby "the Claimant having failed to attend to the updating of the motor vehicle register (…) it is unavoidable to conclude that the Claimant did not proceed with the care that was required of it", leading "(…) the Respondent to limit itself to discharging the legal obligations to which it is bound (…)" (bold by the Respondent).[13]

And, it not having been "(…) the Respondent who gave rise to the submission of the request for arbitral decision, but the Claimant itself" consequently, "the Claimant should be condemned to payment of arbitration costs arising from this request for arbitral decision (…)", applying "the same reasoning (…) to the request for condemnation to payment of indemnity interest filed by the Claimant", concluding that "(…) the legal presuppositions conferring the right to indemnity interest are not met".

The Respondent further states that "even if this were not the case (…), it is nonetheless undeniable that the Respondent limited itself to complying with article 3./1 of CIUC, (…), whereby also by this reasoning it is necessarily the case that the recognition of the right to payment of indemnity interest must be lacking".

The Respondent further states in its Response that, in its view, "(…) there is no interest in holding the meeting provided for in article 18 (…)" of RJAT and that "(…) it does not intend (…) to file any arguments (…)", requesting dispensing with that meeting as well as dispensing with witness examination requested in the request for arbitral decision.

In these terms, the Respondent concludes its Response to the effect that "the request for arbitral decision should be judged unfounded, the tax assessment acts challenged being maintained in the legal order and the Respondent being accordingly absolved of the request".

PRELIMINARY DECISION

4.1. The request for arbitral decision is timely, because submitted within the period provided for in subparagraph a), of no. 1, of article 10 of RJAT.[14]

The parties enjoy legal capacity and ability, are legitimate as to the request for arbitral decision and are duly represented, pursuant to articles 4 and 10 of RJAT and article 1 of Order no. 112-A/2011 of 22 March.

The Tribunal is regularly constituted, pursuant to article 2, no. 1, subparagraph a), articles 5 and 6, all of RJAT and is competent to rule on the request for arbitral decision filed by the Claimant.

The cumulation of claims is legal, as the presuppositions required in article 3, no. 1 of RJAT are met, that is, the merits of the claims depend essentially on the appraisal of the same circumstances of fact and the interpretation and application of the same principles or rules of law.

4.5. No nullities were identified in the proceedings.

4.6. There are no exceptions or preliminary questions that need to be ruled upon, whereby nothing prevents the ruling on the merits of the case.

FACTS

Proven facts

The Claimant is a credit institution authorized to carry on its activity in Portugal, being subject to supervision by the Bank of Portugal.

The Claimant carries on, among others, the activity of consumer financing, assuming special relevance automotive financing, concluding for such purpose financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles.

The Claimant concluded, on different dates, the following financial leasing contracts with the respective lessees (as per copies attached with the arbitral request), for each of the vehicles identified below:

The Claimant, within the scope of its activity, was notified of the following IUC assessments and interest relating to the year 2015:

The Claimant timely paid the IUC assessments and interest identified above.

The Claimant filed, respectively, on 27 December 2016 (#1), on 10 July 2017 (#2) and on 26 January 2017 (#3, #4, #5 and #6), the following Hierarchical Appeals, filed from the decisions dismissing the Gracious Complaints submitted against the IUC assessments identified:

The Claimant was notified of various Letters from the Division of Municipal Tax on Onerous Property Transfers, Stamp Tax, Unique Vehicle Tax and Special Taxes, dated 2 October 2017 (#1), 2 November 2017 (#2) and 3 November (#3, #4, #5 and #6), relating to the orders dismissing (issued on those dates) the Hierarchical Appeals identified in the previous point, rendered without granting the right to be heard and on the ground that it was verified by the Respondent that:

"(…) on the date of the taxable event, (…) the registration of the lease was no longer in effect, there being no finding of the equation of the lessee to owners for purposes of the subjective incidence of the tax (...)";

"(…) being the constitutive fact of the tax (…) constituted by ownership of the vehicle, as attested by the registration or entry in the national territory, (…) the passive subjects of the tax are the owners of the vehicles, in whose names the same are registered (…)", thus demonstrating "(…) the occurrence of the presuppositions of the exigibility of the tax against the appellant here, the appellant having failed to demonstrate the contrary".

From the copies of the financial leasing contracts attached with the request, it follows that, on the date to which the assessments relate, those financial leasing contracts concluded between the Claimant (as the lessor entity) and the respective lessees were no longer in effect, taking into account the information extracted therefrom and which is summarized below:[15]

No other facts capable of affecting the decision on the merits of the request were proven.

Reasoning regarding the factual matters

5.10. Regarding the proven facts, the conviction of the Arbitral Tribunal was based, beyond the free appraisal of the positions assumed by the Parties (regarding facts), on the contents of the documents attached by both Parties to the case.

Unproven facts

With relevance for the decision of the arbitral request, it was not proven that, on the date to which the assessments relate, the financial leasing contracts concluded between the Claimant (as the lessor entity) and the respective lessees (as per copies attached with the request) were still in effect, taking into account the information extracted therefrom and summarized above in point 5.8.

No transfer of ownership of the vehicles identified in point 5.3 in favor of the lessees was proven.

No other facts were found to be unproven with relevance for the arbitral decision.

LEGAL GROUNDS

6.1. In the case, it will be of crucial importance to verify the legality of the six IUC assessments notified to the Claimant, which are the subject of this Request for Arbitral Decision, and for such it will be necessary to answer the following questions to be decided:

6.1.1. Does article 3 of the IUC Code, as written on the date to which the taxable events relate, establish or not a rebuttable presumption as to the owners of motor vehicles as passive subjects of the tax, so as to rebut the presumption that the persons in whose names the same are registered are to be considered as such?

6.1.2. If yes, did the Claimant succeed in demonstrating, in arbitral procedure terms, that it was not, on the date of the IUC assessments subject to this arbitral request, the passive subject of the tax, thereby managing to rebut the presumption referred to in the previous point?

6.1.3. As a consequence, do the IUC assessments effected by the Respondent suffer from illegality in view of the applicable legislation on the date to which the tax facts relate?

On the subjective incidence of IUC

6.2. In the request for arbitral decision, the Claimant states that "the motor vehicles identified (…) were given in financial lease (…) to the customers (…) identified (…) therein", being that the said "lease (…) was in effect in the year (…) in which the obligation to pay the associated IUC (…) became due" whereby it understands that "(…) it cannot (…) assume the status of passive subject of the tax that was assessed against it", seeking the "(…) declaration of illegality of the 6 acts relating to IUC (…) concerning the 6 vehicles (…) identified", as well as the illegality of the acts dismissing the Hierarchical Appeals filed.

6.3. Indeed, the Claimant considers that it is not the passive subject of the tax that was assessed against it, inasmuch as in accordance with the provisions of article 3, no. 1 of the IUC Code (in effect on the date to which the facts relate), a rebuttable presumption is established there, that is, one that admits proof to the contrary, namely, through demonstration that the motor vehicles at the origin of the IUC assessments were leased to third parties on the date of the occurrence of the taxable event in 2015.

6.4. To the contrary, the Respondent considered that the provisions of article 3, no. 1 of the IUC Code do not contain any legal presumption and that, on the contrary, "the new regime for taxation of IUC substantially altered the regime for automotive taxation, with the passive subjects of the tax becoming the owners appearing in the register of ownership (…)", that is to say, the persons in whose names the vehicles are registered.

6.5. Thus, it is clear to the Respondent that "(…) the tax acts under challenge do not suffer from any defect constituting a violation of law" inasmuch as "it was the Claimant, in its capacity as owner, that was the passive subject of IUC", considering that what the Claimant "(…) presents is insufficient to rebut a legal presumption arising from the registration of the vehicles in its name on the dates on which the taxes became exigible (…)".

6.6. In this connection, it will be necessary to determine the subjective incidence of IUC, in accordance with the provisions of the respective Code and to assume a position on the said norm of subjective incidence so as to ascertain whether or not the same establishes a legal presumption.[16]

6.7. However, and before proceeding to interpret the provisions of article 3, no. 1 of the IUC Code, it is relevant to bear in mind the provisions of article 11 of the General Tax Law (LGT), insofar as tax norms should be interpreted in accordance with the general principles of interpretation and, as well, the provisions of article 9 of the Civil Code which establish the rules and elements for the interpretation of norms.

6.8. In fact, the interpretive activity is, as Francesco Ferrara states, "the most difficult and delicate operation to which the jurist may devote himself (…)" for "(…) the interpreter must seek not what the legislator wanted, but what in the law seems objectively wanted (…)" (underlining ours).[17]

6.9. Thus, for the same author, understanding the law "is not only a matter of mechanically grasping the apparent and immediate sense that results from verbal connection; it is to enquire with depth into the legislative thought, to descend from the verbal surface to the intimate concept that the text encloses and to develop it in all its possible directions" (underlining ours).[18]

6.10. As Baptista Machado states[19] "the legal provision presents itself to the jurist as a linguistic statement, as a set of words that constitute a text. Interpreting evidently consists in deriving from that text a determined sense or content of thought. The text can have multiple senses (polysemy of the text) and frequently contains ambiguous or obscure expressions (…)" whereby "(…) even though apparently clear in its verbal expression and bearing a single sense, one must still account for the possibility that the verbal expression has betrayed the legislative thought – a phenomenon more frequent than might appear at first sight" (underlining ours).

6.11. Thus, so that we may conclude whether article 3, no. 1, of the IUC Code establishes (i) a rebuttable presumption as to who should be considered the passive subject of the tax based on the Motor Vehicle Register or whether (ii) the Legislator intended expressly and intentionally to determine, based on the Motor Vehicle Register, who should be considered the passive subject of IUC, it is fundamental firstly to examine the letter of the Law.

6.12. In these terms, in accordance with the provisions of article 3, no. 1 of the IUC Code, as written on the date to which the IUC assessments under challenge relate (2015), "the 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" (underlining ours).

Literal Element

6.13. Now, in accordance with the literal element of the aforesaid norm, the issue centers on the expression "being considered as such" used by the Legislator, inasmuch as the letter of the Law does not refer to the expression "presumed to be", as was contained in the diplomas antecedent to this Code, it being thus questionable whether the nature of presumption continues or not to be present in the norm under analysis (underlining ours).

6.14. In this sense, and by way of example, it is verified that in article 243, no. 3 of the Civil Code and in articles 45, no. 6 and 89-A, no. 4 of the LGT, the expression "is considered" is also used and, nevertheless, we are dealing with legal presumptions whereby, in accordance with the general norms of interpretation, it is considered that the minimum of verbal correspondence is ensured for purposes of determining the legislative thought that is objectively embodied in the norm in question.[20]

6.15. And, as Karl Larenz affirms[21], if "the literal sense in most cases does not suffice as an interpretive criterion, precisely because it still allows various interpretations", it is also true that, if accompanied by other elements it is quite relevant and indicative of the true sense of the norm under analysis, pointing to the effect that the expression "being considered as such" is equivalent to the expression previously used of "presumed to be as such" (underlining ours).

Historical Element

6.16. Nevertheless, and still within the scope of the elements of interpretation in accordance with article 9 of the Civil Code, it is also important to heed the historical element.

6.17. In the understanding of Baptista Machado[22], this element "comprises all the materials related to the history of the provision, namely: the evolutionary history of the institute, the figure or the legal regime in question (…); the so-called sources of the law, that is the legal or doctrinal texts that inspired the legislator in the elaboration of the law (…); the preparatory works" (underlining ours).

6.18. In this connection, the legislator, in defining the subjective incidence of the Municipal Tax on Vehicles (IMV), Vehicle Circulation Tax (ICI) and Cartage Tax (ICA), taxes abolished by IUC, established that "the tax is due by the owners of the vehicles, presumed to be as such, until proof to the contrary, the persons in whose names the same are registered or recorded" (underlining ours).

6.19. In these terms, as to this element of interpretation, it is demonstrated that the antecedents of the IUC Code established a presumption that the passive subjects of IUC are the owners registered in the Motor Vehicle Registry.

6.20. As regards IUC, notwithstanding continuing to attribute to the owners of the vehicles the status of passive subjects, the legislator chose to use a different formulation of the norm of incidence, abandoning the expression "(…) presumed to be as such, (…)" in favor of the expression "(…) being considered as such (…)" thus making clear, as a consequence, that the understanding underlying the provisions of article 3, no. 1 of the IUC Code foresaw a rebuttable presumption, concerning which the semantic question in no way altered the interpretive sense of the norm.[23] [24]

6.21. If the understanding followed in earlier decisions [25] on the same matter is adopted, we understand that it should be concluded that, in fact, in that wording of article 3, no. 1, of the IUC Code a presumption was established, for it was not the substitution of the expression "presumed to be" by the expression "being considered as such" that caused this norm to cease to establish a presumption (underlining ours).

6.22. In fact, we understand that we were dealing with a mere semantic issue, which did not alter (minimally) the content of the norm in question, inasmuch as:

6.22.1. For one to be dealing with a legal presumption, it is necessary that the norm establishing it adapt itself to the respective legal concept (set out in article 349 of the Civil Code), it being for such irrelevant whether the same be explicit (revealed by the use of the expression "presumed to be") or only implicit.[26] [27]

6.22.2. On the other hand, the legislator's freedom to determine the law is limited by fundamental principles established in the Constitution of the Portuguese Republic (CRP), namely the principle of equality, the relevance of which is pertinent in the case under analysis.[28]

6.23. In this connection, "taxation in accordance with the principle of ability to pay will imply the existence and maintenance of an effective connection between the tax obligation and the economic presupposition selected as the object of the tax, requiring, for this, a minimum of logical coherence of the various hypotheses (…) provided for in the law with the corresponding object of the same" (underlining ours).[29]

6.24. Indeed, it is in the sense of the legal concept of presumption and in respect of the constitutional principles of equality and ability to pay that the legislator attributes full efficacy to the presumption derived from the Motor Vehicle Register, embracing it, as such, in the definition of the subjective incidence of this tax, established in no. 1 of article 3 of the IUC Code.

6.25. Additionally, as regards the importance of the Motor Vehicle Register, it is important to note that the register enables the publicizing of the legal situation of assets and, as well, enables one to presume that there exists the right over those assets and that the same belongs to the holder, as shown in the register.

Rational and Teleological Element

6.26. It will now be the turn of the rational or teleological element to be used, which is of the greatest importance for determining the sense of the norm under analysis, inasmuch as, according to author Menezes Cordeiro[30], "interpretation is today dominated by the teleological factor".

6.27. Thus, as regards the rational and teleological element, it is important to note that IUC has underlying it the principle of equivalence (established in article 1 of the Code of that tax), a principle which came to embody environmental concerns by establishing that the tax should burden taxpayers with the environmental and road costs caused by motor vehicle circulation, that is to say, the polluter pays principle (a principle that also underlies article 66, no. 2, subparagraph h), of the CRP and Community Law).[31]

6.28. As Sérgio Vasques writes[32], "in obedience to the principle of equivalence, the tax should be shaped in attention to the benefit that the taxpayer derives from the public activity, or in attention to the cost that it imposes on the community by its own activity" whereby "a tax on motor vehicles based on a rule of equivalence will be equal only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different road wear and environmental cost pay different tax as well" (underlining ours).

6.29. Indeed, what is sought to be achieved through the establishment of the referred principle of equivalence is to bring about that the harm arising to the community, deriving from the use of motor vehicles, be assumed by their owner-users, as costs that only they should bear.

6.30. The known dimension of environmental damage caused by motor vehicles being recognized, the logic and coherence of the system of automotive taxation in general, and of the regime inscribed in the IUC Code in particular, point to the effect that the polluter should pay, thereby associating the tax with environmentally caused damage.

6.31. These are, therefore, concerns of notable importance in the economy of IUC, and which cannot fail to be, coherently, taken into account in the interpretation of article 3, relating to the subjective incidence of that tax.

6.32. In these terms, the taxation (in terms of IUC) of the actual polluters corresponding to an important purpose sought by the law, in light of the elements of a rational and teleological character of interpretation, it is necessary to conclude that no. 1 of article 3 of the IUC Code, as written on the date to which the assessments under challenge relate, established a rebuttable presumption.[33]

6.33. In summary, it is important to emphasize that the said elements of interpretation, whether those related to literal interpretation, whether those relating to logical interpretation elements, of a historical nature or of a rational order, all point to the effect that the expression "being considered as such" has a sense equivalent to the expression "presumed to be as such", it being thus necessary to understand that (it is reiterated), the provisions of no. 1 of article 3 of the IUC Code, as written on the date of the assessments under challenge, established a legal presumption.

6.34. Now, in accordance with the provisions of article 349 of the Civil Code, presumptions are the inferences that the law (or the judge) draws from a known fact to establish an unknown fact, constituting means of proof, having the function of demonstrating the reality of facts (article 341 of the Civil Code), whereby whoever has a legal presumption in their favor is dispensed from proving the fact to which it leads (article 350, no. 1 of the Civil Code).

6.35. However, presumptions, except in cases where the law prohibits it, may be rebutted by proof to the contrary (article 350, no. 2 of the Civil Code) and, being presumptions of tax incidence, these are always rebuttable, as expressly provided for in article 73 of the LGT.[34]

6.36. On the establishment in article 3, no. 1 of the IUC Code of a rebuttable presumption, various arbitral decisions have already pronounced themselves in that sense.[35]

6.37. In these terms, the answer to be given to the question formulated in point 6.1.1, above will be that article 3 of the IUC Code (as written on the date to which the assessments under challenge relate), indeed established a rebuttable presumption as to the owners of motor vehicles, so as to be able to rebut the presumption that the persons in whose names the same were registered were considered as such.[36]

On the subjective incidence of the tax in the validity of a financial leasing contract

6.38. The Legal Framework for the Financial Leasing Contract (governed by Decree-Law no. 149/95 of 24 June, as subsequently amended) establishes that it is an obligation of the lessor, among others, to "grant the enjoyment of the assets for the purposes to which they are intended".

6.39. On the other hand, the same statute establishes the obligations of the lessee, namely, the obligation to "pay the rentals", the obligation to "ensure the preservation of the asset and not make imprudent use of it", as well as the obligation to "use and enjoy the leased asset".

6.40. Taking into account the obligations above transcribed, by way of example, for both parties to a Financial Leasing Contract, it will be possible to conclude that in the validity of such a contract, although the lessor continues as the owner of the asset in question, only the lessee has exclusive enjoyment of the leased asset, using it as if it were the true owner thereof.

6.41. And, being thus, the financial lessee is equated to an owner for purposes of the provisions of no. 1 of article 3 of the IUC Code, that is to say, the same is to say that it will be this one that should be considered the passive subject of IUC (see article 3, no. 2 of that Code).

6.42. Now, the lessor not having at its disposal by legal and contractual requirement the potential for use of the vehicle and the lessee having exclusive enjoyment of the motor vehicle, we reaffirm the conclusion that the ratio legis of the IUC Code mandated that it be the lessee that be responsible for payment of the tax, since it was this one that had the potential for use of the vehicle and to cause the road and environmental costs inherent therein.

6.43. Indeed, the same conclusion is reached when one verifies the importance given to the users of the Leased vehicles, in accordance with the provisions of article 19 of the IUC Code [in effect on the date to which the assessments relate (2015)] under which, the entities that proceeded, in particular, to the Financial Leasing of vehicles were obliged to provide the TA with the tax identity of the users of the Leased vehicles, for purposes of the provisions of article 3 of the IUC Code.[37]

6.44. In these terms, if on the date of the occurrence of the taxable event, a Financial Leasing contract is in effect which has as its object a motor vehicle, the passive subject of the tax is not the lessor but rather, in light of the provisions of no. 2 of article 3 of the IUC Code, the lessee, inasmuch as it is this one that has enjoyment of the vehicle and, as such, the inherent potential for pollution (regardless of whether the registration of the right of ownership remains in the name of the lessor).

On the rebuttal of the presumption

6.45. In light of the above, concluding that the passive subject of the tax is the lessee, if the vehicles subject to IUC assessment are leased, on the date of the taxable event (in this case, in 2015), under a Financial Leasing Contract and, establishing article 3, no. 1, of the IUC Code (at that time) a rebuttable presumption, it remains to analyze whether this presumption was effectively rebutted by the Claimant, as follows from the provisions of article 73 of the LGT.

6.46. What the Claimant proposes to prove, as appears from the case, is that on the date of the taxable event for IUC (in 2015), the motor vehicles that gave rise to the six assessment acts subject to the Request for Arbitral Decision were Leased under six Financial Leasing Contracts (identified in point 5.3, above), attaching, for purposes of proof, copies of the contracts concluded (for each of the vehicles identified in point 5.3), between the Claimant (lessor) and the respective lessees, duly signed by both parties.

6.47. Although the Respondent impugned, for all legal purposes, all the documents attached by the Claimant with the request (article 97 of the Response), the fact is that, being private documents, it was incumbent upon the Respondent to impugn the truthfulness of the letter or the signature.

6.48. Now, it not having done so and not having alleged the falsity of the said documents, the documents attached by the Claimant have full probative force, pursuant to article 376 of the Civil Code, reason for which this Tribunal judged it proven that the assessments under challenge refer to the vehicles identified in the said financial leasing contracts.

6.49. However, from those contracts does not follow the proof (which was necessary) that the same were in effect on the date of the occurrence of the taxable events inasmuch, having regard to the facts proven in points 5.3 and 5.8, the said contracts were no longer in effect on that date(s), it being certain that the Claimant (despite alleging that all contracts were in effect on the date of the occurrence of the taxable event), did not manage to demonstrate it with the documentation attached (point 5.11.).

6.50. And, being a constitutive fact of the right invoked by the Claimant, the burden of proof thereof would rest upon it (which it did not manage to discharge).

6.51. On the other hand, the Claimant also failed to provide proof that it complied with the ancillary obligation imposed by article 19 of the IUC Code in effect on the date to which the tax facts relate.

6.52. Thus, given that the rebuttal of the legal presumption obeys the rule set out in article 347 of the Civil Code (under which full legal proof may only be contradicted by means of proof showing that it is not true the fact that is the subject thereof), it is unavoidable to conclude that the Claimant failed to prove that, on the date of the occurrence of the tax facts under analysis (2015), it was not the passive subject of IUC resulting from the assessments under challenge, inasmuch as it is understood that the said presumption was not rebutted.

6.53. Consequently, the Claimant having failed to demonstrate that, on the date of the IUC assessments, it was not the passive subject of the tax concerning the said assessments, the answer to be given to the question formulated above in point 6.1.2 is in the negative, inasmuch as the Claimant failed to rebut the presumption of article 3 of the IUC Code with respect thereto.

6.54. In this manner, in accordance with the provisions of article 16 of the IUC Code, the Respondent legally assessed the tax against the Claimant, as the entity in whose name the vehicles subject of the assessments were registered (in accordance with the provisions of article 3 of the IUC Code).

6.55. As a consequence, the answer to the question formulated above in point 6.1.3 will also be in the negative, that is to say, the IUC assessments identified, effected by the Respondent do not suffer from any illegality, and should therefore be maintained.

6.56. And, the Claimant having failed to demonstrate that the financial leasing contracts concluded were in effect on the date of the occurrence of the taxable event in each of the assessments under challenge, it follows therefrom that the challenge to the IUC assessments identified must fail, the same being, in consequence, to remain in the legal order.

6.57. Equally, the acts dismissing the Hierarchical Appeals filed against the acts dismissing the Gracious Complaints presented regarding the aforementioned IUC assessment acts for the year 2015 are to be maintained.

On the payment of indemnity interest

6.58. Alongside the annulment of the assessments and consequent reimbursement of the amounts unduly paid, the Claimant further requests in the petition that it be recognized as having the right to indemnity interest, under the provisions of article 43 of the LGT.

6.59. However, taking into account the conclusions above presented that the IUC assessments challenged should be maintained in the legal order (see above, point 6.56), the appraisal of the Claimant's request as to the recognition of its right to indemnity interest is prejudiced.

On responsibility for payment of arbitration costs

6.60. In consonance with the above point, and pursuant to article 527, no. 1 of the CPC (ex vi article 29, no. 1, subparagraph e) of RJAT), it should be established that the Party that gave rise to them shall be condemned in costs or, there being no winning of the action, whoever obtained benefit from the proceeding.

6.61. In this connection, no. 2 of the said article specifies the expression "gave rise to them", according to the principle of losing, understanding that the party against whom judgment goes shall be responsible for the costs of the proceeding, in proportion to the extent to which it loses.

6.62. In these terms, having regard to the above analysis, responsibility for arbitration costs should be exclusively imputed to the Claimant.

DECISION

7.1. In these terms, having regard to the conclusions presented in the previous Chapter, this Arbitral Tribunal decided:

7.1.1. To judge the petition filed by the Claimant to be unfounded, the IUC assessments challenged being maintained in the legal order, as well as the acts dismissing the Hierarchical Appeals filed against the acts dismissing the Gracious Complaints presented regarding the aforementioned assessment acts, with the consequences arising therefrom;

7.1.2. To judge the petition for payment of indemnity interest filed by the Claimant to be unfounded;

7.1.3. To condemn the Claimant to the payment of costs of this proceeding.

Value of the case: In conformity with the provisions of articles 306, no. 2 of the CPC, article 97-A, no. 1 of CPPT and article 3, no. 2 of the Regulations of Costs in Tax Arbitration Proceedings, the value of the case is set at EUR 362.90.

Pursuant to the provisions of Table I of the Regulations of Costs in Tax Arbitration Proceedings, the value of the costs of the Arbitral Process is set at EUR 306.00, to be borne by the Claimant, in accordance with article 22, no. 4 of RJAT.

Let it be notified.

Lisbon, 24 May 2018

The Arbitrator

Sílvia Oliveira

[1] The writing of this decision is governed by the orthography prior to the 1990 Orthographic Agreement, except for transcriptions made.

[2] In this connection, the Claimant cites Bill no. 118/X, which preceded Law no. 22-A/2007, the statute that promoted the replacement of the former Automobile Tax with the current IUC.

[3] For this purpose, the Claimant cites the reasons presented by the then Secretary of State for Tax Affairs during the vote on the Bill in Parliament.

[4] In an opinion rendered at the request of ALF - Portuguese Association of Leasing, Factoring and Renting, a copy of which the Claimant attached to the case (Annex H).

[5] In this matter, the Claimant cites Baptista Machado, in "Introduction to Law and the Legitimizing Discourse", page 186.

[6] Here, and once more, the Claimant cites Diogo Leite Campos in the opinion already referred to in footnote no. 4.

[7] See Essay on Typological Analysis of the Financial Leasing Contract, in Bulletin of the Faculty of Law of the University of Coimbra, vol. XXIII, page 10.

[8] In this matter, the Claimant cites Professor Dr. Agostinho Cardoso Guedes, in Opinion issued at the request of the Association of Specialized Credit Institutions (ASFAC), a copy of which was attached to the case (Annex I), to the effect that "we will have to consider them (the lessees) sole passive subjects of that tax, given that there is no legal rule that, directly or indirectly, attributes to the lessors (…)" that responsibility.

[9] In this respect, the Claimant cites various arbitral decisions rendered in the matter of tax arbitration, namely the decisions rendered in the context of cases no. 27/2013, no. 14/2013, no. 27/2013-T and no. 73/2013-T, in addition to listing those of cases no. 170/2013-T, 256/2013-T, 286/2013-T, 45/2014-T, 60/2014-T, 129/2014-T, 136/2014-T, 221/2014-T, 222/2014-T, 225/2014-T, 228/2014-T, 229/2014-T, 230/2014-T, 232/2014-T, 235/2014-T, 645/2014-T, 655/2015-T, 371/2015-T, 654/2015-T, etc., which "conclude exactly in the same sense" as that advocated by the Claimant here.

[10] To reinforce this understanding, the Respondent cites and partially transcribes the decision rendered in the context of Case no. 210/13.0BEPNF of the Administrative and Tax Court of Penafiel, whereby it is stated in summary that "(…). The lack of registration in the name of the new acquirer causes the subjective incidence of IUC (…) to remain with the titleholder of the property right entered in the Motor Vehicle Registry and to be the responsible party for the assessment and payment of IUC, regardless of its actual sale. (…)".

[11] In this connection, the Respondent refers to the content of the parliamentary debates of 12-03-2008 concerning the approval of Decree-Law no. 20/2008 of 31 January, "(…) from which it follows unequivocally that IUC is due by the persons appearing in the register as owners of the vehicles", so as to "avoid the problems (…) related to the fact that there are many vehicles not registered in the name of the actual owner".

In the same vein, Recommendation no. 6-B/2012 of the Ombudsman, dated 22 June 2012, is cited, whereby it is stated in summary that "(…) with the approval of Law no. 22-A/2007 of 29 July, the statute that approved the Unique Vehicle Tax Code and which substantially altered the regime for automotive taxation (…) the passive subjects of the tax became the owners appearing in the register of ownership, regardless of the circulation of vehicles on the public highway (…)" whereby "at the fiscal level (…) Unique Vehicle Tax is due by the persons appearing in the register as owners of the vehicles".

[12] In this sense, the Respondent enumerates jurisprudence emanating from CAAD (cases no. 63/2014-T, 130/2017-T, 150/2014-T, 220/2014-T, 339/2014-T, among others), transcribing parts of the arbitral decisions rendered in the two first cases above referred to.

[13] In this connection, the Respondent cites and partially transcribes a decision rendered in arbitral proceedings in the context of case no. 26