IUC Subjective Incidence Unconstitutionality – Leasing Vehicles – Arbitral Decision Reform 740/2016-T

TAX ARBITRATION CASE LAW

Case No. 740/2016-T

Date of Decision:
2020-01-27
IUC

Amount of the Claim:
€ 9,918.11

Subject Matter:
IUC – Subjective Scope – Unconstitutionality – Reform of the Arbitration Decision
*Replaces the Arbitration Decision of 30 May 2017.

ARBITRATION DECISION

In compliance with the Judgment of the Central Administrative Court South of 31 October 2019, which declared the nullity of the Arbitration Decision of 30 May 2017, the arbitrator hereby designated by the Deontological Council of the Administrative Arbitration Centre presents a new

I. REPORT

1. On 14-12-2016, the company A..., S.A., NIPC..., filed a petition for constitution of a single arbitral tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), with a view to declaring illegal 100 (one hundred) acts of assessment for Single Circulation Tax issued by the Tax and Customs Authority concerning 44 (forty-four) motor vehicles and relating to the years 2010, 2011 and 2012 in the amount of € 9,205.32 plus compensatory interest totaling € 712.79, and declaring illegal the act of dismissal of the hierarchical appeal filed against the act that dismissed the official review request filed.

2. Pursuant to Article 6(1) of the RJAT, the Deontological Council of the Arbitration Centre designated the arbitrator hereby signed, notifying the parties.

3. The tribunal is duly constituted to consider and decide on the subject matter of the case.

4. The grounds supporting the Claimant's request for arbitration are, in summary, as follows:

4.1 All acts of official tax assessment are based on the same facts and likewise on the same legal grounds – just as the acts of dismissal whose legality is being reviewed here.

4.2 Given this identity of tax facts, factual and legal grounds, and also the competent tribunal for the decision, and taking into account the high number of vehicles and the volume of documentation needed to prove the facts alleged hereinbelow, the Claimant opted, under Articles 3 of the RJAT and 104 of the Tax Code of Procedure and Process, to consolidate the additional assessments whose legality is contested in a single request for arbitration.

4.3 The motor vehicles in question were leased under financial leasing, such leasing being in force in the year (or, more specifically, in the relevant month of the year) in which the obligation to pay the IUC associated with the respective vehicle became due.

4.4 On that date and, moreover, during the entire period that the aforementioned Contracts were in force – as occurs with any contract of this nature – the use of the respective motor vehicles was always exclusively the responsibility of the lessee.

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

4.6 The Claimant was notified to proceed with payment of the IUC, which it duly did.

4.7 Through the aforementioned acts of additional assessment, the Tax Authority came to demand payment of the outstanding IUC from the Claimant here, even though it knew – or ought to have known, given that financial leasing is subject to registration with the Commercial Register – that financial leasing contracts were in place on these particular motor vehicles, and even knew the identity of the lessees.

4.8 In all cases, without exception, a financial leasing contract was in force at the moment when the IUC here in question became due, or when the term for proceeding with its payment ended.

4.9 IUC is the tax intended to burden taxpayers for the environmental and road cost associated with them, in a logic of equivalence and tax equality (see Article 1 of the IUC Code).

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

4.11 Underlying this rule of scope is, of course, the assumption of the potential use of motor vehicles: it is precisely because there is at their disposal the right to use a vehicle – which generates a certain level of pollution, wear of roads, etc. – that such taxable person has increased potential to cause damage to the environment and to infrastructure, damage that justifies, from an economic-legal point of view, its taxation under IUC.

4.12 With respect to both the rules for determining the taxable base and to the applicable rate, including the exemptions enshrined, a common thread is recognized throughout the IUC Code: the intention to tax the vehicle to the fair extent of its pollutive potential.

4.13 Hence the burden corresponding should fall, in the first instance, on the person or entity that has the potential to use the said automobile; that is, that has the potential to produce the pollution that is intended to be, precisely, discouraged.

4.14 The owner did not have, does not have, and will never have – while the contract is in force – the potential to use that vehicle, which falls, thus, exclusively to a third party.

4.15 Such third party, moreover, is perfectly identified before the Tax Authority and other public entities – not only by virtue of registration with the Motor Vehicle Registry of the existence of a financial leasing contract, but also by virtue of the duty incumbent upon the leasing entities, pursuant to Article 19 of the IUC Code, to "provide the Directorate-General of Taxes with data relating to the tax identification of the users of leased vehicles" (see Article 19 of the IUC Code) – such that it does not appear to be of any complexity the task of, in fulfillment of the purpose with which it was introduced into the national legal order, imputing to it the responsibility for the vehicle's polluting capacity and, subsequently, for its taxation.

4.16 It is thus not surprising that, in such cases, the legislator departed from the general rule of ownership – that is, from the rule that makes the taxable obligor coincide with the owner of the vehicle – in favor of greater adherence to the economic substantiality of the situation.

4.17 In these cases – of financial leasing, acquisition with reservation of ownership, etc. – the legislator opted, thus, and (in the Claimant's opinion) rightly, to burden with the tax obligation not the owners, but the individuals to whom falls the enjoyment (potential use) exclusive of the automobiles: the financial lessees, buyers with reservation of ownership or lessees with purchase option.

4.18 Now, in a financial leasing contract, there is no doubt that the right to use the asset is withdrawn from its respective owner – who, in this respect, is assumed to be the lessor – to be included in the sphere of the lessee.

4.19 Indeed, the very notion of "financial leasing," enshrined in the legal instrument that regulates this type of contract in our legal order, presupposes such exclusive enjoyment; in other words, the very type of contract is constructed around the idea of awarding an asset to the lessee so that the latter may enjoy it during the pendency of the contract.

4.20 Note that Article 1 of Decree-Law No. 149/95 of 24 June (amended by Decree-Laws Nos. 265/97 of 2 October and 30/2008 of 25 February) defines financial leasing as "the contract by which one of the parties undertakes, by way of remuneration, to transfer to the other the temporary enjoyment of a thing, movable or immovable, acquired or constructed at the indication of the latter, and which the lessee may purchase, after the agreed period, at a price determined therein or determinable by mere application of the criteria fixed therein."

4.21 Thus, it is stipulated as an obligation of the lessor to "grant the enjoyment of the asset for the purposes to which it is intended" (see subparagraph b) of Article 9(1) of Decree-Law No. 149/95, as amended by Decree-Law No. 30/2008), while in Article 10(2) of the same instrument, the lessee is granted the right to "use and enjoy the leased asset."

4.22 On the other hand, the lessee is also granted the right to defend "the integrity of the asset and its enjoyment"; whereas the lessor is assigned only the obligation to defend the "integrity of the asset," and not its enjoyment – as this, evidently, does not belong to it.

4.23 Not only does the lessor become owner with the objective, assumed from the outset, of transferring the enjoyment of the asset, but it is the lessee, not the lessor, who exercises the typical powers of ownership.

4.24 The latter holds the economic ownership of the asset, so to speak, with no more falling to the lessor than its legal ownership.

4.25 And not only that: the risk of perishing and destruction of the leased asset falls to the lessee, and not to the owner (see Article 15 of Decree-Law 30/2008).

4.26 The lessee may exercise directly, against the seller, the rights arising from the contract of sale concluded by the lessor, without the latter even having to be called to the action (see Article 13 of the same instrument).

4.27 Thus, in these cases, the legal qualification of lessor – encompasses, it is true, but – clearly surpasses the qualification of owner: the lessor is merely an instrumental owner, whose rights and duties differ greatly from those typically associated with the legal figure of ownership.

4.28 Now, according to Article 3(2) of the IUC Code – in force at the time of the facts – the rule is very simple: since the lessees have the exclusive enjoyment of the motor vehicle on which the contract falls, they also have the obligation to pay the tax.

4.29 With respect to financial leasing, it is thus evident: recognizing it, the legislator itself as "user of the leased vehicle" (see Article 19), there is no doubt that the lessee should have responsibility for indemnifying the costs (environmental and road) associated with the potential use of the respective vehicle.

4.30 Knowing in advance that IUC aims to impute to taxpayers the responsibility assailed by the potential use of motor vehicles – with regard to the environmental and road costs that such use entails – it cannot but be a burden on whoever actually causes such costs, which cannot but be the person to whom belongs the right to use the vehicle in question.

4.31 Just as, moreover, appears to be assumed by the Tax Authority itself.

4.32 Considering that, with respect to all and each of the cases – the motor vehicles were already in the possession of the respective lessees at the end of the month of registration or, if it was the year of registration of the vehicle, ninety days after the date of registration – without exception, it must necessarily be concluded that responsibility for the tax assessment pertained not to the leasing entity, the Claimant here, but to the lessees.

4.33 Such lessees whose identity, moreover, is fully known to the Tax Authority; indeed, in compliance with the provisions of Article 19 of the IUC Code, it is timely and promptly informed of the existence of the said leasing contract, as well as of the identity (notably, tax identification number) of the "user of the leased vehicle" (see Article 19), and even if this were not the case, the truth is that the said lessee is likewise, moreover, perfectly identified before the Motor Vehicle Registry.

4.34 When a financial leasing contract is in force at the moment when IUC becomes due, it is the lessee, and not the lessor (even if it is the latter that holds ownership of the vehicle), that is responsible for paying it.

4.35 And let it not be said that the said tax constitutes the responsibility of both entities – lessee and lessor.

4.36 That is, that the former constitutes the primary obligor, with the latter having responsibility to, in second instance, proceed with payment of the outstanding tax.

4.37 This is because, having analyzed the legal norms invoked above, there is no indication that the legislator intended to burden the leasing entity with the responsibility – subsidiary, joint, solidary or any other – for payment of the tax, whenever a lessee exists.

4.38 Had this been the legislative intention, some expression indicating it would have had to be inserted into the legal text.

4.39 Given the foregoing, and weighing everything, it is far too evident that the Claimant is not a taxable person for IUC with respect to the financial leasing contracts of which it is a party, and therefore the acts of additional assessment of which it was the subject are absolutely illegal.

4.40 Indeed, this is the conclusion reached in the numerous arbitration decisions handed down to date on this subject, within the scope of tax arbitration.

4.41 In cases similar to the present one, which opposed the Claimant to the Tax and Customs Authority, the latter requested that arbitration costs be borne by the Claimant, and that compensatory interest not be considered due, given the fact that the Claimant had, allegedly, been "responsible" for the IUC assessments now being contested.

4.42 However, and with all due respect, the Tax Authority's reasoning is without merit, for the reasons which, in advance and as a precaution, are already set out below.

4.43 First, because the Tax Authority already had the opportunity to revoke the acts of assessment in question both in Official Review and in Hierarchical Appeal, something which, had it occurred, would have avoided the need to file the present request for constitution of the arbitral tribunal.

4.44 And because, pursuant to Article 13 of the RJAT, the Tax Authority has the possibility of, upon receiving the arbitration petition and analyzing the arguments and documents gathered by the Claimant, revoking the acts of tax assessment.

4.45 By not doing so, the Tax Authority is expressly assuming that, even in possession of all the information, it would continue to issue the IUC assessments in the precise terms in which they were notified to the Claimant.

4.46 The mentioned assessments are the sole and exclusive responsibility of the Tax Authority, which, thus, cannot but be responsible for payment of compensatory interest and for bearing the arbitration costs.

1. For its part, the Tax and Customs Authority presented a reply in which it defended itself in the following terms:

5.1 Case law constitutes merely persuasive precedent (see Articles 1 and 8(3) of the Civil Code), such precedent being all the stronger the higher the hierarchical level of the tribunal that handed down the decision and the more repetitive the line of reasoning followed.

5.2 Now, with all due respect, the list of arbitration decisions organized by the Claimant does not constitute a set of decisions handed down by a higher-ranking tribunal.

5.3 The tax legislator, in establishing in Article 3(1) who the taxable persons of IUC are, expressly and intentionally established that these are the owners (or in the situations provided for in paragraph 2, the persons mentioned therein), considering as such the persons in whose name the said vehicles are registered.

5.4 Note that the legislator did not use the expression "are presumed," as it could have done, for example, in the following terms: taxable persons of the tax are the owners of vehicles, presumed to be natural or legal persons, of public or private law, in whose name they are registered.

5.5 If it were understood that by using the expression "considered" the tax legislator would have enshrined a presumption, practically all norms of scope in the context of Corporate Income Tax would be set aside precisely because accounting prescribes solutions different from those of the CIRC, which is exactly the purpose of the legislator to set aside such accounting rules.

5.6 In these terms, it is imperative to conclude that, in the case of the present arbitration proceedings, the legislator expressly and intentionally established that they are considered as such [as owners or in the situations provided for in paragraph 2, the persons mentioned therein] the persons in whose name they [the vehicles] are registered, because this is the interpretation that preserves the unity of the legal-tax system.

5.7 To understand that the legislator enshrined here a presumption would unequivocally be to carry out an interpretation contra legem.

5.8 Rather, it is a clear choice of legislative policy adopted by the legislator, whose intention, within its freedom of legislative shaping, was that, for the purposes of IUC, those recorded as such in the motor vehicle register be considered as owners.

5.9 This is, moreover, the understanding already adopted by the case law of our courts.

5.10 Article 6 of the IUC Code establishes, under the heading "Taxable Event and Exigibility," in its paragraph 1, that: "The taxable event of the tax consists of the ownership of the vehicle, as evidenced by registration or enrollment in national territory."

5.11 From the articulation between the scope of the subjective scope of IUC and the fact constituting the corresponding tax obligation, it unequivocally follows that only legal situations subject to registration (without prejudice to the permanent residence of a vehicle in national territory for a period exceeding 183 days, provided for in Article 6(2)) give rise to the birth of the tax obligation.

5.12 For its part, Article 3 of the same article provides that "the tax is considered exigible on the first day of the tax period referred to in Article 4(2)."

5.13 That is, 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 (See Articles 4(2) and 6(3) of the IUC Code, Article 10(1) of Decree-Law 54/75 of 12 February, and Article 42 of the Motor Vehicle Registration Regulations).

5.14 The legislative solution adopted by the tax legislator in Article 3(2) of the IUC Code militate in the same direction by making the equiparations enshrined there coincide with situations in which the motor vehicle register requires the respective registration.

5.15 This position is further evident from the fact that the motor vehicle register to which the Respondent has or may have access and the certificate in which the acts subject to registration must appear, whose presentation may be required by the Respondent from the interested party, contain all elements intended for the determination of the taxable person, without the need to access private contracts that confer such rights, listed by the IUC Code as constituting the legal situation of taxable person of this Tax.

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

5.17 In these terms, the failure to update the registration, as provided for in Article 42 of the Motor Vehicle Registration Regulations, shall be imputable in the legal sphere of the taxable person of IUC and not in that of the Portuguese State, as the active subject of this Tax.

5.18 Even admitting that, from the point of view of the rules of civil law and property registration, the absence of registration does not affect the acquisition of the status of owner and that registration is not a condition for the validity of contracts with real effect, as established in the IUC Code (which in the case in question constitutes special legislation, which, pursuant to general rules of law, derogates from the general rule), the tax legislator intentionally and expressly wanted that those in whose name the vehicles are registered be considered as owners, lessees, buyers with reservation of ownership or holders of the right of purchase option in long-term leasing.

5.19 Note in this respect from the outset that the exhaustively listed cases in Article 3 of the IUC Code, both in its paragraph 1 and in paragraph 2, correspond exactly to cases of mandatory motor vehicle registration pursuant to the Motor Vehicle Registration Code.

5.20 Indeed, the IUC Code carried out a reform of the regime of taxation of vehicles in Portugal, substantially altering the system of motor vehicle taxation, with the taxable persons of the tax becoming the owners listed in the property register, regardless of the circulation of vehicles on public roads.

5.21 In light of all of the foregoing and by force of the provisions of Article 3 of the IUC Code and Article 6 of the same code, it was the Claimant, as owner recorded with the Motor Vehicle Registry, who was the taxable person of IUC.

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

5.23 With a view to such rebuttal, the Claimant came to instruct its request for arbitration with the submission of copies of the financial leasing contracts.

5.24 Given what the Claimant has alleged, the following question naturally arises: do the financial leasing contracts constitute sufficient evidence to shake the (supposed) legal presumption established in Article 3 of the IUC Code?

5.25 In other words: do such contracts demonstrate that, at the date of the facts giving rise to IUC, the vehicles in question were (still) subject to financial leasing agreements concluded by the Claimant?

5.26 As is clearly and unequivocally evident from the Documents submitted, at the date of the facts giving rise to the IUC here in question, the financial leasing contracts had already ended.

5.27 Moreover, if it were concluded that we are dealing with a financial leasing contract granted by the Claimant, it would still be incumbent upon the latter to demonstrate having complied with the ancillary obligation imposed by Article 19 of the IUC Code.

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

5.29 Thus, if the thesis propounded by the Claimant regarding the fact that Article 3 of the IUC Code enshrines a rebuttable presumption were to be followed, then it must be concluded that the functioning of that article (that is, the rebuttal of the presumption) is equally dependent on compliance with what is provided for in Article 19 of the IUC Code, as is evident from its literal element ("for the purposes of Article 3 of this code (…)").

5.30 In simpler terms, in the matter of financial leasing and for purposes of rebutting Article 3 of the IUC Code, it is necessary that financial lessors (such as the Claimant) comply with the obligation inherent in Article 19 of that code in order to exonerate themselves from the obligation to pay the tax.

5.31 Now, the Claimant made no proof regarding compliance with this obligation, as it was incumbent upon it to do, so the intended rebuttal of Article 3 here in question must necessarily fail.

5.32 Indeed, in the matter of financial leasing, the Claimant could only exonerate itself from the tax if it had complied with the specific obligation provided for in that norm of the IUC Code.

5.33 As is known, the law determines deadlines for the submission of documents intended to make proof, with Article 423 of the new Code of Civil Procedure establishing that these should be presented with the plead in which the corresponding facts are alleged.

5.34 Thus, after the filing of the request for arbitration, the submission of further documentary evidence became precluded on the part of the Claimant.

5.35 Indeed, the provision of data relating to the identification of users of leased vehicles does not require any legal formality, sufficing for its compliance a mere communication addressed to the Respondent.

5.36 Thus, having the Claimant not complied with the burden of proof imposed upon it and noting now the non-compliance with the declarative obligation required by Article 19 of the IUC Code, two consequences (intra and extraprocedural) must necessarily be drawn from its omissive behavior.

5.37 First, its responsibility for arbitration costs relating to the present request for arbitration, given that the failure to provide the data inevitably gave rise to the issuance of the assessments sub judice, in the terms better explained in a separate section.

5.38 And secondly, the determination of its responsibility in terms of administrative offenses in light of Article 117, combined with Article 26(4), both of the General Framework of Tax Violations, punishable by a fine of € 300.00 to € 7,500.00 for each of the financial leasing contracts.

5.39 In addition to all of the foregoing, it is also worth noting that if the interpretation conveyed by the Claimant were accepted, then it would be contrary to the Constitution, insofar as such interpretation results in the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

5.40 Indeed, the interpretation proposed by the Claimant, an interpretation that ultimately devalues the registration reality to the detriment of an informal reality unsuitable for minimal control by the Respondent, is offensive to the foundational principle of trust and legal certainty that should inform any legal relationship, here including the tax relationship.

5.41 In parallel, the interpretation given by the Claimant is offensive to the principle of efficiency of the tax system, insofar as it results in a hindrance and increased cost to the competencies assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent form part.

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

5.43 Finally, the argument conveyed by the Claimant represents a violation of the principle of proportionality, insofar as it completely disregards it when confronted with the principle of contributory capacity, when in reality the Claimant has the legal mechanisms necessary and adequate to safeguard its capacity (e.g., motor vehicle registration, request for seizure of documents and request for cancellation of registrations), without, however, having exercised them in due time.

5.44 Authority for motor vehicle registration is not within the sphere of the Respondent, but rather assigned to various external entities, notably the Institute of Registers and Notary, to whom falls the task of transmitting to the Respondent the alterations that may occur regarding the ownership of motor vehicles.

5.45 Therefore, registration of ownership constitutes an essential element in the information system between the Respondent and other public entities, as is evident from Article 5 of Law 22-A/2007 of 29 June (an instrument that carried out comprehensive reform of motor vehicle taxation).

5.46 On the other hand, the transmission of ownership of motor vehicles is not susceptible to being controlled by the Respondent, as there is no ancillary declarative obligation regarding this matter, in contrast to the control that is capable of being carried out, for example, through prior payment of Municipal Tax on Property Transfer in the matter of transmission of property.

5.47 This means, therefore, that IUC is assessed in accordance with the registration information timely transmitted by the Institute of Registers and Notary.

5.48 Now, having the Claimant not taken care of the updating of the motor vehicle register, as it could and was responsible for [Article 5(1-a) of Decree-Law 54/75 of 12 February, and Article 118(4) of the Road Code], and not having ordered the cancellation of the registrations of the vehicles here in question, it must be concluded that the Claimant did not proceed with the care required of it.

5.49 And by not proceeding with the care required of it, it led inevitably for the Respondent to limit itself to giving effect to the legal obligations to which it is bound and, in parallel, to following the registration information that was provided to it by those entitled to do so.

5.50 Consequently, the Claimant should be condemned to payment of arbitration costs arising from the present request for arbitration, pursuant to Article 527(1) of the Code of Civil Procedure ex vi Article 29(1-e) of the RJAT, in line, moreover, with similar issue decided within the scope of case No. 72/2013-T, which proceeded in this arbitration center.

5.51 The same reasoning applies with respect to the request for condemnation to payment of compensatory interest made by the Claimant.

5.52 Indeed, in light of Articles 43 of the General Tax Law and 61 of the Tax Code of Procedure, the right to compensatory interest is dependent on the occurrence of the following prerequisites: (i) the tax having been paid; (ii) the respective assessment having been annulled, wholly or partly, in a gracious or judicial proceeding; (iii) determination, in a gracious or judicial proceeding, that the annulment is grounded on error imputable to the services.

5.53 From all of the foregoing it is clear that the tax acts in dispute are valid and lawful, because conforming to the legal regime in force at the date of the tax facts, so that, in the case at hand, no error imputable to the services occurred.

5.54 Thus, the legal prerequisites conferring the right to compensatory interest are not met.

1. On 31/03/2017, an arbitration order was issued in the following terms:

"Pursuant to subparagraph c) of Article 16 of the RJAT, taking into account that the subject matter of the dispute is fundamentally a matter of law, the pertinent documents are in the case, and the administrative file is submitted, the Tribunal considers that:

1. it is not necessary to hold the meeting provided for in Article 18 of the RJAT, given the absence of the circumstances addressed in the various subparagraphs of paragraph 1 of this provision;

2. it is not necessary to proceed with the examination of the witnesses indicated by the claimant, as the relevant facts are subject to documentary proof;

3. it is not necessary, in accordance with paragraph 2 of Article 18 of the RJAT, to produce oral arguments, given that the positions of the parties are perfectly defined in their respective pleadings.

In these terms, pursuant to subparagraph f) of Article 16 of the RJAT, the parties are invited to, within five (5) days, inform the case whether, despite the above, they nevertheless wish the holding of the meeting referred to in Article 18, substantiating such request.

Should the parties request nothing within the mentioned deadline, it is considered that they have no objection to the Tribunal, without further measures, handing down the final decision, whose date is set, pursuant to paragraph 2 of Article 18 of the RJAT, until 31 May 2017."

1. Through a request dated 6 April 2017, the Claimant came to set out and request, in summary, the following:

7.1 One of the contentious matters in the present case is compliance, by the Claimant, of the ancillary obligation provided for in Article 19 of the IUC Code.

7.2 Now, with respect to compliance with such obligation, the same cannot be susceptible to documentary proof, given that the Tax and Customs Authority does not provide any proof that allows it to attest to compliance.

7.3 Indeed, the notification obligation in question is complied with electronically, through the Finance Portal, not allowing any proof of compliance thereof to be extracted from said portal.

7.4 It is true that case law of the CAAD has pronounced itself numerous times on the nature of such obligation (ancillary), being practically unanimous that its compliance (or lack thereof) could never have consequences for purposes of subjective scope of the tax.

7.5 Having reached this point, in the understanding of the Claimant, the necessity of holding the meeting referred to in Article 18 of the RJAT for examination of the witnesses summoned will thus be dependent on the Tribunal considering whether the proof of compliance with such obligation (provided for in Article 19 of the IUC Code) is, or is not, determinative for the decision of the present case:

a) or the Tribunal considers that compliance with the obligation stipulated in Article 19 of the IUC Code may possibly have consequences with regard to the subjective scope of the tax – which, with all due respect, we do not believe –;

b) or, instead, it considers that such obligation, being of merely ancillary nature, will never have consequences for purposes of scope of the tax, as the Claimant considers and has been the understanding of the CAAD.

7.6 In the first case, being a determinative matter for the decision of the present case, regarding which it is not possible to produce documentary proof, it will be essential to examine the witnesses summoned with a view to ascertaining compliance therewith, for which reason the meeting referred to in Article 18 of the RJAT should be held.

7.7 However, should the Learned Tribunal conclude, in line with the case law already established in that Arbitration Centre, that compliance with such ancillary obligation is not relevant for the proper decision of the matter in question (subjective scope of IUC in the pendency of financial leasing contracts), insofar as it will not appear necessary to produce testimonial evidence of its compliance, it may then dispense with the holding of the meeting provided for in Article 18 of the RJAT.

1. The Respondent replied through a request dated 10 April 2017, setting out, in summary, the following:

8.1 Before all else, the Claimant does not minimally demonstrate what it alleges, that is, that the Respondent does not provide any proof allowing it to attest to compliance with that obligation.

8.2 Moreover, nothing would prevent the Claimant from requesting the Respondent, right after compliance with the obligation here in question, the issuance a posteriori of a document or proof relating to that compliance.

8.3 Therefore, it is manifestly false the impossibility of the Claimant obtaining documentary evidence regarding compliance with Article 19 of the IUC Code.

8.4 Lastly, but not least importantly, it is necessary to recall that testimonial evidence is not apt to demonstrate compliance with that declarative obligation.

8.5 Indeed, it would be, at the very least, unusual for a witness (or even two) to be able to recall each of the contracts of the 44 (forty-four) vehicles here in question and, consequently, the dates on which the same were supposedly communicated to the Respondent.

8.6 Unless, of course, by "testimonial evidence" is meant the diligence of a witness enumerating orally its written notes or, alternatively, making general and abstract statements.

1. On 11/04/2017, an arbitration order was issued in the following terms:

"Having notified both parties of the dispensation of the meeting provided for in Article 18 RJAT, the claimant came to justify the examination of the witnesses it summoned with the aim of proving compliance with the obligation provided for in the (previously in force) Article 19 of the IUC Code. In response, the respondent alleged that compliance with that obligation cannot be the subject of testimonial evidence.

The respondent is right. The general rules on evidence are contained in the Civil Code and Article 395 of that Code is express in the sense that the causes of extinction of obligations cannot be the subject of testimonial evidence. Thus, and since the only objective alleged for the examination of the witnesses was the proof of compliance with that obligation, the dispensation of the same is maintained, so a final decision will be rendered within the indicated deadline."

1. The Tribunal is thus in a position to hand down judgment on the question discussed in the present case.

II. PROVEN FACTS

1. With interest for the decision of the case, the following facts are deemed proven:

11.1. The acts of assessment now being challenged correspond to motor vehicles with the following registrations:

[TABLE OF VEHICLES WITH REGISTRATION NUMBERS, ASSESSMENT NUMBERS, YEARS, IUC VALUES, INTEREST AND TOTAL AMOUNTS - omitted for brevity as it contains extensive numerical data]

11.2. The following financial leasing contracts and contracts-promise of sale and purchase were concluded:

[TABLE OF VEHICLES AND CONTRACT DATES - omitted for brevity]

11.3. At the date when the obligation to pay the IUC associated with the respective vehicle became due, the vehicles referred to above were not in the possession of the Claimant.

III. UNPROVEN FACTS

1. It was not proven that the Claimant provided to the Directorate-General of Taxes the data relating to the tax identification of the users of the leased vehicles.

IV – LAW

1. The following issues are to be considered:

a) The illegality of the acts of assessment of IUC and compensatory interest

b) The alleged unconstitutionality of the interpretation of Article 3 of the IUC Code

c) The right to compensatory interest

Let us examine these issues:

14. THE ILLEGALITY OF THE ACTS OF ASSESSMENT OF IUC AND COMPENSATORY INTEREST

Article 6(1) of the IUC Code establishes that "The taxable event of the tax consists of the ownership of the vehicle."

Article 3 of the same Code provides:

"1 - Taxable persons of the tax are the owners of vehicles, considered as such the natural or legal persons, of public or private law, in whose name the said vehicles are registered.

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

The question that arises here is whether paragraph 1 of Article 3 of the IUC Code enshrines a presumption.

According to Article 349 of the Civil Code, "Presumptions are the inferences which the law or the judge draws from a known fact to establish an unknown fact."

In accordance with Article 73 of the General Tax Law, "Presumptions enshrined in tax scope norms always admit proof to the contrary."

The Tax Authority contends that the legislator expressly and intentionally established that these are the owners (or in the situations provided for in paragraph 2, the persons mentioned therein), considered as such the persons in whose name the said vehicles are registered.

The Tax Authority's argument is based, above all, on the use of the word "considered" and not "presumed" in Article 3 of the IUC Code, asserting that, through a systematic interpretation of the norm, it could be understood that it is not a presumption.

There is not, however, in Portuguese legislation any norm expressly defining that a legal presumption must contain the word "presumed," this being merely a matter of use of synonyms.

As stated in this respect in the Judgment of the CAAD No. 26/2013, we are "before a mere semantic question," and the concept of presumption cannot be understood as "norms containing the word 'presumed'."

It further states, in the same judgment, "It is in the sense of the legal concept of presumption and in respect of the constitutional principles of equality and contributory capacity that the legislator attributes full effect to the presumption derived from motor vehicle registration, embracing it, as such, in the definition of the subjective scope of this tax established in paragraph 1 of Article 3 of the IUC Code. Thus, it cannot but be understood that the expression 'considered as such' contained in the said norm configures a legal presumption, and that this is rebuttable, pursuant to the general terms, and in particular, by virtue of the provisions of Article 73 of the General Tax Law which provides that presumptions enshrined in tax scope norms always admit proof to the contrary."

According to CAAD Judgment No. 289/2013, "The formulation used in the said article, it should be noted, draws, above all, on the expression 'considered,' which raises the question of whether this expression can be attributed a presumptive sense, thus equating it to the expression 'presumed.' These are expressions frequently used with equivalent senses, as is evident in various situations of the Portuguese legal order. In fact, there are countless norms that enshrine presumptions, using, for this purpose, the verb 'consider' in various forms. It is not, therefore, difficult to identify situations in various areas of law in which the expression 'considering' or 'is considered' is used with a sense equivalent to the expression 'presuming' or 'is presumed,' expressions which, both at the level of irrebuttable presumptions and in the context of rebuttable presumptions, are very often given an equivalent meaning (…) In these circumstances, since the mentioned expressions are recurrently used with an equivalent purpose and meaning, it can be concluded that it is not only the use of the verb 'presume' that places us before a presumption, but also the use of other terms can serve as the basis for presumptions, such as, notably, occurs with the expression 'considered,' which is, in our view, precisely what occurs in paragraph 1 of Article 3 of the IUC Code. This is an understanding which, not appearing to correspond to a skewed reading of the law, as the Tax Authority considers, proves itself in tune with the provision in paragraph 2 of Article 9 of the Civil Code, insofar as it assures the legislative thought the minimum correspondence required. In the literal perspective, given what is stated above, there is no doubt that the interpretation which considers a rebuttable presumption established in paragraph 1 of Article 3 has full support in the formulation enshrined there, given the mentioned equivalence between the expression 'considered as such' and the expression 'presumed as such.' The linguistic element, as stated above, being the first that should be used in search of legislative thought, must, however, in order to find the true sense of the norm, be submitted to control of the other elements of interpretation of a logical nature (such being elements of rational (or teleological) sense, of a systematic character or of a historical order)."

It is further stated in CAAD Judgment No. 14/2013, "Revisiting the question of whether paragraph 1 of Article 3 of the IUC Code enshrines a presumption, given all of the foregoing, we cannot but pronounce ourselves in the affirmative for the grounds that precede (…). Thus, if the buyer, new owner of the vehicle, does not take care to register his right of ownership, it is presumed that this right continues to be that of the seller and may, however, this presumption be rebutted by proof to the contrary, that is, proof by any means of the respective sale (See Articles 1 of Decree-Law No. 54/75, 7 of the Constitution, and 350(2) of the Civil Code). In these terms, we are of the opinion that the Tax Authority cannot avail itself of the absence of updating of the registration of the right of ownership to demand payment of the tax from the former owner in whose name the vehicle is registered if, by any means, it is presented with sufficient proof of the respective sale."

Likewise, paragraph 2 of Article 3 of the IUC Code equates to owners financial lessees, buyers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract, given that it is they and not the owners who use the vehicles, thus being burdened "taxpayers to the extent of the environmental and road cost that they cause" (see Article 1 of the IUC Code).

It is further stated in the aforementioned CAAD Judgment No. 289/2013: "Regarding the systematization of the IUC Code, environmental concerns were decisive in ensuring that the aforementioned principle of equivalence was inscribed from the outset in the first article of the Code, which necessarily leads to the subsequent articles, insofar as they are grounded in such principle, being influenced by it. This occurred, notably, with the taxable base, which came to be constituted by various elements, particularly those relating to pollution levels, and with the rates of the tax, established in Articles 9 to 15, which were influenced by the environmental component, and, naturally, also with the very subjective scope itself, provided for in Article 3 of the IUC Code, which cannot escape the mentioned influence (…). The systematic element of interpretation and the interaction between the various articles and principles that integrate the system inscribed in the IUC Code, also appeals to the understanding that what is established in paragraph 1 of Article 3 of the IUC Code cannot but constitute a presumption. Article 1(9) of the Civil Code provides that the search for legislative thought should have "[…] above all in mind […] the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied," circumstances and conditions that, today more than ever, are of environmental sensitivity and respect for matters related to the environment. In this context, the considerations made on the mentioned elements of interpretation, whether of a literal character or of a historical bent, whether of a rational nature or systematic, point to the understanding that Article 3 of the IUC Code establishes a presumption, that is, the ratio legis of that norm, as the reason or purpose that should reasonably be attributed to it, cannot but view the expression 'considered as such' used in the said article as revealing the establishment of a rebuttable presumption, which means that the taxable persons of IUC being, in principle, the owners of the vehicles, considered as such the persons in whose name they are registered, may ultimately be others."

As stated in CAAD Judgment No. 217-2013: "The logic and rationality of the new system of motor vehicle taxation presupposes and aims at a taxable person coincident with the owner of the vehicle, on the assumption that it is he, and not another, the real and effective subject causing the environmental damage, as follows from the principle of equivalence inscribed in Article 1 of the IUC Code. This principle of equivalence, which informs the current single circulation tax, has underlying the polluter-pays principle, and concretizes the idea, embodied in it, that whoever pollutes should, for that reason, pay. It is, after all, to reach the negative environmental externalities arising from the use of motor vehicles, whether assumed by their owners and/or by the users, as costs that only they should bear. Therefore, the presumption inscribed in Article 3 of the IUC Code corresponds to the interpretation most suited to the pursuit of the objectives sought by the legislator. Were it not so, one would be accepting the possibility of taxing natural or legal persons without responsibility in the production of any environmental damage, while the real causes of such damage would not be subject to the tax."

Being therefore a rebuttable presumption, pursuant to Article 73 of the General Tax Law, it shall fall to the Claimant to present proof that it was not the one using the vehicles referred to above.

However, it occurs that, at the date of the IUC assessments in question, Article 19 of the IUC Code was in force (later revoked by subparagraph f) of paragraph 1 of Article 215 of Law No. 7-A/2016 of 30 March), where the following was provided: "For the purposes of the provision in Article 3 of this code, as well as in paragraph 1 of Article 3 of the law of its approval, entities that proceed with financial leasing, operational leasing or long-term leasing of vehicles are obligated to provide to the Directorate-General of Taxes the data relating to the tax identification of the users of leased vehicles."

The Claimant failed to prove that it had complied with the obligation in question, with it being unknown whether it had actually done so. The Tax Authority did not deny, however, that it had complied with the said obligation, but only that it had not presented any documentary proof that it had done so.

It shall therefore be necessary to assess whether non-compliance with this obligation, per se, shall have influence on the subjective scope of the tax.

As well noted in CAAD Judgment No. 655/2015, "Until its revocation by subparagraph f) of paragraph 1 of Article 215 of Law No. 7-A/2016 of 30 March, Article 19 of the IUC Code imposed on the financial lessor of vehicles the obligation to provide the Directorate-General of Taxes (today, the Tax Authority) the data relating to the tax identification of the users of leased vehicles. In the cases in question, the Respondent against-alleges that the Claimant taxable person did not comply with this obligation, which would prevent it from invoking paragraph 2 of Article 3 of the IUC Code. For its part, the Claimant contends that it made this communication through the electronic platform of the Respondent, obtaining no proof. Even before we address the question – which would be prejudicial in relation to this first - of whether this communication was effectively a legal condition for the occurrence of the transfer of the tax scope to the sphere of the lessee, we consider it fitting to base our position as to the factual question raised. It is a general rule and a guarantee of administrated persons that whoever complies with an obligation, within the scope of administrative procedure, has the right to receive a proof of such compliance. In the new model of interaction between taxpayers and the Tax Administration, based on electronic communication, this cannot but also be the rule. However, it is common knowledge that indeed, often, this does not happen. Now, having had the Tax Administration the possibility of contradicting the Claimant as to the fact, alleged by this, of being unable to obtain a proof of the communication provided for in the meanwhile revoked Article 19, it did not. Pursuant to Article 110(7) of the Tax Code of Procedure, and based on the fact, of common knowledge, that it is frequent for the non-provision of proofs of acts that taxpayers carry out through the electronic communication platform of the Tax Authority, we consider we should establish as proven that the Claimant actually complied with the duty incumbent upon it by force of Article 19 of the IUC Code. But even if this were not so, we consider that, the subjective scope being an element of the tax obligation that cannot but be perfectly delimited by law (principle of tax legality, in accordance with Article 103(2) of the Constitution of the Portuguese Republic), and there being found in the law no element that unequivocally leads us to conclude that the legislator intended to make dependent on compliance with the obligation provided for in the meanwhile revoked Article 19 the transfer of the subjective scope from the owner to the lessee, and configuring itself this obligation as an ancillary obligation, it is not legitimate to consider that compliance or non-compliance with this ancillary obligation was determinative of the subjective scope of the tax."

It further states in CAAD Judgment No. 191/2015: "Will it also be asked: what about the communication provided for in Article 19 of the IUC Code? Does its non-compliance conflict with the conclusion in the foregoing paragraph as to the responsible party for payment of the tax? The answer is, in our understanding, negative. Indeed, the consequence arising from non-compliance with this ancillary obligation is that which we see: the Tax Authority issues the assessment notices in the name of the owner of the vehicle, for not knowing that the financial leasing contract was concluded. However, this does not prevent that same owner/lessor from proving the conclusion of the contract and the period for which it was concluded and, thus, preventing payment of the tax. And the fact is that, in the present case, the Claimant presented documentary proof demonstrating the existence of financial leasing contracts that were in force at the date when the facts giving rise to IUC here in question occurred concerning the vehicles referred to in paragraph 11 of the proven facts. In this respect, the Tax Authority says that, in view of non-compliance with Article 19 of the IUC Code, 'it was not the Respondent who gave rise to the filing of the request for arbitration, but the Claimant itself' and that, 'consequently, the Claimant should be condemned to payment of the arbitration costs arising from the present request for arbitration.' This tribunal understands that it does not have merit. On the one hand, the present request for arbitration does not concern only the assessments in which the conclusion of financial leasing contracts was in question, the term of which comprises the dates when the facts giving rise to the tax assessed occurred. Therefore, even if the Tax Authority were right, that right would always be only partial, and could not apply to all cases to which the request for arbitration refers. Secondly, the logic of the Tax Authority fails to take into account that there was a prior administrative proceeding before the present arbitration proceeding within the scope of which the Tax Authority could have annulled the assessments in question. It is also important not to forget that the failure of the Claimant is susceptible to administrative offense liability in light of Article 117, combined with Article 26(4), both of the General Framework of Tax Violations, punishable by a fine of € 300.00 to € 7,500.00 for each of the financial leasing contracts. That is the way found by the legislator to penalize whoever fails to comply with the informative duty towards the Tax Authority."

We can see the same position further in CAAD Judgment No. 232/2014: "The circumstance that the Claimant may not have given due compliance to the provisions of the aforementioned Article 19 of the IUC Code does not stand in the way of what comes before. Indeed – and as is evident – the sanction for non-compliance with any obligation that in that respect may or might fall to the claimant would always have to be sought in the context of the Framework of Tax Violations, and not, naturally, in the subjection to a tax."

We must thus understand that, notwithstanding possible administrative offense liability of the Claimant, pursuant to the Tax Violation Framework, non-compliance with the ancillary obligation referred to in Article 19 of the IUC Code has no influence whatsoever on the subjective scope of the tax.

Even though it is not possible to assess compliance with the informative duty to the Tax Authority provided for in Article 19 of the IUC Code, the fact is that the Claimant came to present such proof subsequently.

As already decided in Judgment 27/2013, "When the Tax Authority understands that the taxable persons of IUC are, definitively, the persons in whose name the motor vehicles are registered, without considering the probative elements that, both in the context of prior hearing and at a later moment, were presented to it, intended to identify the actual and true owners of the vehicles, it is proceeding with illegal assessment of the IUC grounded on the erroneous interpretation and application of the norms of subjective scope of the Single Circulation Tax, contained in Article 3 of the IUC Code, whether at the level of the provision or of the enactment, which configures the practice of a tax act deficient in lawfulness due to error regarding the factual and legal premises, which determines the annulment of the corresponding tax acts."

In failing to accept the proof that the Claimant concluded, with respect to all the vehicles referred to above, financial leasing contracts and contracts-promise of sale and purchase, the Respondent persists in the practice of an unlawful act.

15. THE ALLEGED UNCONSTITUTIONALITY OF THE INTERPRETATION OF ARTICLE 3 OF THE IUC CODE

The Respondent invokes that the interpretation of Article 3 of the IUC Code, in the sense of considering that the said norm contains a rebuttable presumption, is unconstitutional, as it constitutes a violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

Consider, with respect to the principle of trust and the principle of legal certainty, what is stated in the Judgment of the Supreme Administrative Court of 18 June 2003, Case No. 01188/02:

"One of the corollaries of the principle of good faith consists of the principle of protection of legitimate trust, with good faith incorporating the ethical value of trust. See, Marcelo Rebelo de Sousa and José de Melo Alexandrino, in 'Constitution of the Portuguese Republic Annotated,' pp. 396, Margarida Olazabal Cabral, in 'Public competition in administrative contracts,' pp. 92, Jesus Gonzalez Perez, in 'The general principle of good faith in administrative law,' 2nd edition, pp. 52, Frederico Castilho Blanco, in 'The protection of trust in administrative law,' pp. 77 et seq. and Sainz Moreno, in 'Good faith in the relations of the Administration with administrated persons,' in Review of Public Administration, No. 89, pp. 314. One can say, in a synthetic formulation, that the Administration violates good faith when it fails the trust it has awakened in a Particular by acting in non-conformity with what its prior behavior made foreseeable, and while as a general principle of law, good faith means 'that any person should have correct, loyal and unreserved behavior when entering into relationship with other persons' – cited by M. Esteves de Oliveira, Pedro Gonçalves and Pacheco Amorim, in 'Code of Administrative Procedure,' 2nd edition, pp. 108 – presenting itself as intended to, namely, prevent the occurrence of disloyal and incorrect behavior (obligation of loyalty). Indeed, the requirement of protection of trust is also a consequence of the principle of legal certainty, immanent to the Rule of Law. However, the application of the principle of protection of trust is dependent on various prerequisites, above all, that concerning the necessity of being faced with a trust that is 'legitimate,' which is achieved, in particular, by its conformity to law, and one cannot invoke the violation of the principle of trust when this is grounded in a prior act clearly illegal, being such illegality perceptible by he who intends to invoke it in his favor the said principle. On the other hand, for one to be able, validly and relevantly, to invoke such principle it is necessary further that the interested party in question not intended to base it solely on his mere psychological conviction but instead imposing the enumeration of external signs produced by the Administration sufficiently conclusive for a normal recipient and where one can reasonably anchor the invoked trust. See, in this sense, Jesus Gonzalez Perez, in 'Comments on the Administrative Procedure Law,' pp. 982-983. Additionally, another prerequisite to be considered relates to the necessity of the Particular having serious reasons to believe in the validity of the prior acts or conduct of the Administration to which he adjusted his action." (underlined).

In the case at hand, it does not appear possible that such interpretation places in question the protection of trust and legal certainty. Indeed, it flows quite clearly from Article 3 of the IUC Code that the legislator intended to enshrine a presumption, and this is the dominant case law. As for the fact that it is a rebuttable presumption, this derives from the expressly provided in Article 73 of the General Tax Law.

Now, the principles of trust and legal certainty derive from the necessity of there being a minimum of certainty and security in the rights of individuals, as well as in the expectations legally created by them. The reason for the existence of these principles is related to the protection of the trust of individuals in the action of the State.

In the concrete case, there is no possibility of creation of an expectation of trust created by the individual in the sense that Article 3 of the IUC Code does not enshrine a presumption. On the contrary, one could even argue that the principle of trust and legal certainty would legitimize the expectation of the individual who considers that Article 3 of the IUC Code configures a rebuttable presumption, as has always been interpreted.

The reasoning of the Respondent is not followed, which asserts that such interpretation devalues the registration reality to the detriment of an informal reality and unsuitable for minimal control by the Respondent.

The fact that we are dealing with a rebuttable presumption means, as stated above, that it allows proof to the contrary.

It does not cease to fall to the taxable person, as in this case fell to the Claimant, the burden of proving the contrary of what follows from the presumption.

What is not at issue here is control of the information by the Tax Authority, which will always have access to the proof presented by the taxable person.

However, the Tax Authority cannot, subsequently, come to completely disregard the proofs presented by the taxable person.

See further what is stated in the Judgment of the Central Administrative Court South of 14 November 2013, Case No. 06971/13:

"The principle of proportionality is explained as a material principle informing and shaping administrative activity, in the cited Article 266(2) of the Constitution of Portugal, thus implying the lawfulness of all administrative activity (see Article 5(2) of the Administrative Procedure Code; J. J. Gomes Canotilho and Vital Moreira, Constitution of the Portuguese Republic Annotated, 4th Edition, 2nd Volume, Coimbra Editora, 2010, p. 801 et seq.). In accordance therewith, in administrative action there must be adequate proportion between the means employed and the purpose intended to be achieved (see José Manuel Santos Botelho and Others, Administrative Procedure Code Annotated and Commented, Almedina, 4th edition, 2000, p. 67, in annotation to Article 5). Within the scope of tax procedure, the establishment of such principle results from Article 55 of the General Tax Law, having express development in Article 46 of the Tax Code of Procedure. The principle of proportionality obliges the Tax Administration to refrain from imposing on taxpayers procedural obligations that are unnecessary or inadequate to the satisfaction of the purposes which it seeks to pursue or that go beyond what is necessary and adequate to impose on the same taxpayers."

The Respondent invokes that such interpretation of Article 3 of the IUC Code completely disregards the principle of proportionality in confrontation with the principle of contributory capacity, since the Claimant has the legal mechanisms necessary to proceed with the alteration of the registration.

In the concrete case, it is not understood why the Respondent understands that we are before a violation of the principle of proportionality.

Indeed, there is nothing inadequate at the procedural level, in the hypothesis granted to the taxable person of, should it wish, proving that it should not be subject to the tax, for example, by having meanwhile proceeded with the sale of the said vehicles or, as occurs in the present case, in that the said vehicles are encumbered by financial leasing contracts.

As such, there does not exist here a violation of the principle of proportionality.

The Respondent further invokes the violation of the principle of efficiency of the tax system, insofar as it would result in a hindrance and increased cost to the competencies assigned to the Respondent, and that this would prejudice the interests of the State.

Now, the Respondent does not explain how and in what terms the interpretation of Article 3 of the IUC Code as a rebuttable presumption would increase costs or hinder the action of the Tax Authority, so we would be laboring in a purely academic hypothesis.

Hypothetically, even if one admitted that the procedure could have a higher cost: notification to a taxable person for payment of the tax, subsequent proof that the tax should be paid by another taxable person and the resulting notification of the responsible taxable person for payment of the tax; such cost would be residual, given all the action of the Tax Authority.

And even if the cost were minimally relevant, the principle of efficiency of the tax system could never be placed above the principle of tax equality and the principle of tax capacity, which would be manifestly at issue, should Article 3 of the IUC Code not be capable of being considered as a presumption.

It is considered, therefore, that there exists no unconstitutionality in the interpretation of Article 3 of the IUC Code as a rebuttable presumption, so the Respondent acted incorrectly, in ignoring the proof produced by the Claimant.

16. THE RIGHT TO COMPENSATORY INTEREST

As stated in paragraph 1 of Article 43 of the General Tax Law "when it is determined, in gracious reclamation or judicial challenge, that there was error imputable to the services from which results payment of the tax debt in amount superior to that legally due."

As further follows from paragraph 5 of Article 24 of the RJAT, the right to compensatory interest may be recognized in arbitration proceeding.

It must, however, be determined whether or not there was error imputable to the services.

Indeed, it is not possible to assess whether the Claimant complied with the informative duty and, therefore, whether the Tax Authority had knowledge of the existence of the financial leasing contracts in question.

However, having the Claimant filed a request for official review, the Respondent did not consider the documentary proof submitted, and dismissed the request in its entirety, despite having been given knowledge of the existence of the financial leasing contracts.

We are, in this case, facing negligence on the part of the Tax Authority, negligence that translates into an "error imputable to the services," as stated in Article 43 of the General Tax Law.

Taking into account what is established in Article 61 of the Tax Code of Procedure and having verified the existence of error imputable to the services of the Tax Administration, from which resulted payment of the tax debt in amount superior to that legally due (see Article 43(1) of the General Tax Law), we can understand that the Claimant has the right to compensatory interest at the legal rate, calculated on the amount of € 9,918.11, which will be counted from 14-12-2016 until complete reimbursement of that same amount.

V – DECISION

The request for declaration of the illegality of 100 (one hundred) acts of assessment of Single Circulation Tax above identified, issued by the Tax and Customs Authority with respect to 44 (forty-four) motor vehicles and relating to the years 2010, 2011 and 2012 in the amount of € 9,205.32, plus compensatory interest totaling € 712.79, and declaring illegal the act of dismissal of the hierarchical appeal filed against the act that dismissed the official review request filed, is upheld, and the Respondent is condemned to return those amounts.

The value of € 9,918.11 (amount indicated and not contested) is fixed to the case, and the value of the corresponding arbitration fee at € 918.00 pursuant to Table I of the Regulations on Costs of Tax Arbitration Proceedings.

Costs borne by the respondent entity.

Lisbon, 27 January 2020

The Arbitrator

(Luís Menezes Leitão)