IUC Tax on Financial Leasing: Subjective Incidence and Legal Presumptions in CAAD Case 785/2014-T

ARBITRAL DECISION[1]

Claimant - A, Lda.

Respondent - Tax and Customs Authority

The Arbitrator Dr. Sílvia Oliveira, designated by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 2 February 2015, with respect to the process identified above, decided as follows:

1. STATEMENT OF FACTS

1.1

A, Lda. (hereinafter referred to as "Claimant"), a legal entity number 500 142 866, with registered office in …, submitted a request for arbitral pronouncement and for the constitution of a single arbitrator tribunal, on 24 November 2014, pursuant to the provisions of article 4 and article 10, n. 2 of Decree-Law no. 10/2011, of 20 January [Legal Regime for Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority is the Respondent (hereinafter referred to as "Respondent").

1.2

The Claimant requests, in the said request for arbitral pronouncement, that the Arbitral Tribunal declare:

(i) "(…) the illegality of the additional assessments of Unique Circulation Tax (IUC) (…) identified (…) relating to the years 2013 and 2014, plus compensatory interest (…), as well as the reimbursement of the tax improperly paid, plus indemnity interest".

1.3

The request for constitution of the Arbitral Tribunal was accepted by the Honourable President of CAAD on 26 November 2014 and was notified to the Respondent on 28 November 2014.

1.4

The Claimant did not proceed to appoint an arbitrator, whereby, pursuant to the provisions of article 6, n. 2, paragraph a) of the RJAT, the undersigned was designated as arbitrator on 15 January 2015 by the President of the Ethics Council of CAAD, the appointment having been accepted within the legal time limits and terms.

1.5

On 15 January 2015, the Parties were duly notified of this designation, having made no objection to the appointment of the arbitrator, in accordance with the combined provisions of article 11 n. 1 paragraphs a) and b) of the RJAT and articles 6 and 7 of the Ethics Code.

1.6

Thus, in accordance with the provisions of paragraph c) of n. 1 of article 11 of the RJAT, the Arbitral Tribunal was constituted on 2 February 2015, an arbitral order being issued on the same date, to the effect of notifying the Respondent to, pursuant to the provisions of article 17, n. 1 of the RJAT, submit a reply within a maximum period of 30 days and, if it so wished, request the production of additional evidence.

1.7

On 2 March 2015, the Respondent submitted its Reply, defending itself by way of objection and concluding that "the present request for arbitral pronouncement should be judged unfounded, the disputed tax assessment acts remaining in the legal order and the Respondent entity being absolved accordingly from the request".

1.8

On 4 March 2015, an arbitral order was issued to the effect that the Parties pronounce themselves, within a period of five days, on the possibility of dispensing with the holding of the meeting referred to in article 18 of the RJAT, the Respondent having submitted on 10 March 2015 a motion to that effect, as well as requesting the dispensation of "the holding (…) of closing arguments", the Claimant having made no statement regarding the contents of the said arbitral order within the five-day period allowed for doing so, as the Motion presented by the Claimant (on this matter) came to the knowledge of this Arbitral Tribunal, for reasons beyond its control, on 18 March 2015 (notwithstanding, its joinder to the file and notification to the Respondent was admitted through an arbitral order dated 18 March 2015).

1.9

Accordingly, by order of this Arbitral Tribunal, dated 16 March 2015, it was decided to dispense with the holding of the meeting referred to in article 18 of the RJAT as well as to dispense with the submission of closing arguments, 17 April 2015 being set as the date for rendering the arbitral decision and the Claimant was further warned that "up to the date of rendering of the arbitral decision it should proceed with payment of the subsequent arbitration fee, pursuant to the provisions of n. 3 of article 4 of the Fee Regulations in Tax Arbitration Proceedings and communicate this payment to CAAD" (which it did with the date of 17 April 2015).

2. GROUNDS OF THE CLAIM

2.1

The Claimant seeks with the request for arbitral pronouncement "the declaration of illegality of the additional IUC assessments identified (…) relating to the years 2013 and 2014, plus compensatory interest".

On the cumulation of claims

2.2

The Claimant defending the "cumulation of claims" given that its grounding "depends (…) on the assessment of the same circumstances of fact and the interpretation and application of the same principles or rules of law", being manifest, for the Claimant, "the verification of the requirements demanded (…) for the cumulation of claims within the scope of the present request for constitution of arbitral tribunal".

2.3

The Claimant further states that "in the course of its activity (…) it enters into vehicle rental contracts and, at the end of the contract, proceeds on various occasions to sell them to customers", clarifying that "the vehicles identified in the assessments (…) were subject to sale", "(…) in years prior to 2013 and 2014 and on a date prior to the tax event in the years in question".

2.4

The Claimant further states that "whenever it was within its reach (…) it delivered to the new owners the Motor Vehicle Registration forms duly signed, so that they would proceed to register the registration in their name at the competent Motor Vehicle Registration Office".

2.5

The Claimant clarifies that "with regard to (…) the vehicle with the registration plate
...-...-..., it is a vehicle of which the Claimant was never nor is the owner, nor in relation to which it held any legal position that would justify the assessment of IUC".

2.6

Now, within the scope of the said assessments, the Claimant further adds that in 2014 "it was notified by the Tax Administration to exercise the right of prior hearing before the issue of the IUC assessments (…) identified", because "in the understanding of the Tax Administration services, the Claimant was the owner/lessee of the various vehicles (…) and, as such, responsible for payment of the IUC".

2.7

Subsequently, "the Claimant was notified of the IUC assessments (…) in the amount of EUR 5,664.97" and, "notwithstanding its full conviction of the illegality of the assessments in question, the Claimant proceeded in a timely manner with voluntary payment of the tax and compensatory interest".

2.8

"For not accepting the tax acts in question it deduced the request for constitution of arbitral tribunal", invoking that "the present IUC assessments suffer from manifest illegality".

2.9

In truth, "as the IUC is levied on the owners of the vehicles on the date of the tax event and treating the rule (…) as a rebuttable legal presumption by means of proof to the contrary, the demonstration by the Claimant that it alienated the vehicles in question on a date prior to the verification of the tax event in the years 2013 and 2014 is sufficient for us to conclude that the now Claimant is not the subject of the tax".

2.10

In fact, for the Claimant, "with no doubt remaining (…) as to when the tax event occurred in the years 2013 and 2014, what is at issue is whether the Claimant is the subject of the IUC" in light of the applicable legal provisions.

2.11

In summary, for the Claimant, "what matters is to determine whether (…) are subjects of the IUC the owners of the vehicles in whose names the same are registered or, instead" if it is established in the applicable regulation "only a rebuttable legal presumption to the effect that the subjects are the owners of the vehicles, being considered as such those in whose names the vehicles are registered", concluding that "it is evident that it is this latter hypothesis that appears to be the most correct".

2.12

In truth, for the Claimant, "having regard (…) both to the systematic place that the equivalence principle occupies in the IUC Code, to the historical element embodied in that Bill [2], as well as to the ratio legis (…) mentioned [3], it can only be concluded that article 3, n. 1 of the IUC Code establishes a legal presumption, to the effect that are considered as owners those in whose name the vehicles are registered", being "such presumption (…) rebuttable".

2.13

On the other hand, the Claimant argues that, "if the taxpayer demonstrates that he is not the owner of the vehicle, regardless of registration, and being evident that the IUC must be levied and intends to tax those who are the real owners of the vehicle, it is incumbent upon the Tax Administration services to take notice of the actual situation that comes to their knowledge, on pain of distorting the aims of the tax", because "(…) the interpretation of article 3 of the IUC Code, to the effect that should be considered owners of the vehicles and, consequently, subjects of the IUC those in whose name the vehicles are registered, regardless of any proof to the contrary, violates the principles of the inquisitorial system, of justice and of impartiality constitutionally enshrined".

2.14

The Claimant further argues that being "true that the ownership right of motor vehicles is subject to registration (…), such registration does not have a constitutive character (…)", whereby "the definitive registration is nothing more than the presumption that the right exists and belongs to the registered holder, a presumption which is rebuttable thus admitting, therefore, proof to the contrary (…)".[4]

2.15

The Claimant thus concludes that "the function of registration is thus to publicize the situation of the vehicles, that registration not having a constitutive nature of the right of property (…), not constituting a condition of validity of the transfer of the vehicle from the seller to the buyer".

2.16

In this manner, "if the purchasers, new owners of the vehicles do not ensure the registration of their right of ownership, it is presumed that this right continues to be that of the seller, being able, however, this presumption to be rebutted by means of proof to the contrary, that is, proof, by any means, of the respective sale".

2.17

For this purpose, the Claimant reiterates that "it joined to the file sales invoices of the vehicles to which the assessments correspond (…), dated on a date prior to the tax events in the years 2013 and 2014", "documents which benefit from the presumption of truthfulness (…) for which reason the presumption should be considered as rebutted (…), concluding that (…) the Claimant was not the subject of the IUC relating to these vehicles in the years 2013 and 2014".

On voluntary payment and indemnity interest

2.18

In these terms, the Claimant petitions that, having proceeded with the payment of the assessed tax, "it should (…) be reimbursed for the amount improperly paid" and alleges that "(…) as the assessment results under consideration of error attributable to the services, from which resulted payment of tax entirely undue, it also has (…) the right to indemnity interest whose recognition is likewise requested".

3. REPLY OF THE RESPONDENT

3.1

The Respondent in the reply presented defended itself by way of objection having, in summary, presented the following arguments:

On the subjective scope of the IUC

3.2

In this regard, the Respondent alleges that "the first misconception underlying the interpretation defended by the Claimant relates to a biased reading of the letter of the law" (…) because the latter establishes that "are subjects of the tax the owners of the vehicles, being considered as such the persons (…) in whose names the same are registered".

3.3

In these terms, the Respondent further argues that "it is imperative to conclude that (…) the legislator established expressly and intentionally that are considered as (…) owners (…), the persons in whose names the (…) vehicles are registered, because it is this interpretation that preserves the unity of the legal-tax system", thus defending the dismissal of the establishment of a presumption by the legislator.

3.4

Thus, the Respondent argues that "in light of this wording it is manifestly not possible to invoke that it is a presumption, as the Claimant argues (…) it being, rather, a clear option of legislative policy adopted by the legislator, whose intention (…) was that, for the purposes of IUC, are considered owners, those who as such appear in the motor vehicle register"[5], whereby, for the Respondent, "article 3 of the CIUC does not contain any legal presumption (…)".

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

3.5

The Respondent understands that "from the coordination between the scope of the subjective scope of the IUC and the constitutive fact of the corresponding tax obligation it results unequivocally that only the legal situations subject to registration (…) generate the birth of the tax obligation (…)" being that this is "considered due on the first day of the taxation period (…)".

3.6

That is, "the moment from which the tax obligation is constituted presents a direct relationship with the issue of the certificate of registration, in which must appear the facts subject to registration".

3.7

Thus, "in the absence of such registration (…) the owner will be notified to fulfill the corresponding tax obligation, as the Respondent (…) will not have to proceed with the assessment of the tax on the basis of elements that do not appear in registers and public documents and, as such, authentic (…) whereby the non-updating of the register will be attributable within the legal sphere of the subject of the IUC and not that of the Portuguese State, as the active subject of this Tax".

3.8

The Respondent further argues that, "accepting the position defended by the Claimant (…) the Respondent would have to proceed with the assessment of IUC with respect to that other person identified by the person appearing in the motor vehicle register to whom it had first assessed the IUC (…)".

3.9

"In turn, after assessing the IUC with respect to that other person, he could also allege and prove that in the meantime he has already entered into a contract of purchase and sale, financial leasing, long-term rental, or other with another third party, but that he also has not registered (…)", "(…) and so on and so forth (…)", "placing (…) in question the period of limitation of the tax" and, therefore, in the view of the Respondent, "it cannot at all follow such reading".

On the interpretation that ignores the teleological element of interpretation of the law

3.10

In this sense, the Respondent alleges that, having regard to the tenor of parliamentary debates around the approval of Decree-Law no. 20/2008, of 31 January, "it results unequivocally that the IUC is due by the persons who appear in the register as owners of the vehicles", in order to "avoid the problems (…) related to the fact that there are many vehicles not registered in the name of the real owner".

3.11

In truth, in accordance with the position defended by the Respondent, "the new regime of taxation of the IUC came to substantially alter the regime of motor vehicle taxation, the subjects of the tax being henceforth the owners appearing in the register of property (…)".

3.12

Thus, according to the Respondent, "it results clearly that the tax acts in question do not suffer from any defect of violation of law", insofar as in light of the provisions of the applicable legislation, "it was the Claimant, in the capacity of owner appearing in the Motor Vehicle Registration Office, the subject of the IUC".

As to the documents submitted to rebut the presumption

3.13

In this matter, the Respondent understands that being "the Claimant, in the capacity of owner appearing in the Motor Vehicle Registration Office, the subject of the IUC (…) all the reasoning propounded by the Claimant is marred by error, it not being possible to rebut the legal presumption established".

3.14

"However (…) accepting that it be admissible to rebut the presumption in light of jurisprudence (…), it will still be necessary to assess the documents submitted by the Claimant and their evidentiary value with a view to such rebuttal".

3.15

According to the Respondent, "with a view to such rebuttal the Claimant came to instruct its request for arbitral pronouncement with the submission of invoices" which "will not constitute (…) sufficient proof to undermine the (supposed) legal presumption established in article 3 of the CIUC (…), whereby the same are objected to for all legal purposes".

3.16

In truth, the Respondent continues, "invoices are not apt to prove the conclusion of a synallagmatic contract such as purchase and sale, as such documents do not reveal in themselves an essential and unequivocal declaration of intent (i.e., acceptance) on the part of the purported purchasers"[6].

3.17

Additionally, the Respondent states that "the Claimant did not submit documentary proof of receipt of the price when it could and should have done so, that is, in the request for arbitral pronouncement, and is now barred from the possibility of doing so at a later time (…)".[7]

3.18

Next, the Respondent analyzes case by case all documents annexed by the Claimant (with a view to dismissing the presumption of article 3 of the IUC Code) with respect to the alleged ownership of the vehicles with registration plates ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-...-..., concluding that "the Claimant did not succeed in proving the purported transmission of the vehicles listed (…)".[8]

3.19

With respect to the vehicle with registration plate ...-...-..., the Respondent contradicts what is alleged by the Claimant (see point 2.5., supra), stating that "in the database of the AT, updated on the basis of the computerized registry of the IMT, IP, appears as owner of the vehicle" the Claimant "since 09/11/1990, with no subsequent date having been recorded any other fact capable of constituting a transfer of ownership (…)".

On the interpretation that is contrary to the Constitution

3.20

In this scope, the Respondent understands that "the interpretation conveyed by the Claimant is shown to be contrary to the Constitution, insofar as such interpretation results in the violation of the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality".

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

3.21

In this regard, the Respondent alleges that "the registration of property constitutes an essential element in the system of information between the Respondent and other public entities (…) and with the law enforcement authorities (…) with a view to the exchange of information necessary for the assessment and inspection of the (…) IUC".

3.22

Thus, "the transmission of ownership of motor vehicles is not susceptible to being controlled by the Respondent, as there is no obligation as to a declarative ancillary matter on this subject (…) meaning that the IUC is assessed in accordance with the registration information timely transmitted by the IRN".

3.23

In summary, the Respondent alleges that "the IUC is not assessed in accordance with information generated by the Respondent itself (…)" whereby "not having the Claimant taken care of the updating of the motor vehicle register (…) and not having ordered the cancellation of the registrations of the vehicles here in question, it is necessary to conclude that the Claimant did not proceed with the diligence required of it", leading "(…) the Respondent to limit itself to giving fulfillment to the legal obligations to which it is bound (…)".

3.24

"Therefore, it was not the Respondent who gave cause to the deduction of the request for arbitral pronouncement, but rather the Claimant itself" whereby, consequently, "the Claimant should be condemned to pay the arbitration fees resulting from the present request for arbitral pronouncement (…)".

3.25

"The same reasoning applies with respect to the request for condemnation to pay indemnity interest (…)", because, in the view of the Respondent, if "(…) the tax acts in question are valid and lawful, because in conformity with the legal regime in force on the date of the tax facts (…) there did not occur, in this case, any error attributable to the services" whereby "the legal requirements that grant the right to indemnity interest are not met".

3.26

In these terms, the Respondent concludes the reply presented that "the present request for arbitral pronouncement should be judged unfounded, the disputed tax assessment acts remaining in the legal order, (..) the (…) Respondent entity being absolved accordingly from the request".

4. PRELIMINARY RULING

4.1

The request for arbitral pronouncement is timely, because submitted within the period provided for in paragraph a) of n. 1 of article 10 of the RJAT.

4.2

The parties have legal personality and capacity, are legitimately concerned regarding the request for arbitral pronouncement and are duly represented, in accordance with the provisions of articles 4 and 10 of the RJAT and article 1 of Regulatory Order no. 112-A/2011, of 22 March.

4.3

The Tribunal is regularly constituted, in accordance with article 2, n. 1, paragraph a), articles 5 and 6, all of the RJAT and is competent as to the assessment of the request for arbitral pronouncement formulated by the Claimant.

4.4

The cumulation of claims is lawful, as the requirements demanded in article 3, n. 1 of the RJAT are verified, that is, the grounding of the claims depends, essentially, on the assessment of the same circumstances of fact and the interpretation and application of the same principles or rules of law.

4.5

No procedural defects were identified.

4.6

There are no exceptions or preliminary issues of which it is necessary to take cognizance, whereby nothing prevents the determination on the merits of the case.

4.7

In these terms, the following shall be the issues to be decided:

4.7.1

Does article 3 of the IUC Code establish or not a rebuttable presumption as to the owners of motor vehicles, as subjects of the tax, in order to dismiss the presumption that are considered as such the persons in whose names the same are registered?

4.7.2

Did the Claimant succeed in demonstrating, in the matter of arbitral procedure, that it was not, on the date of the IUC assessments which are the subject of this proceeding, the owner of the vehicles which were the subject of those assessments (and identified in point 5.2.), succeeding in rebutting the presumption referred to in the previous point?

4.7.3

Do the IUC assessments made by the Respondent suffer, in consequence, from illegality, in light of the applicable legislation?

5. FINDINGS OF FACT

5.1

Of the facts proven

5.2

The Claimant is a commercial company that engages in the activity of motor vehicle rental and the provision of related services.

5.3

The Claimant, in the course of its activity, was notified in 2014 of the following official IUC assessments "Notice for Prior Hearing", in accordance with copies of documents annexed to the proceedings:

5.4

However, it should be noted that both the notification relating to the vehicle with registration plate ...-...-... and the one relating to the plate ...-...-..., will here be disregarded for evidentiary purposes as the respective vehicles are not in the list of those whose IUC assessment gave rise to the present request for arbitral pronouncement (see next point).

5.5

The Claimant was further notified of the following official IUC assessments documented, which are at the origin of this request for arbitral pronouncement:

[Table with multiple entries showing registration plates, registration data, values in EUR, document numbers, and years 2013 and 2014 - content preserved as in original with vehicle registration data and amounts]

5.6

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

5.7

Of the facts not proven

5.8

With relevance to the decision of the request, the transfer of ownership of the vehicles identified below is considered as not proven, having regard to the insufficiency of the documentary evidence, submitted to the file, for that purpose (Invoices and Debit Notes – ND[9]) by the Claimant:

[Table with multiple entries showing registration plates, document types, document data, values with VAT in EUR, and document numbers - content preserved as in original]

5.9

It was also not proven that the vehicle with registration plate ...-...-... never belonged to the Claimant, in light of the tenor of the documentation annexed.

5.10

No other facts as not proven with relevance to the arbitral decision were verified.

6. GROUNDS FOR DECISION

On the subjective scope of the IUC

6.1

The issue underlying the present request for arbitral pronouncement, in general, and the requests which are part of it, in concrete, shall be that of the verification of the lawfulness of the IUC assessments notified to the Claimant.

6.2

In the request for arbitral pronouncement the Claimant invokes the circumstance that, on the date to which the tax facts that originated them relate, it was no longer the owner of the vehicles and, consequently, did not assume the status of subject of the tax which was assessed to it.

6.3

In effect, the Claimant considers not to be the subject of the tax which was assessed to it, because in accordance with the provisions of article 3, n. 1 of the IUC Code, a rebuttable presumption is established there, that is, one that admits proof to the contrary, namely, through the demonstration of the alienation of the vehicles at the origin of the IUC assessments on a date prior to the verification of the tax event in the years 2013 and 2014 (underlined by us).

6.4

To the contrary, the Respondent considered that the provisions of article 3, n.1 of the IUC Code does not contain any legal presumption and that, rather, it established expressly and intentionally that are considered as owners the persons in whose names the vehicles are registered.

6.5

Now, being this the principal issue to be decided in the present proceedings, it will be necessary to determine the subjective scope of the IUC, in accordance with the provisions of the respective Code, and to take a position on the said rule of subjective scope in order to determine whether or not it establishes a legal presumption.

6.6

In this dispute, if the said presumption is established there, it is necessary to verify whether it is susceptible of being rebutted (as the Claimant argues) or if, on the other hand, it is established in an express and non-rebuttable manner, that the persons in whose names the vehicles are registered are the owners, for the purposes of the subjective scope of the IUC (as the Respondent argues).

6.7

Preliminarily, and with a view to the assessment of this matter, it should be borne in mind that the purchasers of the vehicles become owners of those same vehicles by means of the conclusion of the corresponding purchase and sale contracts, with or without registration.

6.8

In this scope, there are three articles of the Civil Code that matter to be considered regarding the acquisition of ownership of a motor vehicle, namely:

6.8.1

Article 874, which establishes the notion of a contract of purchase and sale, as being "(…) the contract by which ownership of a thing, or another right, is transferred, by means of a price";

6.8.2

Article 879, paragraph a), according to which the essential effects of the contract of purchase and sale are provided as "the transfer of ownership of the thing or of the ownership of the right";

6.8.3

Article 408, n. 1, which establishes that "the constitution or transfer of real rights over a determined thing is effected by mere effect of the contract, except as otherwise provided by law".

6.9

We are thus in the domain of contracts with real effect, which means that their conclusion causes the transfer of real rights, which in the case of motor vehicles, is determined by mere effect of the contract.

6.10

In the scope of contracts with real effect, cite Pires de Lima and Antunes Varela, in annotations to article 408 of the Civil Code, when they argue that "(…) contracts said to be real by having as their immediate effect the constitution, modification or extinction of a real right (…) distinguish themselves from the so-called real contracts, which require the delivery of the thing as an element of their formation".[10]

6.11

We are thus faced with contracts in which the ownership of the thing sold transfers, without further ado, from the seller to the purchaser, having, as the cause, the contract itself.

6.12

Jurisprudence also has argued, in light of the provisions of article 408, n. 1 of the Civil Code that "the constitution or transfer of real rights over a determined thing is effected by mere effect of the contract, except as otherwise provided by law".[11]

6.13

In this case shall be the contract of purchase and sale of a motor vehicle [see article 874 and 879 paragraph a) of the Civil Code], which does not depend on any special formality, being valid even when concluded in verbal form.[12]

6.14

Having the contract of purchase and sale, in light of what is mentioned above, a real nature, with the mentioned consequences, it should also be considered the legal value of motor vehicle registration (the object of that contract), to the extent that the transaction of that property is subject to public registration.

6.15

In effect, article 1 of Decree-Law no. 54/75, of 12 February, considers that with respect to vehicle registration that "it has essentially as its purpose to publicize the legal situation of motor vehicles (…), with a view to the security of legal commerce", and that, in accordance with the Real Estate Registration Code (applicable ex vi article 29 of the RJAT), "definitive registration constitutes a presumption that the right exists and belongs to the registered holder in the exact terms in which the registration defines it".

6.16

Thus, it seems safe to conclude that definitive registration is a rebuttable presumption of the existence of the right, which can be set aside, that is, which admits proof to the contrary.

6.17

Notwithstanding, it should be noted that in the IUC Code there is no provision requiring registration as a condition of validity of contracts.

6.18

However, and before proceeding to interpret the provisions of article 3, n. 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 rules must be interpreted in accordance with the general principles of interpretation and, also, the provisions of article 9 of the Civil Code which establishes the rules and elements for the interpretation of rules.

6.19

In effect, in order that we can conclude whether article 3, n. 1 of the IUC Code establishes (i) a rebuttable presumption as to who should be considered a subject of the tax on the basis of Motor Vehicle Registration or whether (ii) the Legislator intended expressly and intentionally to determine, on the basis of Motor Vehicle Registration, who should be considered the subject of the IUC, it is fundamental in the first place to pay attention to the letter of the Law.

6.20

In these terms, in accordance with the provisions of article 3, n. 1 of the IUC Code, "are subjects of the tax 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" (underlined by us).

Literal element

6.21

Now, in accordance with the literal element of the rule referred to, the issue centers on the expression "being considered as such" used by the legislator.

6.22

In fact, the letter of the Law does not refer to the expression "it is presumed", as appeared in the diplomas preceding the present Code, thus being questionable whether the nature of presumption continues or not to be present in the rule under analysis.

6.23

In this sense, by way of example, it is verified that in article 243, n. 3 of the Civil Code and in articles 45, n. 6 and 89-A, n. 4 of the LGT, the expression "is considered" is also used and, however, we are faced with legal presumptions whereby, in accordance with the general rules of interpretation, it is considered that the minimum of verbal correspondence is assured for the purposes of the determination of the legislative thought that is objectified in the rule in question.[13]

Historical element

6.24

Thus, and further in the scope of the elements of interpretation in accordance with article 9 of the Civil Code, it matters also to pay attention to the historical element.

6.25

The legislator, in defining the subjective scope of the Municipal Vehicle Tax (IMV), Circulation Tax (ICI) and Haulage Tax (ICA), taxes abolished by the IUC, established that "the tax is due by the owners of the vehicles, being presumed as such, until proof to the contrary, the persons in whose name the same are registered or matriculated" (underlined by us).

6.26

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

6.27

As far as the IUC is concerned, notwithstanding that it continues to attribute to the owners of the vehicles the status of subjects of the tax, the legislator opted to use a different formulation of the rule of scope, abandoning the expression "(…) being presumed as such, (…)" in favor of the expression "(…) being considered as such (…)".

6.28

In consequence, it is clear that the understanding underlying the provisions of that article of the IUC Code provides for a rebuttable presumption, with respect to which the semantic question in no way alters the interpretive sense of the rule.[14] [15]

6.29

If the understanding professed in previous decisions [16] on the same subject is adopted, we understand that it should be concluded that, in fact, article 3, n. 1 of the IUC Code establishes a presumption, as it is not the substitution of the expression "it is presumed" for the expression "is considered" that causes this rule to cease to establish a presumption.

6.30

In truth, we understand that this is merely a semantic matter that does not minimally alter the content of the rule in question, because:

6.30.1

For there to be a legal presumption, it is necessary that the rule establishing it adapt itself to its respective legal concept (set forth in article 349 of the Civil Code), being irrelevant to such whether it is explicit, revealed by the use of the expression "it is presumed" or only implicit.[17] [18]

6.30.2

On the other hand, the legislator's freedom of configuration is limited by fundamental principles enshrined in the CRP, namely, the principle of equality, whose relevance is pertinent in the case under analysis.

In effect, in the tax sphere, the principle of equality is translated as the generality and abstraction of the rule that creates the essential elements of the tax, in accordance with the contributive capacity of each one.

6.31

In this scope, "taxation in conformity with the principle of contributive capacity will imply the existence and maintenance of an effective connection between the tax obligation and the economic fact selected as the object of the tax, requiring for this a minimum of logical coherence of the various concrete hypotheses of tax provided for in law with the corresponding object of the same".[19]

6.32

It is in the sense of the legal concept of presumption and in respect of the constitutional principles of equality and contributive capacity that the legislator attributes full efficacy to the presumption derived from motor vehicle registration incorporating it, as such, in the definition of the subjective scope of this tax, established in n. 1 of article 3 of the IUC Code.

6.33

In effect, as regards the importance of Motor Vehicle Registration, it matters to note that registration permits the publicization of the legal situation of the property and, likewise, to presume that there is the right over those and that the same belongs to the registered holder, in accordance with what appears in the register.

6.34

With this, we can consider that registration does not have a constitutive nature of the right, but rather a declarative nature, whereby it is concluded that registration does not constitute a condition of validity of the transfer of the vehicle from the seller to the purchaser.

6.35

Ownership is thus acquired by means of the conclusion of a contract of purchase and sale, in accordance with the provisions of article 879, paragraph a) of the Civil Code, whereby it is provided that one of the effects of this contract rests on the transfer of the thing or of the ownership of the right.

Rational and teleological element

6.36

Finally, as to the rational and teleological element, it matters to note that the IUC has as its underlying principle the principle of equivalence, enshrined in article 1 of the respective Code.

6.37

This principle came to embody environmental concerns by establishing that the tax should burden the taxpayers for the environmental and road costs caused by motor vehicle circulation, that is, whoever pollutes must pay (principle which also underlies article 66, n. 2, paragraph h) of the CRP and Community Law [20]).

6.38

In effect, what is intended to be achieved through the establishment of the said principle is to ensure that the harms which arise for the community, resulting from the use of motor vehicles, are assumed by their owner-users, as costs which only they should bear.

6.39

Being known the dimension of environmental damage caused by motor vehicles, the logic and coherence of the system of motor vehicle taxation, in general, and of the regime inscribed in the IUC Code in particular, point to the sense that whoever pollutes must pay, thus associating the tax with environmentally caused damage.

6.40

Thus, this imputation of the tax burden to the subjects who only apparently are in those conditions, biases the ratio legis of which should be the actual owners who should bear the respective tax, given that they are the real polluters.

6.41

These are, thus, concerns with notable importance in the economy of the IUC, and which cannot fail to, coherently, take into account in the interpretation of article 3, relating to the subjective scope of that tax.

6.42

In these terms, corresponding the taxation (in the context of IUC) of the actual polluters to an important purpose aimed at by law, in light of the elements of a rational and teleological nature of interpretation, it is necessary to conclude that n. 1 of article 3 of the IUC Code establishes a rebuttable presumption.[21]

6.43

In summary, it matters to point out that the said elements of interpretation, whether those related to literal interpretation, whether those relating to logical elements of interpretation, of a historical or rational order, all point to the sense that the expression "being considered as such" has a sense equivalent to the expression "being presumed as such", and should thus be understood that, it is reiterated, the provisions of n. 1 of article 3 of the IUC Code establish a legal presumption.

6.44

Now, in accordance with the provisions of 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.

6.45

In this way, presumptions constitute means of proof, having this as its function the demonstration of the reality of facts (article 341 of the Civil Code), whereby whoever has the legal presumption in his favor is relieved of the burden of proving the fact to which it leads (article 350, n.1 of the Civil Code).

6.46

However, presumptions, except in cases where the law prohibits it, can be rebutted, by means of proof to the contrary (article 350, n. 2 of the Civil Code).

6.47

Treating tax presumptions of scope, these are always rebuttable, as expressly provided for in article 73 of the LGT.

6.48

In truth, these presumptions of tax scope can be rebutted through the appropriate adversarial procedure, provided for in article 64 of the Tax Procedure and Process Code (CPPT) or, alternatively, by way of gracious objection or judicial challenge of the tax acts which are based on them.

6.49

Regarding the establishment in article 3, n. 1 of the IUC Code of a rebuttable presumption, various arbitral decisions have already pronounced themselves in that sense.[22]

6.50

In these terms, the answer which should be given to the question formulated in point 4.7.1., supra shall be that article 3 of the IUC Code does, in effect, establish a rebuttable presumption as to the owners of motor vehicles, in order to be able to dismiss the presumption that are considered as such the persons in whose names the same are registered.[23]

On the rebuttal of the presumption

6.51

Concluding that article 3, n. 1 of the IUC Code establishes a rebuttable presumption, it remains to analyze whether this presumption was effectively rebutted by the Claimant, in accordance with the provisions of article 73 of the LGT.

6.52

Thus, in general, the person (natural or legal) who is registered in the register as owner of the vehicle (and who, in that sense, is considered by the Tax Authority as being the subject of IUC), must demonstrate by means of available evidence that he is not the actual owner of the vehicle and, likewise, that the ownership was transferred to another.

6.53

What the Claimant proposes to prove, according to what results from the file, is that it transferred the ownership of the vehicles at a moment prior to the periods to which the assessments relate and, to prove that such transfers of ownership occurred, the Claimant submits copies of invoices and debit notes as documents supporting those transfers.

6.54

It thus becomes necessary to analyze what value should be recognized to these elements to prove the transfer, by the Claimant, of the ownership of the vehicles.

6.55

In compliance with the law, whenever a purchase and sale of a vehicle occurs, a bilateral document is filled out intended for motor vehicle registration (the completion of which does not constitute an essential formality of the transaction) and which contains a declaration signed by both parties regarding the conclusion of the contract.

6.56

And precisely because the purchase and sale of a movable thing is a non-formal transaction, to the services of Motor Vehicle Registration this particular instrument is sufficient as evidence to proceed with the alteration of the register (which can be promoted by the seller, on behalf of the purchaser, furnished with a simple copy of that declaration).

6.57

When the seller is an entity dedicated to the commerce of motor vehicles (as is the case of the Claimant), this can promote the registration, on behalf of the purchaser, through a simple request, as provided for in article 25, n. 1, paragraphs c) and d) of the Motor Vehicle Registration Regulations.

6.58

Now, what the Claimant seeks in the proceeding is not merely to rebut a tax presumption but rather to rebut the presumption of truthfulness of the facts which are registered publicly (and for purposes of public interest), presenting for this as evidence copies of invoices and debit notes (not signed by the purchaser), in both cases, dealing with private documents, unilaterally issued, with a commercial character.[24]

6.59

Now, given that for the issuance of the same there was no intervention on the part of the purchaser, this means that he can deny that the invoice corresponds to any transaction actually concluded, thus invalidating any evidentiary value of the same, it not being required of him even to produce any counterevidence in that regard.[25]

6.60

In consequence, to these private documents, for being unilateral, cannot be recognized but a very limited evidentiary value.[26]

6.61

In truth, in the case under analysis, as a mechanism to rebut the presumption, the Claimant only joined, as was already mentioned, as proof that it was no longer the legitimate owner of the vehicles identified in point 5.5., supra, copies of invoices or of debit notes to prove the alleged transfer of ownership of the same.[27]

6.62

In this scope, the rebuttal of the legal presumption obeys the rule contained in article 347 of the Civil Code, whereby legal proof in full can only be contradicted by means of proof that shows that it is not true the fact which is its object, which means that it is not enough for the opposing party to counter with mere counterevidence, it being necessary to show that the presumed fact is not true, in such a way that there remains no uncertainty that the facts resulting from the presumption are not real.

6.63

Now, from the analysis of the invoices and debit notes (as private documents and unilateral, the issuance of which does not suppose the intervention of the counterparty), annexed by the Claimant to the proceeding, should to the same be recognized a reduced value to prove the existence of a synallagmatic contract, as is the case of purchase and sale, because any of those accounting documents does not even prove the payment of the price by the purchaser.[28]

6.64

In effect, in general terms, both invoices and debit notes constitute accounting documents prepared by companies, having to:

6.64.1

Invoices be framed as accounting documents through which the seller sends to the purchaser the general conditions of the transaction performed; and

6.64.2

Debit notes be framed as accounting documents in which the issuer communicates to the addressee that the latter owes him a certain monetary amount.

6.65

As both documents appear in the phase of settlement of the amount to be paid by the purchaser, but will not make proof of the payment of the price by the same, in consequence, not making proof that the contract of purchase and sale was concluded (in truth, only the issue of invoice/receipt or of receipt makes proof of payment and settlement [29]).

6.66

In truth, not having been annexed to the proceeding, namely, copy of the contract of purchase and sale, copy of the document proving payment of the price (cheque or proof of transfer of the amount which was received from the sale of each vehicle) or copy of the receipt, the actual transfer of the ownership of the vehicles could not be proven.

6.67

Thus, only with the presentation of such documents (with presumption of truthfulness and fitness), would there have been force sufficient to rebut the presumption which results from the assessments, in accordance with the provisions of article 73 of the LGT.

6.68

In these terms, it will be necessary to conclude that the Claimant did not succeed in proving the transfer of ownership of the vehicles which constitute the object of the IUC assessments which form part of the Arbitral Request and, in consequence, did not succeed in rebutting the presumption derived from the registration in Motor Vehicle Registration.

6.69

Consequently, the Claimant did not succeed in demonstrating that, on the date of the IUC assessments, it was not the owner of the vehicles which were the subject of those assessments (and identified in point 5.5., supra), the answer being negative to the question formulated in point 4.7.2., that is, it did not succeed in rebutting the presumption of article 3 of the IUC Code.

6.70

In this manner, in accordance with the provisions of article 16 of the IUC Code, the Respondent was competent to assess the tax to the Claimant, as the person in whose name the vehicles which were the subject of the assessments were registered (in accordance with the provisions of article 3 of the IUC Code).

6.71

In consequence, the answer shall also be negative to the question formulated above in point 4.7.3., that is, the IUC assessments made by the Respondent do not suffer, in consequence of the above, from illegality, and should not, therefore, be annulled.

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

6.72

Finally, as to the request for payment of indemnity interest, the right to the same will be prejudiced by the conclusion assumed in point 6.71., supra, because it was understood that, in light of the above, the assessments which are the object of the Request do not suffer from illegality and, therefore, should not be annulled, having regard to the insufficient evidence presented by the Claimant to rebut the presumption enshrined in article 3 of the IUC Code[30].

6.73

In keeping with the previous point, and in accordance with the provisions of article 527, n. 1 of the Code of Civil Procedure (CPC) in force (ex vi 29, n. 1, paragraph e) of the RJAT), it should be established that shall be condemned in costs the party which shall have given cause to them or, there being no winning of the action, who from the proceeding drew profit.

6.74

In this scope, n. 2 of the said article specifies the expression "shall have given cause to them", according to the principle of lapse, understanding that gives cause to the costs of the proceeding the losing party, in the proportion in which it is.

6.75

Thus, the Parties should be condemned having regard to the principle of proportionality, that is, being attributed to them responsibility for costs, in the proportion in which they are the losing party.

6.76

In these terms, the responsibility for arbitration costs should be attributed to the Claimant.

7. DECISION

7.1

In accordance with the provisions of article 22, n. 4 of the RJAT, "the arbitral decision rendered by the arbitral tribunal contains the establishment of the amount and the apportionment among the parties of the costs directly resulting from the arbitral proceeding".

7.2

In this scope, the basic rule relating to responsibility for the costs of proceedings is that the party which shall have given cause to them should be condemned, it being understood that the party which gives cause to the costs of the proceeding is the losing party, in the proportion in which it is (article 527, n. 1 and 2 of the CPC in force).

7.3

In the case under analysis, having regard to the above, the principle of proportionality imposes that the totality of responsibility for costs be attributed to the Claimant.

7.4

In these terms, having regard to the conclusions defined in the foregoing Chapters, this Arbitral Tribunal decided:

7.4.1

To judge unfounded the request for arbitral pronouncement presented by the Claimant, the respective tax assessment acts remaining in consequence;

7.4.2

To judge unfounded the request for condemnation of the Respondent in the reimbursement of the amounts paid by the Claimant, as well as the request for payment of indemnity interest, because prejudiced by the decision of the foregoing point;

7.4.3

To condemn the Claimant to payment of the costs of the present proceeding.

Value of the proceeding: In accordance with the provisions of articles 306, n. 2 of the CPC, article 97-A, n. 1 of the CPPT and article 3, n. 2 of the Fee Regulations in Tax Arbitration Proceedings, the value of the proceeding is fixed at EUR 5,664.97.

In accordance with the provisions of Table I of the Fee Regulations in Tax Arbitration Proceedings, the value of the costs of the Arbitral Proceeding is fixed at EUR 612.00, chargeable to the Claimant, in accordance with article 22, n. 4 of the RJAT.

Notify.

Lisbon, 17 March 2015

The Arbitrator

Sílvia Oliveira

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

[2] Bill no. 118/X which gave rise to Law no. 22-A/2007, of 29 June [which approved the Vehicle Tax Code (ISV) and the Unique Circulation Tax Code (IUC)].

[3] For the Claimant, "the ratio legis points to the sense of intending the actual owners and users of the vehicles (…)".

[4] In this scope, the Claimant cites jurisprudence emanated in Decisions of the Supreme Court of Justice rendered within the scope of case no. 03B4369, of 19 February 2004 and case no. 07B4528, of 29 January 2008.

[5] To reinforce this understanding, the Respondent cites the decision rendered within the scope of Case no. 210/13.0BEPNF of the Administrative and Tax Court of Penafiel (having annexed a copy of this decision with the Reply presented - Doc. no. 2), in the terms of which "the failure to register in the name of the new purchaser causes the subjective scope of the IUC (art. 3, n. 1 of the CIUC) to remain with the registered owner of the right of property in the Motor Vehicle Registration Office and be responsible for the assessment and payment of the IUC, regardless of its actual alienation".

[6] In this scope, the Respondent cites jurisprudence emanated from CAAD (cf. cases no. 63/2014-T, no. 150/2014-T and no. 220/2014-T).

[7] In this matter, the Respondent cites transcriptions of the interlocutory decisions rendered within the scope of arbitral cases no. 75/2012-T and no. 212/2014-T.

[8] In this scope, the Respondent annexed with its Reply a copy of the internal cadastral register of each vehicle which is the subject of assessment (Doc. no. 1 of the Reply).

[9] In this regard, see point 6.51 to point 6.60 of Chapter 6 (Decision).

[10] See articles 1129, 1142 and 1185 of the Civil Code.

[11] In this sense, see Decision of the Supreme Court of Justice Case 03B4369, of 19/02/2004.

[12] In this sense, see Decision of the Supreme Court of Justice of 3/3/98, in CJSTJ, 1998, year VI, Volume I, page 117.

[13] Attention should be paid to the fact that as regards the second legal provision referred to, Jorge Lopes de Sousa considers there to be a question of a rebuttable presumption of notification for purposes of counting the period of limitation of the right to assess (see Tax Procedure and Process Code Annotated, Vol. I, 6th Edition, Áreas Editora, S.A., Lisbon 2011, page 388).

[14] In this sense, Jorge Lopes de Sousa states that "in tax scope matters, presumptions can be revealed by the expression it is presumed or by similar expression" (in CPPT, 6th Edition, Áreas Editora. Lisbon, 2011, page 589) (underlined by us).

[15] Also in the same sense, A. Brigas Afonso and Manuel Teixeira Fernandes (in "Vehicle Tax and Unique Circulation Tax", Coimbra Editora, 2009, page 187) consider that "there were no alterations with respect to the situation that prevailed within the scope of the extinct IMV, ICI and ICA.

[16] In this sense see, namely, the arbitral decisions rendered in cases 14/2013-T, 26/2013-T, 27/2013-T, 34/2014-T and 42/2014-T.

[17] In this sense, see Jorge Lopes de Sousa, CPPT, 6th Edition, Áreas Editora. Lisbon, 2011, page 586.

[18] See Decision of the Administrative Supreme Court Case 441/11, of 29 February 2012 and Decision of the Administrative Supreme Court Case 381/12, of 2 May 2012.

[19] See Decision of the Constitutional Court Case 343/97, of 29 April.

[20] With the signature, on 7 February 1992, in Maastricht, of the Treaty of the European Union, the said principle came to appear as support for Community policy in the field of the environment (see article 130-R, n. 2).

[21] In this scope, according to Francesco Ferrara (in Interpretation and Application of Laws, 2nd Edition, Arménio Amado, Editor, Successor, Coimbra, 1963, page 130), "(…) legal interpretation is by its nature essentially teleological".

[22] See, namely, the arbitral decisions rendered in cases 14/2013-T, 26/2013-T, 27/2013-T, 73/2013-T, 170/2013-T and 67/2014-T and 115/2014-T.

[23] In this scope, see Decision of the Administrative Court of Appeal Case 08300/14, of 19 March 2015, in the terms of which can be read that "the IUC is legally configured to function in integration with the motor vehicle register, which is inferred from the outset from article 3, n. 1 of the IUC Code, rule where (…) a legal presumption is established that the holder of the motor vehicle register is its owner, being such presumption rebuttable, by force of article 73 of the LGT" (underlined by us).

[24] In this sense, see arbitral decision rendered in case 67/2014, of 15 September.

[25] In this scope, see Decision of the Court of Appeal, Case no. 224338/08.7YIPRT.L1-8, of 4 February 2010.

[26] In this sense various jurisprudence has pronounced itself, namely the Decision of the Court of Appeal, Case no. 1586/2008-8, of 5 June 2008, when it is written that "the documents submitted limit themselves to the existence of the statements contained in them, that is, that invoices were issued referring to merchandise supplied (…) from the documents it does not result that (…) the merchandise contained in the submitted invoices was ordered and that this was delivered to it" (underlined by us).

[27] See copy of documents contained in Doc. no. 1 annexed to the Request.

[28] In this sense, see Decision of the Administrative Court of Appeal Case 08300/14, of 19 March 2015.

[29] See article 787 of the Civil Code.

[30] In effect, in tax arbitral proceedings there is only place for payment of indemnity interest, in accordance with the provisions of articles 43, nn. 1 and 2 and 100 of the LGT, when it is determined that there was error attributable to the services from which results payment of the tax debt in an amount greater than that legally due (underlined by us). In the case under analysis, by promoting the official IUC assessments considering the Claimant as the subject of the IUC, the Respondent limited itself to giving fulfillment to the provisions of n. 1 of article 3 of the IUC Code which (as above has already been analyzed), attributes such status to the persons in whose names the vehicles are registered, no error being perceived, considering the circumstances described, which would be attributable to it.