CAAD 81/2015-T: IUC Subjective Incidence on Leasing Vehicles – Financial Institution Not Liable

ARBITRAL DECISION

I – REPORT

1. On 9.02.2015, the Applicant, A…, Ltd., legal entity number …, with registered office at Building…, Avenue…, lot…, second floor, in Lisbon, applied to CAAD for the establishment of an Arbitral Tribunal, pursuant to Article 10 of Decree-Law No. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Tax and Customs Authority is the Respondent, requesting the annulment of the assessments of Unique Circulation Tax identified in a table attached to the request for arbitral ruling, in the total amount of € 12,726.42, which had been the subject of the appeal number …2014…, in which the request for annulment of the same was decided to be dismissed.

The Applicant, alleging that it paid the amount of the assessments, also requests the reimbursement of the taxes which it considers to have been paid wrongfully and also indemnificatory interest.

1. The request for establishment of the arbitral tribunal was accepted by the Honorable President of CAAD and notified to the Tax and Customs Authority.

Pursuant to and for the purposes of the provisions of Article 6, paragraph 1, of the RJAT, by decision of the President of the Ethics Council, duly communicated to the parties within the legally applicable time limits, Professor Dr. Guilherme d'Oliveira Martins was appointed as arbitrator.

By decision of the President of the Ethics Council of 7 December 2015, following justified resignation from the functions of the initially appointed arbitrator, his replacement was determined by the signatory, who communicated to the Ethics Council and to the Administrative Arbitration Center the acceptance of the assignment within the regularly applicable time limit.

The Arbitral Tribunal was established on 20.04.2015.

1. The grounds presented by the Applicant in support of its claim were, in summary, the following:

a. The Applicant is a credit financial institution subject to supervision by the Bank of Portugal and conducts activity in the field of automobile financing, namely under the modality of granting loans for the acquisition of vehicles or the conclusion of financial leasing contracts.

b. The Applicant received several assessment notices for unique circulation tax ("IUC") on vehicles related to the aforementioned activity, regarding which it filed an appeal that was processed under no. …2014…, which was dismissed, and of which the Applicant was notified on 11 November 2014.

c. The Applicant is not the taxpayer for IUC relating to the vehicles in question in any of the years to which the current official assessments now subject to the request for arbitral ruling related, since in all cases covered by the present request for arbitral ruling, the assessed tax relates to vehicles already sold by the Applicant on the date of the occurrence of the tax event, to vehicles whose leasing contracts were still in effect, or tax that had already been previously paid, and all these cases correspond to reasons for exclusion of subjective incidence of the tax.

d. Article 3, paragraph 1 of the IUC Code establishes a presumption, rebuttable by proof to the contrary, as results from Article 73 of the General Tax Law.

e. A different interpretation would violate the constitutional principle of contributive capacity as well as the principle of equivalence enshrined in Article 1 of the IUC Code.

f. Although Article 3, paragraph 1, of the IUC Code provides that "Taxpayers are the owners of vehicles (…)", paragraph 2 of the same provision adds that "Financial lessees, acquirers with reservation of title, as well as other holders of the right of option to purchase by force of leasing contract are equated to owners", and from the combined application of these provisions it follows that although normally the taxpayer is the owner, if the vehicle has been the subject of leasing, the taxpayer should be the financial lessee and not the Applicant.

g. As for situations in which prior to the assessments the tax in question had already been assessed and paid by the Applicant in the past, the tax acts under judicial review should be considered non-existent as this constitutes duplication of collection, which is subject to special censure by the tax legislator, as inferred from the provision contained in the Code of Tax Procedure and Process as one of the typified grounds for opposition to execution, in addition to the fact that payment extinguishes the tax legal relationship as follows from Article 36, paragraph 1, together with Article 40, both of the General Tax Law.

h. Wherefore, all assessments subject to the request for arbitral ruling are illegal.

1. The ATA – Tax and Customs Administration, called upon to respond, presented a reply, in summary, in the following terms:

I) Preliminary issue – lack of filing of the assessments relating to the present request for arbitral ruling.

On this matter, the Respondent, in summary, sustained that:

a. Notwithstanding that the Applicant filed an Attached Table in which the numbers of the assessments are listed, the IUC assessments are not attached to the present proceedings.

b. This fact generates the impossibility of identification of the contested tax acts, given that the scope of the appeal proceedings which is the object and the respective decision are different from the scope of the present request for arbitral ruling.

c. In the present case, the Applicant failed to comply with the cited legal rule, having not proceeded with the identification of the IUC tax acts whose legality it comes to challenge.

d. Therefore, the present request for arbitral ruling is at least irregular, by clear and manifest violation of the provision in Article 10, paragraph 2, letter b) of the RJAT, the Applicant having not attached to the file the tax acts relating to the "various" IUC assessments whose legality it intends to challenge in this Arbitral Tribunal.

e. The exception invoked should be judged as well-founded and proven pursuant to the provision in Article 577 e) of the CPC, which gives rise to dismissal of the proceedings pursuant to Article 278, paragraph 1, letter d) of the same legal instrument.

By contestation,

Regarding assessments relating to vehicles subject to financial leasing

a. In the first place, even if we were to conclude that we are dealing with financial leasing contracts granted by the Applicant, it was still incumbent upon the latter to demonstrate compliance with the ancillary obligation imposed by Article 19 of the IUC Code, which it did not do, wherefore it must be concluded that the Applicant is the taxpayer for the tax.

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

c. Now, the Applicant provided no proof regarding compliance with this obligation with respect to the motor vehicles now under analysis as was incumbent upon it, wherefore the intended rebuttal of Article 3 here in question must necessarily fail.

d. In fact, in the matter of financial leasing the Applicant could only exempt itself from the tax if it had complied with the specific obligation provided in that provision of the IUC Code.

e. The Applicant having not complied with that obligation, it must necessarily be concluded that it is the taxpayer for the tax.

Regarding the sale of vehicles before the tax event

f. We consider that the Applicant's allegations cannot at all succeed, inasmuch as it makes an interpretation and application of the legal rules subsumable to the case under judicial review that is notoriously erroneous.

g. In fact, the understanding advocated by the Applicant results not only from a skewed reading of the letter of the law, but also from the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined throughout the IUC Code and, more broadly, throughout the entire fiscal legal system, and further results from an interpretation that ignores the ratio of the regime enshrined in the article in question, and likewise throughout the IUC Code.

h. Indeed, Article 3, paragraph 1 of the IUC Code establishes that "Taxpayers for the tax are the owners of vehicles, considered as such the natural or legal persons, of public or private law, in whose name the same are registered."

i. In these terms, it is imperative to conclude that, in the case of the present arbitral proceedings, the legislator established expressly and intentionally that are considered as such [as owners or in the situations provided in paragraph 2, the persons therein enumerated] the persons in whose name the same [the vehicles] are registered, inasmuch as this is the interpretation that preserves the unity of the fiscal legal system.

j. To understand that the legislator enshrined here a presumption would be unequivocally to carry out an interpretation against the law.

k. In light of this wording it is manifestly not possible to invoke that this is a presumption, as the Applicant contends.

l. It is, rather, a clear option of legislative policy adopted by the legislator, whose intention, within its freedom of legislative configuration, was that, for the purposes of IUC, those who as such appear in the motor registry be considered owners.

m. Also the systematic element of interpretation of the law demonstrates that the solution advocated by the Applicant is untenable, and the understanding championed by it finds no support whatsoever in the law.

n. This results not only from the aforementioned paragraph 1 of Article 3 of the IUC Code, but also from other provisions enshrined in the said Code.

o. In these terms, and in the same sense, Article 6 of the IUC Code, under the heading "Tax Event and Exigibility," in its paragraph 1, provides that: "The tax event is constituted by ownership of the vehicle, as attested by registration or enrollment in national territory."

p. From the articulation between the scope of subjective incidence of IUC and the fact constitutive of the corresponding tax obligation it follows unequivocally that only legal situations subject to registration (without prejudice to the permanence of a vehicle in national territory for a period exceeding 183 days, provided in paragraph 2 of Article 6) generate the birth of the tax obligation.

q. In addition to all that has been set out above, it must further be noted that if the interpretation conveyed by the Applicant were to be accepted, then it would be shown to be contrary to the Constitution, insofar as such interpretation would result in the violation of the principle of good faith, the principle of legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

r. In fact, the interpretation proposed by the Applicant essentially devalues registration reality to the detriment of an informal reality and one not subject to minimal control by the Respondent, is offensive of the fundamental principle of good faith and legal certainty that must inform any legal relationship, including here the tax relationship.

s. In support of its thesis, the applicant came to file second copies of invoices with descriptions of "residual values" and "sale of non-leased vehicle," documents which, for due purposes, are hereby contested.

t. It is apparent that the Applicant proves nothing, nor even attempts to do so.

u. In truth, it limits itself to filing second copies of invoices, without making any proof or even demonstrating any indication of non-compliance and, above all, of the existence of any purchase and sale contract.

v. In sum, the Applicant failed to prove the alleged transfer of the vehicles here in question.

w. Mere unilateral documents do not possess sufficient probative value in order to rebut the legal presumption contained in the registry.

Regarding the alleged duplication of collection

x. The assessments relating to the vehicles …-…-… and …-…-… on which the Applicant bases itself to allege duplication of collection relate to different years.

y. Those relating to the present proceedings refer to the year 2011, and the other assessments and payments alleged by the Applicant as the basis for duplication of collection relate to the year 2009, thus there being no duplication of collection.

The Respondent further alleges subsidiarily:

z. The transfer of ownership of motor vehicles is not subject to control by the Respondent.

aa. The Applicant, having not taken care to update the motor registry, did not proceed with the diligence required of it, wherefore it can only complain of itself regarding the assessments now placed in issue.

bb. The Respondent limited itself to complying with the legal obligations to which it is bound and, in parallel, to following the information contained in the motor registry which was provided to it by the competent authority, wherefore it should not be condemned to pay indemnificatory interest, nor costs of the arbitral proceedings, since it was the Applicant that, by not having diligenced for the filing of the registry, gave rise to the present request for arbitral ruling.

cc. In fact, in light of Articles 43 of the LGT and 61 of the CPPT, the right to indemnificatory interest depends on verification of the following conditions: (i) the tax being paid; (ii) the respective assessment having been annulled, wholly or partially, in administrative appeal proceedings or judicial proceedings; (iii) determination, in administrative appeal proceedings or judicial proceedings, that the annulment is based on error attributable to the services.

dd. In the case of the present proceedings there is an absence of error attributable to the services, wherefore the necessary requirements for the right to indemnificatory interest are not met.

1. By order of 15.02.2016 the exception raised by the Respondent was judged not well-founded.

By order of the same date the hearing provided for in Article 18, paragraph 1, of the RJAT was dispensed with, on the ground of the prohibition of performance of useless acts, it further having been determined that written submissions be presented by the parties.

1. Applicant and Respondent presented written submissions in which they maintained, in the essential, the positions already assumed in their pleadings.

2. The tribunal is materially competent and is regularly established pursuant to the RJAT.

The parties have judicial personality and capacity, are parties in interest, and are legally represented.

The proceedings are not marred by vices that would invalidate it.

1. It is necessary to resolve the following questions:

1. Whether the assessments under judicial review are illegal due to violation of law.

2. Whether the Applicant should be recognized as having the right to reimbursement of the taxes paid.

3. Whether the Applicant should be recognized as having the right to indemnificatory interest on the amounts paid.

II – THE RELEVANT MATERIAL FACTS

1. The Tribunal considers the following facts as proved:

9.1. The Respondent made the assessments of Unique Circulation Tax and respective compensatory interest, in the total amount of € 12,726.42, identified in a table attached to the request for arbitral ruling, which is hereby given as fully reproduced for all legal purposes.

9.2. All these tax acts were the subject of the appeal number …2014…, which dismissed the request for annulment of the same by order of 7.11.2014, notified to the appellant on 11.11.2014.

9.3. The motor vehicles with license plates …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… were sold by the Applicant on a date prior to the date of the occurrence of the tax events relating to the assessments relating to those vehicles.

9.4. The motor vehicle …-…-… was sold on a date prior to the occurrence of the tax event relating to the year 2012.

9.4. The motor vehicles with license plates …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… on the date of the occurrence of the tax events relating to the assessments which refer to them were the subject of a financial leasing contract in effect, with the Applicant as lessor.

9.5. The motor vehicle …-…-…, on the date of the occurrence of the tax event relating to the year 2011 was the subject of a financial leasing contract in effect, with the Applicant as lessor, and on the date of the occurrence of the tax event relating to the year 2012 was no longer the property of the Applicant, having been sold.

9.6. The Applicant paid the debts arising from the assessments relating to the present proceedings.

1. With interest for the decision of the case the following facts were not proved:

• That the motor vehicles with license plates …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… were sold by the Applicant on a date prior to the date of the occurrence of the tax events relating to the assessments relating to those vehicles.

• That the motor vehicle …-…-… was sold on a date prior to the occurrence of the tax event relating to the year 2011.

• That the motor vehicle with license plate …-…-… on the date of the occurrence of the tax event relating to the assessment which refers to it was the subject of a financial leasing contract in effect.

• That regarding vehicles …-…-… and …-…-… there had previously occurred before the assessments subject to the present proceedings assessment and payment of assessments relating to the same year.

1. Reasoning of the decision regarding the material facts.

The decision regarding the material facts given as proved is founded on the documents in the file, namely those offered by the parties and those in the administrative proceedings, as well as the position of the Respondent regarding the facts alleged by the Applicant.

Regarding the facts considered proved relating to the sale of vehicles, the tribunal's conviction was founded on the second copies of invoices filed in connection with the accounting statements relating to the purchasers thereof, where payments relating to the price of the same are recorded.

Regarding proof of the effectiveness of financial leasing contracts, the tribunal's conviction results from the financial leasing contracts filed by the Applicant relating to the vehicles in question.

Regarding the facts not proved, the decision on such matter results from the absence of demonstration of the same based on the evidentiary elements in the file.

Above all, it must be noted that all second copies of invoices filed by the Applicant contain the statement: "–Valid after good payment," from which it follows that only after payment thereof is the aforementioned sale considered effected.

With respect to vehicle …-…-…, the assessment refers to 2011, the tax event occurred on 1.07.2011 but the vehicle was only paid on 15.7.2011, as per the accounting statement.

With respect to the vehicle with license plate …-…-…, it results from the accounting statement that the amount is not fully paid.

With respect to the vehicle with license plate …-…-…, the tax event refers to the month of October of the year 2012 but payment was only made in the month of December of that year, so that in October the sale had not yet been effected in view of the above-mentioned condition inserted in the invoice.

Also with respect to vehicle …-…-… payment was only made on 24.06.2010, but the tax event relates to the 1st of that month, the date on which, pursuant to the invoice, the Applicant was still the owner.

The same occurs with the vehicle with license plate …-…-… relating to the year 2011. Payment was made on the 24th of February but the tax event relates to the 1st of that month; the vehicle with license plate …-…-… (the tax event relates to the first day of the month of March 2011 but payment occurred on 20.04.2012; vehicle …-…-…, (the tax event occurred in February 2012 but the sale was only effected on 17.7.2012.); …-…-… (The assessment refers to the month of July 2009, but payment only occurred on 27.01.2010); …-…-… (payment was made on the 24th of June but the tax event had already occurred on the 1st of that month); and …-…-… (2010, payment effected in September 2010 with the tax event occurring on the first day of the preceding month).

With respect to vehicle …-…-…, it results from the accounting statement that the potential purchaser of the vehicle is still a debtor for 2,165.21 €, wherefore, pursuant to the invoice, the sale cannot be considered effected.

Regarding vehicle …-…-…, the description refers to a value of "total loss" with a Company as recipient suggesting indemnification for total loss and not sale of the vehicle, the same occurring with vehicle …-…-….

The invoices relating to vehicles …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… do not mention "sale" or "residual value" and therefore the occurrence of sale is not proved.

Regarding the non-consideration as proved that, as regards vehicles with license plates …-…-… and …-…-…, there had previously occurred before the assessments subject to the present proceedings assessments and respective payments relating to the same year, the decision in question results from the absence of proof of such facts, given that the documents filed by the Applicant, supposedly for proof of such matter, refer to a different tax period (2009, the assessments under judicial review relating to these vehicles pertaining to 2011).

III – APPLICABLE LAW

1. Pursuant to Article 3, paragraph 1 of the IUC Code, "taxpayers for the tax are the owners of vehicles, considered as such the natural or legal persons, of public or private law, in whose name the same are registered."[1]

In light of this provision the question arises, with respect to vehicles sold on a date prior to that of the tax events without the motor registry entries of such transfers having been made at the time of the occurrence of these, whether the person in whose name the ownership of the vehicles is registered can dismiss the quality of taxpayer for the tax in case of proving the sales.

1. In order to provide an answer to the problem in question, it seems pertinent to ascertain whether Article 3, paragraph 1 of the IUC Code establishes a presumption, a position sustained by the Applicant, or whether, differently, it is merely the configuration of the legal tax type, within the ambit of freedom of legislative configuration, as the Respondent contends, and in accordance with Article 73 of the General Tax Law "Presumptions enshrined in provisions of tax incidence always admit proof to the contrary."

2. In the doctrine has been analyzed the distinction between fictions and presumptions, in the perspective of tax law.

Thus, ANA PAULA DOURADO, ("The Principle of Tax Legality: Typicity, Indeterminate Legal Concepts and Margin of Free Appraisal", Almedina Publishers, Theses collection, 2007) writes:

"With respect to fictions, as a technique used in tax laws, and its function, Karl Larenz tells us that 'legal fictions normally aim at the application of the rule given for a foreseen fact (F1) to another foreseen fact (F2)... the law "feigns" that F2 is a case of F1'" (p. 603).

"Fiction is distinguished from simple presumption and absolute presumption by not being based 'on a probability that normally transforms into truth,' for it 'deforms ('a legal truth') consciously'" (p. 604).

Also on this question, in terms convergent with ANA PAULA DOURADO, JOÃO SÉRGIO RIBEIRO, ("PRESUMPTIVE TAXATION OF INCOME, A Contribution to Re-equating the Indirect Methods of Determining the Taxable Matter, Almedina, Theses, 2010, pp. 48-49) considers that the criterion of distinction between the two realities should be "eminently juridical" and that "In light of this criterion the essential difference between presumption and legal fiction comes to reside in the fact that the former has as its point of departure the truth of a fact, that is, a connection to the natural order of things, given that from a known fact an unknown probable fact is inferred; whereas fiction, in contrast, arises from a falsehood or something unreal, disconnected from the natural order of things. That is, in fiction a legal truth distinct from the real is created; in presumption a causal relationship is created between two realities or natural facts. (…).

Despite both presumption and fiction constituting the result of legislative techniques, through which consequences of juridical facts taken as true are inferred, what truly distinguishes them is the circumstance that, in legal presumption, the presumed fact has a high degree of probability of existing, and in fiction, the presumed fact is very improbable."

CASALTA NABAIS, also addressed this question ("The Fundamental Duty to Pay Taxes", Almedina, 2004, p. 500-501) writing that "(…) it is necessary to separate the situations in which we are faced with legal presumptions, in which from a known fact (real or even juridical) a natural probably juridical fact is inferred, in which case proof to the contrary must be admitted, to make them compatible with the principle of contributive capacity, from the situations in which we encounter the assumption of rules of common experience as taxation rules, thus verifying the construction of legal norms (or legal types) with the (possible) resort to legal fictions. In these, the principle of contributive capacity suffers the natural clash of the principles of practicability and effective struggle against tax evasion, and must content itself with a relatively safe valve for those cases which, by reaching such rigor of inequity, cannot but allow the dismissal of such rules of experience."

1. In the case in question, and in light of the authoritative doctrine cited, it appears clear that in Article 3, paragraph 1 of the IUC Code, we are before a presumption, insofar as it results (very) probably from the fact of a person having a vehicle registered in their name that they are, in fact, the owner thereof.

It is this very probability that underlies the presumption derived from registration enshrined in Article 7 of the Land Registry Code, applicable by cross-reference from Article 29 of the Motor Registry Regulation.

It is true that the law does not use the expression "presuming as such, until proof to the contrary," which appeared in Article 3, paragraph 1 of the Municipal Tax on Vehicles Regulation[2], but this is not seen as preventing us from being materially before a presumption.

As was written in the decision rendered in the arbitral proceedings no. 286/2013-T[3], "just as is already noted in other arbitral decisions rendered in this CAAD regarding the same matter (see the decisions rendered in proceedings nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, wherein it is possible to find examples of legislative provisions, distinct from those above invoked, in which similarly the use of the expression 'considering' or 'considered' with the meaning of presumption occurs), not only cannot one say, in any way, that the attribution of a presumptive meaning to the expression 'considering' does not possess 'a minimum of verbal correspondence, albeit imperfectly expressed' (paragraph 2 of Article 9 of the Civil Code), but, more than that, must even be recognized in such word a current and normal correspondence to that presumptive meaning.

For this reason, the fact that, differently from what happened with the literal enunciation 'presuming' which formerly appeared in Article 3 of the Tax on Vehicles Regulation, the legislator has now come to use in the IUC Code the formula 'considering' which appears in the current Article 3 of that Code, does not assume decisive weight, inasmuch as this expression has perfect semantic potentiality to involve the establishment of a presumption."[4]

1. The judgment of the STA of 4-11-2009, rendered in proceedings 0553/09, applying Article 73 of the General Tax Law in the context of income tax, goes even further in considering that this rule "does not appear to be applicable only to provisions of tax incidence in the proper sense, but also to all provisions that establish fictions that influence the determination of taxable matter (either directly, through fictionalized values for taxable matter, or indirectly, by fictionalized fixation of the values of income relevant to its determination). This, it seems, is the scope of the adverb 'always' used in Article 73 of the General Tax Law, which raises this rule to a basic principle of the entirety of the tax legal order, a corollary of the principle of equality in the distribution of public charges, founded on the principle of contributive capacity."

It is true that IUC is not, essentially, subordinated to the principle of contributive capacity, but rather to the principle of equivalence. However, this does not appear to impose different solutions insofar as both principles are intrinsically linked to the general principle of tax equality, where they find their foundation.

In truth, "The principle of contributive capacity represents the material criterion of equality suited to taxes"[5], whereas "The principle of equivalence represents the material criterion of equality suited to fees and contributions."[6]

1. It should further be noted that, in addition to Article 1 of the IUC Code providing that "Unique Circulation Tax complies with the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost which they cause, in implementation of a general rule of tax equality," other provisions reinforce and make concrete the weight of this principle in the internal system of this tax.

First of all, Article 3, paragraph 1 of the Law which approved the IUC Code (Law No. 22-A/2007 of 29 June), making concrete this idea of equivalence, determines that: "The revenue generated by the IUC levied on vehicles of categories A, E, F and G is the responsibility of the municipality of residence of the taxpayer or equivalent person, as well as 70% of the component relating to engine displacement levied on vehicles of category B, except if such revenue is levied on vehicles subject to long-term rental or operational leasing, in which case it must be allocated to the municipality of residence of the respective user."

And, for the purposes of effective implementation of this legislative intention, Article 19 of the IUC Code provides that: "For the purposes of the provision in Article 3 of this Code, as well as paragraph 1 of Article 3 of the law of its approval, entities which proceed with financial leasing, operational leasing or long-term rental of vehicles are obliged to furnish to the Department-General of Taxes the data relating to the tax identification of the users of the leased vehicles."

On the other hand, this principle of equivalence is further made concrete in paragraph 2 of Article 3 of the same Code by providing that "Financial lessees, acquirers with reservation of title, as well as other holders of rights of option to purchase by force of the leasing contract are equated to owners."

1. Thus it becomes very clear the decisive importance conferred by the Law to the principle of equivalence, both on the side of the causer of the environmental and road cost, and on the side of the Municipality which tendentially bears such costs and which, for this reason, is the beneficiary of the revenue of the tax.

As Sérgio Vasques emphasizes: "The structure of the new unique circulation tax is also clearly commutative, which since 2007 burdens automobiles according to CO2 emission levels, openly appealing to the principle of equivalence and a relation of exchange with taxpayers"[7].

If it were not possible for the person enrolled as owner in the motor registry to dismiss the quality of taxpayer, by proving that he was not the owner on the date of the tax event, this idea of equivalence could be decisively put in question, taxing the person who did not cause the environmental and road cost and possibly not allocating the revenue to the Municipality which tendentially bore those costs.

1. The Respondent also sustains that the interpretation proposed by the Applicant of Article 3, paragraph 1 of the IUC Code is contrary to the Constitution of the Portuguese Republic insofar as it devalues registry reality as against an "informal reality,"[8] violating the principle of good faith and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

It is not seen, with due respect, how the position which sustains that we are, in Article 3, paragraph 1 of the IUC Code, before a rebuttable presumption, could put in question the principles of good faith and legal certainty, it being that the same impose duties and restrictions on juridical-public action.[9]

The same may be said, in the essential, of the principle of proportionality.[10]

Indeed, with respect to this principle, we would even say that the question which could be placed would be whether such principle would not be violated with the interpretation preconized by the Respondent insofar as, if it were admitted that the citizen could be prevented, for purposes of taxation, from proving that despite the registry he is not the effective owner of the vehicle, this would amount to suffering the consequence of the omission of an act (the motor registry) whose interested party in terms of legal certainty, from the civil-juridical perspective is another person (the purchaser).

In truth, even if it is admitted that such solution is suitable to achieve the public aim in view, it is not clear that there is an absence of alternative measures equally apt.

On the other hand, from the point of view of balance or proportionality in the strict sense, it is understood that a rule with the interpretation sustained by the respondent would have excessive costs, from the point of view of the rights and interests of private parties (in this case the former owners of the vehicles) against the benefits aimed to be achieved with the public interest, and is thus not verified this fundamental requirement of the principle of proportionality.

In reality, the benefit achieved, from the perspective of management of the tax, with the rebuttable presumption is already significant, and cases of absence of registry by purchasers are surely situations in a number certainly of little relevance in the universe of vehicle transactions, in view of the natural motivation of purchasers to perform the registry, since this is in their own interest.

It should further be noted that the rebuttable presumption already represents some sacrifice for the legitimate interests of the seller, insofar as in order to exempt himself from taxation offensive of the principle of equivalence, he bears the burden of rebutting the same.

However, weighing in particular the requirements of practicability of tax management, it is considered that the same is apt, necessary and reasonable from the point of view of the principle of proportionality, which would not be the case with an absolute presumption, explicit or implicit, which would not even allow the citizen the possibility of making proof contrary to the presumption.

1. The Respondent further invoked that the rule in question, in the interpretation sustained by the Applicant, would violate the principle of efficiency of the tax system.

It appears that the Respondent has in mind the idea of efficiency in tax law, related to administrative efficiency.[11] It must be observed, however, that the relevance of a principle in the solution of a concrete case must not operate in isolation but in joint weighing with the other principles and, in the sequence of what has been said above regarding the principles of equality, equivalence, and proportionality, the idea of efficiency is not sufficient to postpone the possibility of the taxpayer dismissing the presumption resulting from the motor registry. Moreover, efficiency and practicability are sufficiently safeguarded by the existence of a rebuttable presumption, in the terms referred to above.

1. Thus it is concluded that Article 3, paragraph 1 of the IUC Code establishes a rebuttable presumption, and the interested party, in order to dismiss the same, must prove that, despite the registry, he was not the real owner, by having sold the motor vehicle in question on a date prior to that of the tax event.

In this sense, among others, were the decisions rendered in the arbitral proceedings numbers 26/2013-T, 27/2013-T, 14/2013-T, 170/2013-T, 256/2013-T, 286/2013-T and 289/2013-T, 140/2014-T, 228/2014-T, 230/2014-T, 333/2014-T, 366/2014-T, 350/2014-T and 680/2014-T,[12] whose understanding is endorsed.

1. In the case in question, it results from the material facts given as proved that the motor vehicles with license plates …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… , …-…-… and …-…-… were sold by the Applicant on a date prior to the date of the occurrence of the tax events relating to the assessments relating to those vehicles.

Accordingly, all assessments relating to these vehicles are marred by the vice of violation of law and cannot but be annulled.

Similarly, having been proved that the motor vehicles with license plates …-…-… and …-…-… were sold on a date prior to the occurrence of the respective tax events relating to the year 2012, the assessments of this year are marred by the same vice, with identical consequence.

1. Moreover, it also results from the material facts that the motor vehicles with license plates …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… on the date of the occurrence of the tax events relating to the assessments which refer to them were the subject of a financial leasing contract in effect with the Applicant as lessor, the same occurring with the motor vehicle …-…-… relating to the year 2011.

From paragraph 2 of Article 3 of the "IUC Code" it emerges with clarity that, in situations in which the effectiveness of a financial leasing contract is verified, the taxpayer will be the lessee and not the owner of the vehicle, independently of compliance by the lessor with the obligation provided in Article 19 of the IUC Code which, in light of the content of that rule, manifestly does not have relevance for purposes of subjective incidence of the tax[13], a solution which is in harmony with the principle of equivalence enshrined in the already mentioned Article 1 of the "IUC Code."

Accordingly, the assessments in question relating to vehicles subject to financial leasing contracts in effect on the date of occurrence of the tax events are marred by the vice of violation of law, which implies their annulment.

1. The Applicant further came to request the condemnation of the Respondent to reimburse the amounts paid corresponding to the assessment subject to the present proceedings, as well as the respective indemnificatory interest.

Let us see.

In harmony with the provision in letter b) of Article 24 of the RJAT, the arbitral decision on the merits of the claim for which there is no appeal or challenge binds the tax administration as from the end of the time limit provided for appeal or challenge, and the latter, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the time limit provided for spontaneous execution of the sentences of tax courts, must "restore the situation that would have existed if the tax act subject to the arbitral decision had not been practiced, adopting the acts and operations necessary for this purpose," which is in harmony with what is provided for in Article 100 of the LGT [applicable by force of the provision in letter a) of paragraph 1 of Article 29 of the RJAT] which establishes that "the Tax Administration is obliged, in case of total or partial success of an appeal, judicial challenge or recourse in favor of the taxpayer, to immediate and full reestablishment of the legality of the act or situation subject to the dispute, comprising the payment of indemnificatory interest, if applicable, from the end of the time limit for execution of the decision."

Although Article 2, paragraph 1, letters a) and b), of the RJAT use the expression "declaration of illegality" to define the competence of the arbitral tribunals functioning in CAAD, making no reference to condemning decisions, it should be understood that the powers which in judicial challenge proceedings are attributed to tax tribunals are comprised in its competencies, and this is the interpretation which harmonizes with the sense of the legislative authorization on which the Government based itself to approve the RJAT, in which it proclaims, as a first directive, that "the arbitral tax proceeding must constitute an alternative procedural means to judicial challenge proceedings and to the action for recognition of a right or legitimate interest in tax matters."[14]

The judicial challenge proceeding, despite being essentially a proceeding for annulment of tax acts, admits the condemnation of the Tax Administration in the payment of indemnificatory interest, as is inferred from Article 43, paragraph 1, of the LGT, in which it is established that "indemnificatory interest is due when it is determined, in administrative appeal or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount superior to the legally due" and Article 61, paragraph 4 of the CPPT (in the wording given by Law No. 55-A/2010 of 31 December, to which corresponds paragraph 2 in the original wording), which provides that "if the decision which recognized the right to indemnificatory interest is judicial, the time period for payment is counted from the beginning of the time limit for its spontaneous execution."

Thus, paragraph 5 of Article 24 of the RJAT in stating that "payment of interest is due, regardless of its nature, in the terms provided for in the general tax law and in the Code of Tax Procedure and Process" must be understood as permitting the recognition of the right to indemnificatory interest in arbitral proceedings.

In the case in question, it is manifest that, following the declaration of illegality of the assessment acts, there is occasion for reimbursement of the tax relating to the assessments annulled by force of the aforementioned Articles 24, paragraph 1, letter b), of the RJAT and Article 100 of the LGT, as this is essential to "restore the situation that would have existed if the tax act subject to the arbitral decision had not been practiced."

With respect to indemnificatory interest, it is incumbent to appreciate this claim in light of Article 43 of the General Tax Law.

Article 43, paragraph 1, provides that "Indemnificatory interest is due when it is determined, in administrative appeal or judicial challenge, that there has been error attributable to the services from which results payment of the tax debt in an amount superior to the legally due."

In the case "under judicial review" it was not demonstrated that the Respondent had knowledge, on the date of the assessments, that the vehicles in question had been sold on a date prior to that of the tax events or were subject to financial leasing contracts in effect on the date of the same.

In making the assessments, the Respondent acted on the basis of the presumption established in Article 3, paragraph 1 of the "IUC Code," it not having been demonstrated, nor even alleged, that the Applicant brought to the knowledge of the Respondent the transfers and the leasing contracts in question. Having limited itself to applying what results from the said rule, in the absence of elements of proof that would dismiss such presumption, it cannot be concluded that there was an occurrence of "error attributable to the services."

Accordingly, the request for condemnation of the Respondent to pay indemnificatory interest to the Applicant does not succeed.

IV – DECISION

Thus, the Arbitral Tribunal decides, judging partially successful the request for arbitral ruling:

a) To declare the annulment of all assessments of tax and compensatory interest relating to vehicles with the license plates …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… , …-…-… and, further, the assessment relating to the motor vehicle with license plate …-…-… relating to the year 2012, all better identified in the table attached to the request for arbitral ruling and which total the amount of € 11,259.35.

b) Not to declare the annulment of the remaining assessments which, consequently, remain in the legal order.

c) To condemn the Respondent to reimburse to the Applicant the amounts paid relating to the assessments now annulled.

d) To absolve the Respondent of the payment of indemnificatory interest.

Value of the action: € 12,726.45 (Twelve thousand seven hundred twenty-six euros and forty-five cents) pursuant to the provision in Article 306, paragraph 2, of the CPC and Article 97-A, paragraph 1, letter a), of the CPPT and Article 3, paragraph 2, of the Regulation of Costs in Arbitration Proceedings.

Costs in the amount of € 918.00 to be borne by the Applicant and Respondent in the proportion of 11.53% and 88.47%, respectively, pursuant to paragraph 4 of Article 22 of the RJAT.

Let notification be made.

Lisbon, CAAD, 15.03.2016.

The Arbitrator

Marcolino Pisão Pedreiro

[1] Article 2, paragraph 2 of the same article further provides that "Financial lessees, acquirers with reservation of title, as well as other holders of rights of option to purchase by force of the leasing contract are equated to owners."

[2] Approved by Decree-Law No. 143/78 of 12 June and repealed by Law No. 22-A/2007 of 29 June. This provision had the following wording: "the tax is due by the owners of vehicles, presuming as such, until proof to the contrary, the persons in whose name the same are enrolled or registered."

[3] Available in "https://caad.org.pt/tributario/decisoes/decisao.php?s_processo=286%2F2013&s_data_ini=&s_data_fim=&s_resumo=&s_artigos=&s_texto=&id=341"

[4] Moreover, as sustained by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in the annotation to Article 73, paragraph 3 of the General Tax Law ("LGT") "presumptions in the matter of tax incidence can be explicit, revealed by the use of the expression 'it is presumed' or similar (…). However, presumptions may also be implicit in provisions of incidence, particularly of objective incidence, when there are considered as constituting taxable matter certain values of movable or immovable property, in situations in which it is not impracticable to ascertain the actual value" (See "General Tax Law Annotated and Commented", Encontros da Escrita, 4th Edition, 2012, p. 651).

[5] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, p. 251.

[6] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, p. 260.

As this author further notes on p. 227 of the same work "Until the end of the 20th century, special taxes on alcohol, tobacco, petroleum products or automobiles had no other objective than that of raising revenue, showing the unilateral features typical of any tax.

From the 1980s and 1990s (…), however, these tax figures came to be instrumentalized to the compensation of the costs which the consumption of these brings to public health and the environment, with which special excise taxes have come to gain the commutative nature which is typical of contributions."

[7] Manual of Tax Law, Almedina, 2011, p. 229.

[8] It should be noted, however, that the principle of freedom of form or consensuality prevails in Portuguese law (Article 219 of the Civil Code). Unless the law requires it, the validity of a contractual declaration does not depend on observance of special form. The "informal reality" to which the applicant alludes is in truth the material reality which results from the rules of civil law.

[9] Jorge Bacelar Gouveia notes that the principle of legal certainty requires "the publicity of the acts of public authority, as well as the clarity and determinability of the sources of law" and that the principle of protection of good faith requires "that the prevailing normative framework not change in a way that frustrates the expectations generated in citizens regarding its continuity, with the prohibition of intolerable retroactivity of laws, as well as the need for its alteration in conformity with expectations that are constitutionally protected" (Manual of Constitutional Law, Almedina, 4th Ed., Vol. II, p. 821).

[10] According to the same author, the configuration of this principle "is based on an internal material limitation to juridical-public action of a discretionary character, containing the excessive effects which might eventually present themselves in the issuance of public authority measures of an ablatory nature for the respective addressees" (op. cit. pp. 839-840).

[11] And not, manifestly, the principle of efficiency of tax law for, as written by Jónatas E.M. Machado and Paulo Nogueira da Costa "From the principle of Efficiency it follows that the tax system should not have distortionary effects and should not interfere with the functioning of markets, except when, due to the existence of market failures, the same do not function efficiently." (Course in Tax Law, Coimbra Publisher, 2009, p. 28.)

[12] Consultable in https://www.caad.pt/tributario/tributario-jurisprudencia.

[13] Although it may be relevant for other purposes, particularly for purposes of weighing the occurrence in the assessment of "error attributable to the services" as a condition of the attribution of indemnificatory interest to the taxpayer.

[14] On this question see Jorge Lopes de Sousa, Commentary to the Legal Framework for Tax Arbitration, in GUIDE TO TAX ARBITRATION, Coord. Nuno Villa-Lobos and Mónica Brito Vieira, 2013, Almedina, pp. 110-116).