IUC Tax Subjective Incidence: Legal Presumptions on Vehicle Ownership Challenged at CAAD

ARBITRAL DECISION[1]

Claimant – A…, S.A.

Respondent - Tax and Customs Authority

The Arbitrator Dr. Sílvia Oliveira, appointed by the Ethics Council of the Administrative Arbitration Centre (CAAD) to form the Arbitral Tribunal, constituted on 25 February 2015, with respect to the aforementioned proceeding, decided as follows:

1. STATEMENT OF FACTS

1.1. A…, S.A. (hereinafter referred to as "Claimant"), legal entity no. …, with registered office at Rua …, no. …, in Lisbon, submitted a request for arbitral pronouncement and constitution of a Single Arbitral Tribunal, on 22 December 2014, pursuant to Article 4 and Article 10, no. 2 of Decree-Law no. 10/2011, of 20 January [Legal Regime of Arbitration in Tax Matters (RJAT)], in which the Tax and Customs Authority (hereinafter referred to as "Respondent") is the respondent.

1.2. The Claimant intends, in the aforementioned request for arbitral pronouncement, that the Arbitral Tribunal:

1.2.1. "Declare the illegality of the IUC assessments identified (…), relating to the years 2009 and 2010, in the total amount of EUR 6,476.00", and,

1.2.2. Order the Claimant to be, consequently, "(…) reimbursed the amount disbursed, plus compensatory interest".

1.3. The request for constitution of the Arbitral Tribunal was accepted by His Excellency the President of CAAD on 23 December 2014 and was notified to the Respondent on 26 December 2014.

1.4. The Claimant did not proceed to appoint an arbitrator, whereby, pursuant to Article 6, no. 2, paragraph a) of RJAT, the signatory was appointed as arbitrator on 10 February 2015 by the President of the Ethics Council of CAAD, the appointment having been accepted within the period and on the terms legally provided.

1.5. On 10 February 2015, both Parties were duly notified of this appointment, and neither manifested a wish to refuse the arbitrator's appointment, in accordance with the combined terms of Article 11, no. 1, paragraphs a) and b) of RJAT and Articles 6 and 7 of the Code of Ethics.

1.6. Accordingly, in compliance with the provisions of paragraph c), no. 1, of Article 11 of RJAT, the Arbitral Tribunal was constituted on 25 February 2015, with an arbitral order issued on the same date, to notify the Respondent to, pursuant to Article 17, no. 1 of RJAT, submit its answer within a maximum period of 30 days and (if it so wishes) request the production of additional evidence.

1.7. On 27 March 2015, the Respondent submitted its Answer, having defended itself by way of Exception and Objection.

1.8. With respect to Exception, the Respondent alleged:

1.8.1. The lack of jurisdiction of the Arbitral Tribunal as to subject matter, in that it is "(…) clear that it is outside the sphere of tax arbitration to issue any judgment on the constitutionality of Article 5/3 of Decree-Law 78/2008, by violation of the principle of equality";

1.8.2. The passive illegitimacy of the Respondent, in that it contends that "considering that the competence to effect the official cancellation of registrations is within the competences of the Institute of Land Mobility", and being "(…) the Respondent (…) an entity foreign to the proceeding (…)", this "(…) will always be attributable to the owner, to the IMT or even to the IRN".

1.9. Additionally, with respect to Objection, the Respondent objects to the arguments presented by the Claimant, concluding its answer in the sense that "(…) the exceptions invoked should be judged to have merit, as proven, which give rise to dismissal of the action (…)" and "if this is not understood to be the case, the present request for arbitral pronouncement should always be judged to have no merit, as proven, maintaining in the legal order the disputed tax assessment acts and absol[ving] (…) the Respondent of the claim".

1.10. On 31 March 2015, an arbitral order was issued setting 13 April 2015 as the date for the meeting referred to in Article 18 of RJAT, the Claimant having submitted on 6 April 2015 a request to change that date due to the impossibility of its representative's attendance, the Respondent having been notified of such request by arbitral order dated 8 April 2015, to reschedule the meeting to 27 April 2015.

1.11. On 9 April 2015, the Respondent filed the Administrative File with the proceedings, with the exception of an Excel document authored by the Claimant which, as it was on a CD, could not be inserted into the CAAD case management platform, and therefore its admission to the proceedings was requested.

1.12. The aforementioned request was accepted by this Arbitral Tribunal through an order dated 16 April 2015, in which the provision of the said CD at the meeting to be held at CAAD on 27 April 2015 is admitted.

1.13. On 27 April 2015, pursuant to Article 18 of RJAT, the first arbitral meeting was held at CAAD, from which the corresponding minutes were drawn up, the content of which is hereby fully reproduced.

1.14. In the course of this meeting, which was attended by the representatives of both Parties, "the Respondent proceeded to deliver a CD (…) as ordered by the arbitral order of 16 April 2015" (see points 1.11. and 1.12., above), a copy having been delivered to the arbitrator and another copy remaining in the custody of CAAD.

1.15. On the other hand, in the course of the aforementioned meeting, the Claimant was notified to "within ten days, make a statement regarding the exceptions raised by the Respondent", it having further been decided, with the agreement of both Parties, that both waived the presentation of oral or written pleadings.

1.16. Finally, at the said meeting, 27 May 2015 was set for the pronouncement of the arbitral decision and the Claimant was further warned that "until the date of pronouncement of the arbitral decision it should proceed to pay the subsequent arbitral fee, in accordance with no. 3 of Article 4 of the Regulation of Costs in Processes of Tax Arbitration and communicate this payment to CAAD".

1.17. On 7 May 2015, the Claimant submitted, in writing, a response to the exceptions raised by the Respondent.

1.18. On 26 May 2015, the Claimant communicated to CAAD the payment of the subsequent arbitral fee, made on 13 May 2015.

2. GROUNDS OF CLAIM

2.1. The Claimant intends with the request for arbitral pronouncement "the declaration of illegality of the IUC assessments (…) identified (…), relating to the years 2009 and 2010, in the total amount of € 6,476.00 (…)".

On the Cumulation of Claims

2.2. The Claimant, given that it intends "to have appreciated the question relating to the subjective scope of IUC in the year of registration of the vehicles (…)", contends that "the merits of the claims (…) depend essentially on the appreciation of the same circumstances of fact and the interpretation and application of the same principles and rules of law", for which reason it requests "that (…) the cumulation of claims be admitted".

On the Facts

2.3. The Claimant goes on to state that "it is the official distributor in Portugal of the A… automobile brand" and that "within the scope of its activity (…) it imports automobiles of the said brand and subsequently proceeds to sell them to its customers".

2.4. The Claimant further states that "for the purpose of selling automobiles in conditions of immediate circulation (…) it requests from the competent services the attribution of the respective registrations (…) on a date prior to or on the same date as the sale of the vehicles", being "(…) obliged to effect the initial registration of the property of the vehicle in its own name".

2.5. Subsequently, the Claimant "(…) sells and registers the (…) vehicles in the names of its customers".

2.6. In 2013, the Claimant "was notified by the tax authority to exercise the right of prior hearing before the issuance of the IUC assessments (…) identified (…)" because, "in the understanding of the tax authority services (…) it was (…) the owner/lessee (…) of the various vehicles then identified and, as such, responsible for the payment of the IUC (…)".

2.7. According to the Claimant, despite having exercised "(…) in a timely manner the right of prior hearing before the issuance of the aforementioned IUC assessments, arguing that it had no longer been the owner of those vehicles for more than 10 years and that it had requested their cancellation on 25.01.2010 (…) it was to be notified of the order by which the intention to maintain the IUC assessment in question was determined", having also been notified "(…) of the tax acts (…) identified, in the total amount of

€ 6,476.00, plus compensatory interest".

2.8. Indeed, according to the Claimant "the vehicles in question are of category C, registered between the years 1966 and 1979 and sold (…) more than 10 years (…) ago", for which reason the Claimant reiterates that "as soon as it ascertained that the ownership of the aforementioned vehicles continued to be associated with it (…) it requested the cancellation of their respective registrations with reference to 25.01.2010, which may be verified by consultation with the Institute of Land Mobility and Transport, I.P".

2.9. The Claimant "notwithstanding its full conviction of the illegality of the assessments in question (…) proceeded to the voluntary payment of the tax, under the exceptional regime for tax debts and social security (…) benefiting from the waiver of payment of the corresponding compensatory interest (…)".

2.10. And "it was because it did not accept the tax acts in question that it filed the respective administrative complaint" which was to be denied "by letter no. …, of 3.10.2014, from the Administrative Justice Division of the Finance Directorate of Lisbon" on the grounds that, in the Claimant's view, the Respondent "persist[s] (…) in the understanding that (…) IUC is due and payable by the owner of the vehicle that appears identified in the certificate of registration or registration, on the first day of the tax period, which in the case of first registration of the vehicle corresponds to the year that begins on the date of registration (…)".

2.11. "The Claimant does not accept such understanding, for which reason it brings the present request for constitution of an arbitral tribunal".

On the Law

2.12. Indeed, "the tax acts in question relate to IUC due on 31 vehicles registered between the years 1966 and 1979, sold by the Claimant more than 10 years (…) ago, as is apparent from analysis of the inventories (…)".

2.13. However, the Claimant goes on, "in the understanding of the tax authority services, the vehicles in question were property" of the Claimant "(…) until the date of cancellation of the registrations, which occurred on 25-01-2010 (…), for which reason they consider" that the Claimant "is the taxable person on whom fell the obligation to pay the tax on the vehicles in question".

2.14. "It so happens that (…) such understanding has no support in law, for which reason the tax acts in crisis are illegal".

2.15. Indeed, the Claimant argues that "there exists at the present time no obligation to (…) possess documentation relating to the sales of the vehicles in question and, consequently, the absence of such documentation cannot be used to draw the conclusion that (…) it was the owner of the aforementioned vehicles".

2.16. "Accordingly, as those vehicles do not appear in its inventories and there is no obligation to maintain documentation proving their sale, it should be concluded that" the Claimant "was not its owner in the years to which the tax relates and, as such, the assessments in question are affected by illegality".

2.17. This conclusion is not obstructed, according to the Claimant, by "the circumstance that the vehicles were registered until 25.01.2010 in the name of" the Claimant, for "registration of ownership is not a constitutive fact of the right and merely presumes its existence, and may be rebutted by proof to the contrary".

2.18. Now, in the case in question, the vehicles in question were no longer the property of the Claimant, for they were "sold by way of purchase and sale contracts between" the Claimant "and its customers (…)".

2.19. "Effectively, the vehicles in question were sold by way of purchase and sale contracts (…)", which "did not follow written form" but being "contracts with real effect (…) the transmission of ownership operates by mere effect of the contract".

2.20. On the other hand, the Claimant notes that "although the right of ownership of motor vehicles is subject to registration (…) such registration does not have a constitutive character", constituting "a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it (...) a presumption which is rebuttable, admitting (…) proof to the contrary (…)".[2]

2.21. In these terms, the Claimant concludes that "the function of registration is (…) to give publicity to the situation of vehicles, the registration not having a constitutive nature of the right of ownership, but only a declarative one, not constituting a condition of validity of the transmission of the vehicle from seller to buyer".[3]

2.22. In this manner, "if the acquirers, new owners of the vehicles, do not provide for the registration of their right of ownership, it is presumed that this right continues to belong to the seller, being able, however, this presumption to be rebutted by proof to the contrary (…)", the Respondent not being able to "take advantage of the failure to update the registration of the right of ownership to require payment of the tax from the former owner in whose name the vehicle is registered if, by any means, sufficient proof is presented to it that the vehicles in question are not its property".

2.23. Accordingly, "as it is proven from the documents attached" that the Claimant "was no longer the owner of the vehicles in question (…) it can only be concluded that it is not this the taxable person", "being (…) the tax acts in question illegal, and should be annulled".

2.24. Nevertheless, the Claimant contends that if this is not understood to be the case, "the vehicles in question are not subject to IUC, which also affects the legality of these tax acts" in that Decree-Law no. 78/2008, of 6 May "established a transitional and exceptional regime for the cancellation of vehicle registrations which do not have a certificate of qualified destruction or dismantling (…)" but "the fact that a (…) cancellation was not provided for registrations prior to 1 January 1980 would lead to the conclusion that such vehicles would not be subject to IUC".

2.25. However, according to the Claimant, the legislator "forgot that (…) automobiles of categories C and D are subject to tax, regardless of the year of registration", falling "short of what was intended".

2.26. However, the Claimant concludes that "from the interpretation of Article 5, no. 3, of Decree-Law no. 78/2008, in accordance with its teleological element, it is necessary that the regime of official cancellation of registrations provided for therein also apply to vehicles of categories C and D registered before January 1980 (…)".

2.27. Accordingly, the Claimant reiterates that "being vehicles of category C registered between the years 1966 and 1979, it can only be understood that, being mandatory the cancellation of their respective registrations, they are not subject to IUC (…)".

2.28. "If this is not understood to be the case (…) then no. 3 of Article 5 of Decree-Law no. 78/2008 will always be unconstitutional, by violation of the principle of equality (…) by providing that only the registrations of categories C and D assigned between 1 January 1980 and 31 December 2000 should be officially cancelled, and not those before, excluding vehicles from tax in the first case and taxing them in the second (…)".[4]

2.29. Finally, and without prejudice to all the foregoing, the Claimant argues that "it will always be said that, being automobiles of category C, the vehicles in question are subject to taxation (…) only if used for private transport of goods, for transport on own account or for rental without driver which has these purposes" which "would always lead to the conclusion, in the case in question, that the vehicles in question are not subject to IUC because they are not intended for those purposes" because, the Claimant being "a company that engages in the sale of automobiles and which is not authorized to carry out any other type of activity, it is evident that the vehicles in question are not intended for the said purposes" "which is therefore sufficient to affect the legality of these tax acts".

On Voluntary Payment and Compensatory Interest

2.30. "Notwithstanding the Claimant's full conviction of the illegality of the assessments in question, it proceeded to their voluntary payment under the exceptional regime for tax debts and social security (…), benefiting from the waiver of payment of the corresponding compensatory interest".

2.31. Accordingly, "as the present request for constitution of an arbitral tribunal is to have merit, as it must be decided, the Claimant should be reimbursed for the amount unduly paid", plus "(…) compensatory interest whose recognition is equally requested".

3. ANSWER OF THE RESPONDENT

3.1. The Respondent in the answer presented defended itself by Exception and Objection, having in summary presented the following arguments:

BY EXCEPTION

On the Lack of Jurisdiction of the Arbitral Tribunal as to Subject Matter

3.2. In this regard, the Respondent alleges that, with respect to the claim "for annulment of the assessments (…) by means of raising (…) the question of violation of Article 2 of CIUC, when articulated with Article 5/3 of Decree-Law 78/2008, a measure that established a transitional and exceptional regime for the cancellation of vehicle registrations that do not have a certificate of qualified destruction or dismantling, (…) it is necessary (…) to raise the lack of jurisdiction of the Single Arbitral Tribunal in that the appreciation of such matter goes beyond the competences that are reserved to it by law" and "(…) it is clearly evident that it is outside the sphere of tax arbitration to appreciate any questions concerning the official cancellation of registrations, that is, a matter which not only lies upstream of the tax act, but is not even a matter that falls within the legal competences of the Respondent".

3.3. According to the Respondent, "what emerges from the analysis of Decree-Law 78/2008 itself is the competence of the Institute of Land Mobility" (IMT) "to appreciate those questions", resulting "(…) clearly that it is outside the sphere of tax arbitration to issue any judgment on the constitutionality of Article 5/3 of Decree-Law 78/2008, by violation of the principle of equality", constituting "(…) a dilatory exception which prevents the continuation of the proceeding", leading "(…) to dismissal of the action with respect to the claim in question".

On the Passive Illegitimacy of the Respondent

3.4. In this matter, the Respondent contends that "by way of its request for arbitral pronouncement the Claimant comes to request the application of the regime of official cancellation of registrations prior to January 1980 (…)" but, "considering that the competence to effect the official cancellation of registrations falls within the competences of the IMT", "it is necessary to conclude that there is a pressing interest in acting (…) on the part of the IMT and the Institute of Registries and Notaries" (IRN) "in this dispute", and therefore "(…) the Respondent is an entity foreign to the proceeding of official cancellation of registrations prior to January 1980", "which will always be attributable to the owner, to the IMT or to the IRN".

3.5. Accordingly, the Respondent requests "(…) the direct intervention of those entities in this arbitral proceeding (…)".

3.6. However, given that "not only are the IMT and the IRN not represented in this proceeding, but also there is no act binding the IMT or the IRN to the jurisdiction of the Administrative Arbitration Centre (…)", the Respondent understands that there is:

3.6.1. "Passive illegitimacy of the Respondent, represented by its highest officer, to appear in court";

3.6.2. "Interest in acting (to contest) of the IMT or the IRN, in that they have a personal and direct interest in the outcome of this dispute" and,

3.6.3. "Impossibility of curing the alleged passive illegitimacy through an incident of direct intervention in this case, given the non-binding of the IMT or the IRN to the jurisdiction of CAAD".

3.7. In these terms, and with respect to this exception of illegitimacy, the Respondent concludes "that the exception invoked should be considered to have merit and the Claimant absolved of the request for arbitral pronouncement (…)".

BY OBJECTION

On Error as to the Prerequisites

3.8. In this matter, the Respondent understands that "the allegations of the Claimant cannot possibly succeed, in that it makes a notoriously erroneous interpretation and application of the legal norms subsumed to the case sub judice" in that "the understanding propounded by the Claimant not only incurs a biased reading of the letter of the law, but also the adoption of an interpretation that does not attend to the systematic element, violating the unity of the regime established throughout the CIUC, (…) throughout the tax legal system and (…) also an interpretation that ignores the ratio of the regime established in the article in question, and (…) throughout the CIUC".

On the Subjective Scope of IUC

3.9. In this regard, the Respondent alleges that "the first misunderstanding underlying the interpretation defended by the Claimant is related to a biased reading of the letter of the law" (…) in that it establishes that "the taxable persons of the tax are the owners of the vehicles, being considered as such the persons (…) in whose names the same are registered".

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

3.11. Accordingly, the Respondent contends that "in light of this wording it is manifestly not possible to invoke that this is a presumption, as the Claimant contends (…) being instead a clear choice of legislative policy adopted by the legislator, whose intention (…) was that, for the purposes of IUC, those considered owners are those who appear as such in the motor vehicle registry"[5] and therefore, for the Respondent, "Article 3 of CIUC does not contain any legal presumption (…)".

On the Interpretation that Does Not Attend to the Systematic Element, Violating the Unity of the Regime

3.12. In this regard, the Respondent understands that "from the articulation between the scope of the subjective scope of IUC and the constitutive fact of the corresponding tax obligation it follows unequivocally that only legal situations that are the subject of registration (…) give rise to the birth of the tax obligation (…)" being that this is "considered exigible on the first day of the tax period (…)".

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

3.14. Accordingly, "in the absence of such registration (…) the owner will be notified to comply with 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 registries and public documents and, as such, authentic (…) and therefore the non-updating of the registration will be attributable in the legal sphere of the taxable person of the IUC and not in that of the Portuguese State, as the active subject of this Tax".

3.15. The Respondent goes on to argue that, "if the position defended by the Claimant were to be accepted (…) the Respondent would have to proceed with the assessment of IUC with respect to that other party identified by the person appearing in the motor vehicle registry to whom it had first assessed the IUC (…)".

3.16. "In turn, after assessing IUC with respect to that other party, that party could also claim and prove that in the meantime it has already concluded a purchase and sale contract, financial lease, long-term rental, or other contract with another third party, but that this party also did not register (…)", "(…) and so on and so forth (…)", "placing (…) in question the statute of limitations period for the tax" and therefore, in the Respondent's view, "such an interpretation cannot possibly be followed".

On the Interpretation that Ignores the Teleological Element of Interpretation of Law

3.17. In this regard, the Respondent alleges that, taking into account the tenor of Parliamentary debates[6] concerning the approval of Decree-Law no. 20/2008, of 31 January, "it follows unequivocally that IUC is due by the persons who appear in the registry as owners of the vehicles", so as to "avoid the problems (…) related to the fact that there are many vehicles not registered in the name of the real owner".

3.18. According to the position defended by the Respondent, "the new regime of taxation of IUC came to substantially alter the regime of motor vehicle taxation, with those appearing in the property registry becoming taxable persons of the tax (…)".[7]

3.19. Accordingly, according to the Respondent, "it is clear that the tax acts in crisis do not suffer from any defect of violation of law" in that, in light of the applicable legislation, "it was the Claimant, in the capacity of owner appearing in the Motor Vehicle Registry, the taxable person of the IUC".

On the Documents Attached with a View to Rebutting the Presumption

3.20. In this matter, the Respondent understands that being "the Claimant, in the capacity of owner appearing in the Motor Vehicle Registry, the taxable person of the IUC (…) the entire reasoning propounded by the Claimant is affected by error, and it is not possible to rebut the legal presumption established".

3.21. "However (…) if it is accepted that it is admissible to rebut the presumption in light of the case law (…), it is nevertheless still necessary to appreciate the documents attached by the Claimant and their evidentiary value with a view to such rebuttal", "this appreciation which constitutes the analysis of a question (…) of fact.

3.22. Indeed, according to the Respondent, "with a view to such rebuttal the Claimant constructed an argumentative framework" which "is not at all apt to succeed".

3.23. In support of its defense, the Respondent cites the decision rendered by the Collective Arbitral Tribunal, constituted in case no. 63/2014-T, to the effect that "(…) the party in whose favor there is a legal presumption, which constitutes full proof, does not have to prove the fact to which it leads. (…) In this situation (…) full legal proof can only be contradicted by means of proof that shows that the fact which is its subject is not true. Which means that it is not enough for the opposing party to present counterproof (…). It must show that the presumed fact is not true, so that there is no doubt that the facts resulting from the presumption are not true".

3.24. Whereby the Respondent states that "the proof (…) submitted by the Claimant is not at all apt to demonstrate the transfer of ownership of the vehicles (…) at a moment prior to the fact that gave rise to the tax".[8]

On the Illegality of the Assessments by Violation of Article 2 of the IUC Code in Articulation with Article 5/3 of Decree-Law 78/2008

3.25. In this regard, reaffirming the Respondent "the lack of jurisdiction of this Single Arbitral Tribunal to appreciate the question raised by the Claimant, in that such question goes beyond the competences that are reserved by law to CAAD (…)", it reiterates that "(…) the Claimant has no reason whatsoever" in that:

3.25.1. "In the first place, (…) Article 5/3 of Decree-Law 78/2008, of 6 May, falls within the legislative freedom of the legislator who (…) expressly and intentionally chose to provide for a regime of official cancellation of registrations relating to vehicles registered between 1 January 1980 and 31 December 2000";

3.25.2. "In the second place, (…) Article 2 of Decree-Law 78/2008 is peremptory in stating that the regime of cancellation of registrations provided for therein can only occur up to 2008-12-31, that is, the regime established in Decree-Law 78/2008 constituted a transitional and exceptional regime for the cancellation of registrations, as unequivocally referred to in its preamble and in Article 1" and therefore "(…) at the time of submission of the request for arbitral pronouncement Decree-Law 78/2008 had long since ceased to be in force in the Portuguese legal order";

3.25.3. "In the third place, because the Claimant intends that the official cancellation of registrations be effected under Article 5/3 of Decree-Law 78/2008, considering, on one hand, that this legal measure (i) was published on 2008-05-06, (ii) was made available on that same date and (iii) came into force the following day (…) and considering, on the other hand, that the measure would only be in force until 2008-12-31, by force of what is provided in its Article 2" and therefore "it is necessary to conclude that the intended official cancellation of registrations would necessarily have to occur somewhere between 2008-05-07 and 2008-12-31" but "(…) the cancellation of registrations was only requested on 2010-01-25", the Respondent alleging that this Single Arbitral Tribunal does not have "power to simultaneously (i) annul the cancellations requested by the Claimant in 2010, (ii) effect in 2015 a cancellation reported somewhere between 2008-05-07 and 2008-12-31 and (iii) restore a decree-law whose validity ended on 2008-12-31";

3.25.4. "In the fourth place, the Claimant's thesis has no support whatsoever in the letter of Article 5/3 of Decree-Law 78/2008" because "in reality, the understanding defended (…) is merely an attempt at analogical interpretation of the law which (…) is not admitted by law";

3.25.5. "In the fifth and final place, even if absurdly all the arguments so far expended (…) did not succeed, the position defended by the Claimant would still be doomed to fail".

On the Unconstitutionality of Article 5/3 of Decree-Law 78/2008, by Violation of the Principle of Equality

3.26. In this regard, the Respondent reaffirms "the lack of jurisdiction of this Single Arbitral Tribunal to appreciate the question raised by the Claimant, in that such question goes beyond the competences that are reserved by law to CAAD", further stating that "the Claimant has no reason whatsoever, with entirely applicable here part of the arguments already expended (…)".

On the Unconstitutionality of Article 2/1-c) and d) of the IUC Code by Violation of the Principle of Equality

3.27. In this matter, the Respondent contends that the Claimant is not correct in that "categories C and D cannot be equated to category A, for they are motor vehicles with a completely different nature and functions and this is enough to conclude that there is no violation of the constitutional [principles]".[9]

On the Illegality of the IUC Assessments, by Violation of Article 2/1-c) of the IUC Code

3.28. Also on this point, the Respondent does not agree with what is alleged by the Claimant, in that, "it is not because the Claimant allegedly engages only in the sale of automobiles that it automatically follows that the vehicles in question were not intended for private transport of goods, for transport on own account or for rental without driver which has those purposes".

On the Interpretation Non-Compliant with the Constitution

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

On the Payment of Compensatory Interest and Responsibility for Payment of Arbitral Costs

3.30. In this respect, the Respondent alleges that "IUC is not assessed in accordance with information generated by the Respondent itself (…)" and therefore "not having the Claimant taken care of the updating of the motor vehicle registry (…) and not having had the registrations of the vehicles in question here cancelled, it is necessary to conclude that the Claimant did not act with the diligence required of it", leading "(…) the Respondent to limit itself to complying with the legal obligations to which it is bound (…)".[10]

3.31. "Therefore, it was not the Respondent who gave rise to the submission of the request for arbitral pronouncement, but rather the Claimant itself" and therefore, consequently, "the Claimant should be condemned to pay the arbitral costs resulting from this request for arbitral pronouncement (…)".

3.32. "The same reasoning applies with respect to the claim for condemnation to pay compensatory interest (…)" in that, in the Respondent's view, if "(…) the tax acts in crisis are valid and legal, because in conformity with the legal regime in force at the time of the tax facts (…) there did not occur, in this case, any error attributable to the services" and therefore "the legal prerequisites conferring the right to compensatory interest are not met".

3.33. In these terms, the Respondent concludes that "the exceptions invoked should be judged to have merit, as proven, which give rise to dismissal of the action (…) and if this is not understood to be the case, the present request for arbitral pronouncement should always be judged to have no merit, as proven, maintaining in the legal order the disputed tax assessment acts and absol[ving], in conformity, the Respondent of the claim".

4. CLAIMANT'S RESPONSE TO THE EXCEPTIONS RAISED BY THE RESPONDENT

4.1. The Claimant, in response to the exceptions raised by the Respondent, for these are exceptions which prevent "knowledge of the merits of the claim", presented a response thereto, in which it deduced the following arguments:

On the Lack of Jurisdiction of the Arbitral Tribunal as to Subject Matter

4.2. With respect to this exception, the Claimant understands that "the Respondent has no reason whatsoever" because, "contrary to what the Respondent invokes, the Claimant petitions in the proceedings for the appreciation of the legality of the IUC assessments (…), a matter within the jurisdiction of arbitral tribunals (…)", further clarifying that "in the course of appreciating the legality of the assessments in crisis in the proceedings a question is raised concerning the interpretation of the legal norm of objective scope applicable (…)".

4.3. According to the Claimant, "the (…) Article 5, no. 3, of Decree-Law no. 78/2008, of 6 May, is brought to bear, in that it appears relevant to the interpretation of the legal norm of objective scope of the tax, that is, the said Article 2, no. 1, paragraph c), of CIUC", the Claimant not petitioning "the official cancellation of registrations prior to 1 January 1980, contrary to what is stated in the learned Answer, but rather the annulment of the IUC assessments relating to the vehicles with those registrations".

4.4. The Claimant reiterates that, "in fact, what (…) it invokes is that Article 5, no. 3, of Decree-Law no. 78/2008, of 6 May, should be interpreted to the effect that it is also applicable to vehicles registered before 1 January 1980 and, thus, that they would not be subject to IUC, from which follows the illegality of the IUC assessments in crisis", "and therefore, the question on which the Tribunal is called to rule is confined, in any event, to the legality of the IUC assessments".

4.5. In this regard, the Claimant further clarifies that "(…) understanding contrary to that would result in the unconstitutionality of Article 2, no. 1, paragraphs c) and d), of CIUC, by violation of the principle of equality provided in Article 13 of the Constitution of the Portuguese Republic (CRP), in that it results in unjustified discriminatory treatment between automobiles for goods registered between 1 January 1980 and 31 December 2000 and those registered before 1 January 1980, subjecting the latter to taxation and excluding from taxation the former, as well as unjustified differentiated treatment between light passenger vehicles and goods vehicles, subjecting the latter to taxation and excluding from taxation the former that were registered before 1 January 1981".

4.6. Accordingly, "with this ground the Claimant invokes that the aforementioned legal norm, contained in Article 2, no. 1, paragraphs c) and d), of CIUC, should be set aside and the tax acts annulled", "and therefore, also in this regard, the Tribunal is called to rule on the legality of the IUC assessments issued on the basis of the legal norm considered unconstitutional or on an unconstitutional interpretation thereof".

4.7. The Claimant concluding that "(…) the exception invoked by the Respondent should be judged to have no merit".

On the Passive Illegitimacy of the Respondent

4.8. With respect to the exception of passive illegitimacy invoked by the Respondent, the Claimant understands that it "should (…) be judged to have no merit, in that, as was clarified above (…), what is at issue is (…) the appreciation of the legality of the IUC assessments (…) identified, the Respondent (…) being the entity competent to proceed with the assessment of the tax and, consequently, to proceed with the annulment of the assessments issued by it".

4.9. In these terms, the Claimant reiterates that "the Respondent has an interest in acting (…) for which reason it is a party having standing in the proceeding", and therefore "(…) the invoked exception of passive illegitimacy should be judged to have no merit (…).

4.10. Accordingly, the Claimant concludes its Response to the exceptions invoked by the Respondent to the effect that "(…) the exceptions raised by the Respondent should be judged to have no merit and the request for constitution of the arbitral tribunal should be judged to have merit, condemning the Respondent in the annulment of the tax acts in crisis (…), with the consequent reimbursement of the amount disbursed by the Claimant, plus compensatory interest".

5. APPRECIATION OF PRELIMINARY ISSUES

5.1. In accordance with the provisions of Article 608 of the Code of Civil Procedure (CPC) in force, applicable by force of Article 22 of RJAT, "(…) the judgment knows, in the first place, of the procedural questions which may determine the dismissal of the action, according to the order imposed by their logical precedence" and the judge must "resolve all questions that the parties have submitted to its appreciation, except those whose decision is precluded by the solution given to others (…)" (underlining ours).

5.2. The Respondent having, in its Answer, raised exceptions which, if upheld, may prevent knowledge of the merits of the case, it is necessary that this Arbitral Tribunal rule on the following preliminary issues:

5.2.1. Lack of jurisdiction of the Arbitral Tribunal as to subject matter;

5.2.2. Passive illegitimacy of the Respondent to appear in court given that the IMT or the IRN has an interest in acting (to contest) (in that they have a personal and direct interest in the outcome of this dispute) and given the impossibility of curing the alleged passive illegitimacy through an incident of direct intervention in this case (given the non-binding of the IMT or the IRN to the jurisdiction of CAAD).

5.3. In this regard, having in mind that the determination of the material jurisdiction of the tribunals must precede knowledge of any other matter, as is apparent from the reading of the combined provisions of Articles 16 of the Code of Procedure and Tax Procedure (CPPT), 13 of the Code of Procedure in Administrative Tribunals (CPTA) and 96 of the CPC (subsidiarily applicable by referral of no. 1 of Article 29 of RJAT), this exception should be analyzed first.

5.4. In the event that the exception of material lack of jurisdiction of this Arbitral Tribunal is upheld, knowledge of the exception of passive illegitimacy will be precluded, taking into account the fact that each of them, by itself, represents an insuperable obstacle to the appreciation of the merits of the case, justifying a ruling of dismissal of the action [Article 89, no. 2 of CPTA, subsidiarily applicable by force of Article 29, no. 1, paragraph c) of RJAT].

On the Material Lack of Jurisdiction of CAAD

5.5. In the context of this exception, the Respondent alleges that having (in its view) the Claimant presented a claim "for annulment of the assessments (…) by means of raising (…) the question of violation of Article 2 of CIUC (…) articulated with Article 5/3 of Decree-Law 78/2008, a measure that established a transitional and exceptional regime for the cancellation of vehicle registrations which do not have a certificate of qualified destruction or dismantling (…) the appreciation of such matter goes beyond the competences that are reserved to it by law" and therefore "(…) it is clearly evident that it is outside the sphere of tax arbitration to appreciate any questions concerning the official cancellation of registrations (…)".

5.6. In response to this, the Claimant came to clarify that "it petitions in the proceedings for the appreciation of the legality of the IUC assessments (…), a matter within the jurisdiction of arbitral tribunals (…)", further clarifying that, "in the course of appreciating the legality of the assessments in crisis (…) a question is raised concerning the interpretation of the legal norm of objective scope applicable (…)" and therefore "the (…) Article 5, no. 3, of Decree-Law no. 78/2008, of 6 May, is brought to bear, in that it appears relevant to the interpretation of the legal norm of objective scope of (….) IUC", concluding that it does not petition "the official cancellation of registrations prior to 1 January 1980 (…) but rather the annulment of the IUC assessments relating to the vehicles with those registrations" (underlining ours).

5.7. Indeed, from a reading of the request for arbitral pronouncement presented by the Claimant, what is requested is the "declaration of illegality" of the identified assessments in the proceedings, with the consequences flowing therefrom, that is, annulment of the respective tax acts and the consequent reimbursement of the sums paid as tax, plus compensatory interest.

5.8. Now, in accordance with the provisions of Article 2, no. 1 of RJAT, "the jurisdiction of arbitral tribunals comprises the appreciation of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account;

b) The declaration of illegality of acts of determination of taxable matter where it does not give rise to the assessment of any tax, acts of determination of the collectible matter and acts of determination of property values".

5.9. Additionally, "the AT is bound to the jurisdiction of the arbitral tribunals that function in CAAD and that have for their object the appreciation of claims relating to taxes whose administration is incumbent upon it" and not excepted (see below point 5.11.), as is the case with IUC.

5.10. Indeed, Article 4, no. 1 of RJAT refers the binding of the tax administration to the jurisdiction of the arbitral tribunals to joint ordinance of the Ministers of Finance and Justice (Ordinance no. 112-A/2011, of 22 March), in accordance with which, are bound to arbitral jurisdiction:

a) The General Directorate of Contributions and Taxes (DGCI)[11] and,

b) The General Directorate of Customs and Special Taxes on Consumption (DGAIEC).

5.11. Accordingly, in accordance with the provisions of the aforementioned Ordinance, the Tax and Customs Authority is bound to the jurisdiction of the arbitral tribunals that function in CAAD and that have for their object the appreciation of claims relating to taxes whose administration is incumbent upon it (Article 2, no. 1 of RJAT), with the exception of the following (underlining ours):

a) "Claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account which have not been preceded by recourse to administrative proceedings, in accordance with Articles 131 to 133 of CPPT";

b) "Claims relating to acts of determination of the collectible matter and acts of determination of taxable matter, both by indirect methods, including the decision of the revision proceeding";

c) "Claims relating to customs duties on importation and other indirect taxes that apply to goods subject to import duties" and,

d) "Claims relating to the tariff classification, origin and customs value of goods and to tariff quotas or whose resolution depends on laboratory analysis or on steps to be carried out by another Member State in the context of administrative cooperation on customs matters".

5.12. In these terms, the situation under analysis in these proceedings is covered by the jurisdiction of the arbitral tribunals in light of the provisions of Article 2 of RJAT [see point 5.8., paragraph a), above], and therefore this Tribunal considers itself materially competent to know the request for arbitral pronouncement presented, and therefore the exception raised by the Respondent regarding material lack of jurisdiction of the Arbitral Tribunal does not succeed.

On the Passive Illegitimacy of the Respondent

5.13. The Respondent declares itself a party lacking standing to be sued in this arbitral proceeding, because it considers that the passive standing to intervene in the dispute will be that of the IRN and the IMTT.

5.14. Indeed, the Respondent states in its answer that the Claimant requests in its request for arbitral pronouncement "the application of the regime of official cancellation of registrations prior to January 1980 (…)" but, "considering that the competence to effect the official cancellation of registrations falls within the competences of the IMT", "it is necessary to conclude that there is a pressing interest in acting (…) on the part of the (…) IMT and the (…) IRN in this dispute".

5.15. Now, as "(…) the Respondent (…) is an entity foreign to the proceeding of official cancellation of registrations prior to January 1980", "which will always be attributable to the owner, to the IMT or to the IRN", it comes to request "(…) the direct intervention of those entities in this arbitral proceeding (…)".

5.16. However, given that "(…) there is no act binding the IMT or the IRN to the jurisdiction of the Administrative Arbitration Centre (…)", there is "impossibility of curing the alleged passive illegitimacy through an incident of direct intervention in this case (…)", the Respondent concludes "that the exception invoked should be considered to have merit (…)".

5.17. Now, the ruling on the exception raised by the Respondent necessarily implies the analysis and evaluation of the claim and the grounds thereof, as formulated by the Claimant.

5.18. In substantive law, the concept of standing relates to the relationship between the subject and the object of the legal act, postulating as a rule the coincidence between the subject of the legal act and the holder of the interest put at stake by it.[12]

5.19. As a procedural prerequisite (general), or necessary condition for a ruling on the merits, in adjectival law the same concept expresses the relationship between the party in the proceeding and the object thereof (the claim or petition) and, therefore, the position that the party must have so that it may occupy itself with the claim, either bringing it or contesting it.

5.20. As in substantive law, it will have to be ascertained, as a rule, by the ownership of the interests at stake (in the proceeding), in accordance with the criterion stated in nos. 1 and 2 of Article 30 of the CPC, that is, as a function of the direct interest (and not indirect or derivative) in suing, expressed by the legal advantage that will result for the claimant if the action succeeds, and of the direct interest (and not indirect or derivative) in contesting, expressed by the legal disadvantage that will result for the defendant if it loses (or, considering the material case formed by dismissal of the claim, by the legal advantage that will result therefrom for the defendant).[13]

5.21. Still within the rule stated above, the ownership of the interest in suing and of the interest in contesting is ascertained, whenever the claim asserts (or denies) the existence of a legal relationship, by the ownership of the legal situations (right, duty, subjection, etc.) that integrate it.

5.22. Article 30, no. 3 of the CPC provides that "in the absence of an indication of law to the contrary, those considered holders of the relevant interest for the purposes of standing are the subjects of the relationship as contested, as it is configured by the claimant" (underlining ours).

5.23. The aforementioned provision was intended to put an end to the "classic" discussion in our civil procedural law, between Alberto dos Reis and Barbosa de Magalhães, concerning the need to know whether "the ascertainment of the ownership of the interests (or of the legal situations integrated in the material relationship asserted or denied in court) should, for the ascertainment of procedural standing, be made in objective terms, that is, abstracting only from the actual existence of the right or material interest, or in subjective terms, that is, also abstracting from its actual ownership" (underlining ours).

5.24. If it is true that the legislator adopted the second thesis, it is also necessary to state that Barbosa de Magalhães never considered that the standing of the parties has to be ascertained always and only by what the claimant alleges in the petition it formulates but rather that, to the extent that standing should be determined only as a function of the ownership of the disputed material relationship, this should be taken with the configuration that was given to it unilaterally in the initial petition.

5.25. In accordance with the prevailing thesis, as well synthesized by Lebre de Freitas, João Redinha and Rui Pinto[14], to the ascertainment of standing is of interest only the consideration of the claim and the grounds thereof, independent of the proof of the facts that integrate the latter.

5.26. Having made these legal considerations, the claim formulated by the Claimant for the declaration of illegality of the IUC assessments identified in the proceedings, relating to the years 2009 and 2010, must be analyzed, with the objective of ascertaining the passive standing of the Respondent.

5.27. In this regard, it will be important to answer certain questions so as better to define who has an interest in being sued in the proceeding, taking into account the claim made by the Claimant (see point above):

5.27.1. Did the Respondent have standing to proceed with the IUC assessments of the years in question (2009 and 2010)? And to proceed with their annulment?

5.27.2. Does the Respondent have standing to proceed with the reimbursement of IUC and proceed with the payment of compensatory interest, if it is considered that the IUC assessments are illegal and, consequently, the tax was unduly borne by the Claimant?

5.28. With respect to the standing of the Respondent to be sued with respect to the claim for pronouncement, giving an answer to the question formulated above at point 5.27.1., it is necessary to analyze the arguments that follow.

5.29. In accordance with the provisions of Article 2 of Law no. 22-A/2007, of 29 June (measure that approves the IUC Code), "the competence relating to the administration of IUC falls (…) to the General Directorate of Taxes (…)", this entity having, in accordance with the provisions of Article 5 thereof, "(…) concluded protocols with the IRN and the IMTT (…), with a view to the exchange of information necessary for the assessment and supervision (…) of IUC" (underlining ours).

5.30. Indeed, in accordance with the provisions in the updated version of Decree-Law no. 54/75, of 12 February, are subject to registration, among others, "the right of ownership", "the extinction or modification of rights (…) previously registered", "any other legal facts subject by law to registration", being "mandatory the registration of the right of ownership and the registration of the change of name and habitual residence (…) of the owners (…)".

5.31. In general terms, according to the same measure, "the registration of vehicles is essentially for the purpose of giving publicity to the legal situation of motor vehicles (..), with a view to the security of legal transactions", being considered vehicles, for the purposes of registration, "motor vehicles (…) which, in accordance with the Road Code, are subject to registration".

5.32. Accordingly, "each vehicle corresponds to a certificate of registration", of which "all registrations in force must appear (…)", and the Conservators may, having "knowledge that the annotations of the certificate of registration are incomplete or out of date", "notify the respective holder to present it at the Conservatory within the period designated to it (…)" (underlining ours).

5.33. In this regard, "motor vehicle registration is organized in a computerized central file, this database having as its purpose to organize and keep up to date the information concerning the legal situation of these assets (…)" having, "access to the information contained in the motor vehicle registry (…) the General Directorate of Customs and Special Taxes on Consumption (…)", being able in this case to be authorized to consult, for the pursuance of the respective legal and statutory assignments, (…)" (underlining ours).

5.34. "The communication and consultation provided for in the preceding point are conditioned on the conclusion of a protocol with the General Directorate of Registries and Notaries which defines, in light of the legal or statutory assignments of the interested entities, the limits and conditions of communications and consultation" (underlining ours).

5.35. Additionally, in accordance with the provisions of Article 16 of the IUC Code, "the competence for the assessment of IUC is that of the Tax and Customs Authority" (underlining ours).

5.36. Accordingly, with respect to the claim formulated by the Claimant, the answer is affirmative to the question that we posed above at point 5.27.1. that the Respondent had standing to proceed with the IUC assessments relating to the years 2009 and 2010 and, in these terms, as it is incumbent on it to the competence to administer the tax, it will also have standing to proceed with the annulment of those assessments if affected by illegality (see Chapter 8.).

5.37. And if it has passive standing in this matter, it makes no sense whatsoever to analyze the question of "direct intervention of those entities (IMTT and IRN) in this arbitral proceeding", because it is precluded.

5.38. Still with respect to the standing of the Respondent to be sued with respect to the claim for pronouncement, giving an answer to the question formulated above at point 5.27.2., it will be important to take into account the provisions of Article 100 of the General Tax Law (LGT), applicable to the case by force of the provisions in paragraph a) of no. 1 of Article 29 of RJAT.

5.39. Indeed, in accordance with the legislation referred to at the preceding point "the tax administration is obliged, in the event of full or partial success of administrative complaints or administrative appeals, or of judicial proceeding in favor of the taxable person, to the immediate and full reinstatement of the situation that would exist if the illegality had not been committed (…), in accordance with the conditions provided in the law." (underlining ours).[15]

5.40. Accordingly, in light of the above (still with respect to the claim formulated by the Claimant), the answer is affirmative to the question that we posed above at point 5.27.2. that the Respondent has standing to proceed with the reimbursement of IUC and proceed with the payment of compensatory interest, if the IUC assessments are to be considered illegal and, in consequence, the tax was unduly borne by the Claimant (see Chapter 8.).

5.41. In these terms, in light of the conclusions reached at points 5.28. to 5.36. and 5.37. to 5.40., this Tribunal considers that the Respondent has passive standing to be sued in Court, and therefore the exception of passive illegitimacy of the Respondent with respect to the claim formulated by the Claimant does not succeed.

6. INTERLOCUTORY JUDGMENT

6.1. The request for arbitral pronouncement is timely, as submitted within the period provided in paragraph a), no. 1, of Article 10 of RJAT.

6.2. The Tribunal is regularly constituted, in accordance with Article 2, no. 1, paragraph a), and Articles 5 and 6, all of RJAT.

6.3. Having in mind the analysis carried out in the preceding Chapter, in the context of knowledge of the exception of material lack of jurisdiction of the Arbitral Tribunal, it is considered that the same is competent regarding the appreciation of the request for arbitral pronouncement formulated by the Claimant.

6.4. The parties enjoy legal personality and capacity.

6.5. Having in mind the analysis carried out in the preceding chapter, in the context of knowledge of the exception of passive illegitimacy of the Respondent, it is considered that both parties are standing with respect to the request for arbitral pronouncement and are duly represented, in accordance with the provisions of Articles 4 and 10 of RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March.

6.6. The cumulation of claims is legal, as the prerequisites required in Article 3, no. 1 of RJAT are verified, that is, its success depends essentially on the appreciation of the same circumstances of fact and the interpretation and application of the same principles or rules of law.

6.7. No nullities were identified in the proceeding.

6.8. There are no other exceptions nor other preliminary issues that need to be addressed, and therefore nothing prevents knowledge of the merits of the case.

6.9. In these terms, the following will be the issues to be decided:

6.9.1. Does Article 3 of the IUC Code establish a rebuttable presumption with respect to the owners of motor vehicles as taxable persons of the tax, so as to rebut the presumption that are considered as such the persons (singular or collective) in whose names the same are registered?

6.9.2. Has the Claimant succeeded in demonstrating, in the matter of arbitral proceeding, that it was not, at the date of the IUC assessments that are the subject of this proceeding, the owner of the vehicles that are the subject of those assessments (and identified at point 7.3. of the following Chapter), thus succeeding in rebutting the presumption referred to in the preceding point?

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

7. MATERIAL FACTS

7.1. Of the Facts Established

7.2. The Claimant is the official distributor in Portugal of the A… automobile brand and, within the scope of its activity, proceeds to:

7.2.1. The import of automobiles of the said brand;

7.2.2. The subsequent sale of the said automobiles to its customers;

7.2.3. The request for registration, on a date prior to or on the same date as the sale of the vehicles, and the initial registration, in its own name, of the ownership of the vehicles.

7.3. The Claimant, within the scope of its activity, was notified in 2013 of official IUC assessments, relating to the years 2009 and 2010, plus compensatory interest, and identified as follows, whose deadline for payment was 10 December 2013:

[Table of vehicles and assessment amounts]

7.4. The Claimant exercised its right of prior hearing in writing with respect to the IUC assessments identified above on 11 October 2013 (as set forth in Doc. no. 3 attached to the Administrative Complaint).[16]

7.5. The Claimant was notified of Letter no. …, of 25 October 2013, concerning the "prior hearing regarding IUC for 2009 and 2010" with respect to the vehicles identified above (see point 7.3, above) and the intention to maintain the aforementioned tax assessments (Doc. no. 4 of the Administrative Complaint)[17].

7.6. The Claimant made payment of the amount of IUC of all the assessments identified above, in a total of EUR 6,476.00, on 18 December 2013[18][19], under the Exceptional Regime for Settlement of Tax Debts and Social Security (Decree-Law no. 151-A/2013, of 31 October), thus benefiting from the waiver of payment of the corresponding compensatory interest associated, in a total of

EUR 1,149.36.

7.7. The Claimant submitted on 31 March 2014 an Administrative Complaint

(no. …2014…) relating to the IUC assessments identified above, to the effect of requesting the annulment of the IUC and the respective compensatory interest, invoking for such purpose that "the assessments relate to vehicles registered between the years 1966 and 1979, vehicles sold more than 10 years ago, which do not appear in its inventory and, at the present time, there is no longer an obligation to possess documentation concerning the sale thereof and therefore the absence of such documentation cannot be used to draw the conclusion that it was the owner of the aforementioned vehicles" (as per the information available in the Administrative File attached to the proceedings).

7.8. The Claimant was notified of the draft decision refusing the Administrative Complaint identified in the preceding point, through Letter no. …, of 14 August 2014, through which it was also notified to exercise, within a period of 15 days, the right of prior hearing provided in Article 60 of the LGT (as per the information available in the Administrative File attached to the proceedings).

7.9. The Claimant did not exercise the right of prior hearing referred to in the preceding point, having been notified of the decision, dated 30 September 2014, through Letter no. …, of 3 October 2014, to the effect of refusing the said Administrative Complaint (as per the information available in the Administrative File attached to the proceedings).

7.10. The Claimant requested the cancellation of the registrations, which are the subject of the IUC assessments under analysis, on 25 January 2010.

7.11. No other facts capable of affecting the merit decision of the claim were established.

7.12. Of the Facts Not Established

7.13. It was not established, for the purposes of the argumentative thesis presented by the Claimant (and identified above at point 2.29.) that the vehicles that are the subject of the IUC assessments under analysis were not intended for the purposes provided in Article 2, no. 1, paragraph c) of the respective Code.

7.14. No other facts were found as not established with relevance for the arbitral decision.

8. LEGAL GROUNDS

8.1. The question underlying this request for arbitral pronouncement, in general, and the claims that are part of it, in particular, will be the verification of the legality of the IUC assessments notified to the Claimant, for which the Claimant has requested the granting of the administrative complaint no. …2014…, the annulment of the tax acts identified, as well as the reimbursement of the amount of tax paid, plus compensatory interest.

8.2. By way of preamble, and with respect to the request for granting of the administrative complaint identified at the preceding point, it should be noted that Article 2 of RJAT sets out the matters on which the Arbitral Tribunal may rule, being among the competences defined therein "the declaration of illegality of acts of assessment of taxes" [included in no. 1, paragraph a) of that article], and the arbitral jurisdiction is not confined to cases in which a direct challenge is brought against an act of that nature.

8.3. Indeed, the illegality of assessment acts may be declared judicially as a corollary of the illegality of a second-degree act, which upholds an assessment act, incorporating its illegality.

8.4. Accordingly, "the inclusion in the jurisdiction of the arbitral tribunals that function in CAAD, of cases in which the declaration of illegality of the acts, listed in Article 2 of RJAT, is effected through the declaration of illegality of second-degree acts (…), results with certainty from the reference made in that provision", namely, to assessment acts of taxes, "which expressly refer to as included among the jurisdictions of the arbitral tribunals".[20]

8.5. Notwithstanding the fact that Article 2 of RJAT ("jurisdiction of the arbitral tribunals") does not expressly include the appreciation of claims for declaration of illegality of acts refusing an administrative complaint, the fact that paragraph a), no. 1, of Article 10 of RJAT makes reference to nos. 1 and 2 of Article 102 of CPPT, in which various types of acts that give rise to the period for judicial challenge are indicated (including refusal of administrative complaint), makes it clear that all types of acts capable of being challenged through judicial challenge proceedings, covered by those nos. 1 and 2, will be within the jurisdiction of the arbitral tribunals that function in CAAD, provided they have as their object an act of one of the types indicated in the aforementioned Article 2 of RJAT.

8.6. Also with respect to this matter, as highlighted by Jorge Lopes de Sousa[21], in the comments to the provisions of Article 97 of CPPT, "it clearly results that, in cases in which the act to be challenged is an assessment act or an act that comprises the appreciation of an assessment act [act refusing an administrative complaint (…)] the appropriate means is the challenge proceeding (…)", if the act to be challenged effectively contains the appreciation of the legality of an assessment act (underlining ours), which is what happens in the case under analysis.

On the Subjective Scope of IUC

8.7. Returning to the request for arbitral pronouncement, the Claimant invokes the circumstance that, at the date to which the tax facts giving rise to them refer, it was no longer the owner of the vehicles and, consequently, did not assume the capacity of taxable person of the tax which was assessed against it.

8.8. Indeed, the Claimant considers it is not the taxable person of the tax assessed against it, in that in accordance with the provisions of Article 3, no. 1 of the IUC Code, a rebuttable presumption is established therein, that is, one that admits proof to the contrary, namely, through demonstration of the sale of the vehicles at the origin of the IUC assessments on a date prior to the date of the occurrence of the tax-generating fact in the years 2009 and 2010.

8.9. Conversely, the Respondent considered that the provision of Article 3, no. 1 of the IUC Code does not contain any legal presumption and that, rather, it established expressly and intentionally that those considered as owners are the persons in whose names the vehicles are registered.

8.10. Now, being this the main question to be decided in these proceedings, it will be necessary to determine the subjective scope of IUC, in accordance with the provisions of the respective Code, and to adopt a position regarding the said legal norm of subjective scope so as to ascertain whether or not it establishes a legal presumption.

8.11. In this dispute, if the said presumption is established therein, it must be verified whether it is susceptible of being rebutted (as the Claimant contends) or whether, conversely, it provides expressly and irrefutably that the persons in whose names the vehicles are registered are the owners, for the purposes of the subjective scope of IUC (as the Respondent contends).

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

8.13. In this regard, there are three articles of the Civil Code that are important to consider with respect to the acquisition of ownership of a motor vehicle, namely:

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

8.13.2. Article 879, paragraph a), in accordance with which the essential effects of the purchase and sale contract are provided as "the transmission of ownership of the thing or the acquisition of the right";

8.13.3. Article 408, no. 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 provided for in law".

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

8.15. In the domain of contracts with real effect, cite Pires de Lima and Antunes Varela, in notes to Article 408 of the Civil Code, when they contend that "(…) contracts called real in that they have as their immediate effect the constitution, modification or extinction of a real right (…) are distinguished from so-called real contracts, which require the delivery of the thing as an element of their formation".[22]

8.16. In this regard, we are before contracts in which the ownership of the thing sold is transferred, without more, from the seller to the buyer, having, as a cause, the contract itself.

8.17. Also case law has contended, in light of the provision of Article 408, no. 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 provided for in law".[23]

8.18. This will be the case of the purchase and sale contract of a motor vehicle [see Articles 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.[24]

8.19. Having the purchase and sale contract, in light of the foregoing, a real nature, with the aforementioned consequences, there must also be consideration of the legal value of motor vehicle registration (the subject of that contract), in that the transaction of that asset is subject to public registration.

8.20. Indeed, Article 1 of Decree-Law no. 54/75, of 12 February, considers that with respect to the registration of vehicles that "is essentially for the purpose of giving publicity to the legal situation of motor vehicles (…), with a view to the security of legal transactions", and in accordance with the Property Registry Code (applicable ex vi Article 29 of RJAT), "the final registration constitutes a presumption that the right exists and belongs to the registered holder in the precise terms in which the registration defines it".

8.21. Accordingly, it appears to be a secure conclusion that the final registration is a rebuttable presumption of the existence of the right, which can be displaced, that is, which admits proof to the contrary.

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

8.23. However, and before proceeding to interpret the provision of Article 3, no. 1 of the IUC Code, it is relevant to bear in mind the provision of Article 11 of the LGT, in that tax norms must be interpreted in accordance with the general principles of interpretation and, as well, the provision of Article 9 of the Civil Code which establishes the rules and elements for the interpretation of norms.

8.24. Indeed, in order for us to be able to conclude whether Article 3, no. 1, of the IUC Code establishes (i) a rebuttable presumption of who should be considered a taxable person 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 taxable person of IUC, it is fundamental in the first place to pay attention to the letter of the Law.

8.25. In these terms, in accordance with the provision of Article 3, no. 1 of the IUC Code, "the taxable persons of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered" (underlining ours).

Element of Literal Interpretation

8.26. Now, in accordance with the literal element of the referred provision, the problem centers on the expression "being considered as such" used by the legislator.

8.27. Indeed, the letter of the Law does not refer to the expression "presumed", as did appear in the decrees preceding this Code, and it is therefore questionable whether the nature of presumption continues or not to be present in the norm under analysis.

8.28. In this regard, by way of example, it appears that in Article 243, no. 3 of the Civil Code and in Articles 45, no. 6 and 89-A, no. 4 of the LGT, the expression "is considered" is also used and, however, we are before legal presumptions and therefore, in accordance with the general norms of interpretation, it is considered that the minimum correspondence in expression is assured, for the purposes of the determination of the legislative thought which is objectified in the norm in question.[25]

Historical Element

8.29. Accordingly, and still within the scope of the elements of interpretation in accordance with Article 9 of the Civil Code, it is important to also take into account the historical element.

8.30. The legislator, in the definition of the subjective scope of Municipal Tax on Vehicles (IMV), Tax on Circulation (ICI) and Haulage Tax (ICA), taxes abolished by 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 names the same are registered or matriculated" (underlining ours).

8.31. In these terms, with respect to this element of interpretation it is demonstrated that the predecessors of the IUC Code established a presumption that the taxable persons of IUC are the owners registered at the Motor Vehicle Registry.

8.32. With respect to IUC, although it continues to ascribe to the owners of vehicles the capacity of taxable persons, the legislator chose to use a different formulation of the legal norm of scope, abandoning the expression "(…) being presumed as such, (…)" in favor of the expression "(…) being considered as such (…)".

8.33. In consequence, it is clear that the understanding underlying the provision 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 norm.[26] [27]

8.34. If the understanding followed in earlier decisions [28] on the same matter is adopted, we should conclude that, indeed, Article 3, no. 1, of the IUC Code establishes a presumption, for it is not the substitution of the expression "being presumed" for the expression "being considered" that causes this norm to cease to establish a presumption.

8.35. In truth, we believe we are before a mere semantic matter, which does not in the least alter the content of the norm in question, in that:

8.35.1. In order for there to be a legal presumption, it is necessary that the norm that establishes it adapts to the respective legal concept (contained in Article 349 of the Civil Code), being for such purpose irrelevant whether it is explicit, revealed by the use of the expression "are presumed", or merely implicit.[29] [30]

8.35.2. On the other hand, the freedom of the legislator to shape the law is limited by fundamental principles established in the CRP, namely, the principle of equality, whose relevance is pertinent in the case under analysis.

With respect to taxation, the principle of equality is translated into the generality and abstraction of the norm that creates the essential elements of the tax, in accordance with the contributive capacity of each one.

8.36. In this regard, "taxation in accordance with the principle of contributive capacity will imply the existence and maintenance of an effective connection between the tax obligation and the economic prerequisite selected as the subject matter of the tax, requiring, for this reason, a minimum of logical coherence of the various concrete tax situations provided for in law with the corresponding subject matter thereof".[31]

8.37. 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 grants full effect to the presumption derived from motor vehicle registration, receiving it, as such, in the definition of the subjective scope of this tax, established in no. 1, of Article 3 of the IUC Code.

8.38. Indeed, with respect to the importance of Motor Vehicle Registration, it is important to note that registration makes it possible to give publicity to the legal situation of assets and, as well, to presume that the right exists over them and that it belongs to the holder, as appears in the registry.

8.39. 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 transmission of the vehicle from seller to buyer.

8.40. Ownership is thus acquired by means of the conclusion of a purchase and sale contract, in accordance with the provision of Article 879, paragraph a), of the Civil Code, in accordance with which it is provided that one of the effects of this contract is based on the transmission of the thing or the acquisition of the right.

Rational and Teleological Element

8.41. Finally, with respect to the rational and teleological element, it is important to note that IUC is underlain by the principle of equivalence, established in Article 1 of the respective Code.

8.42. This principle came to embody environmental concerns by establishing that the tax should burden taxpayers for the environmental and road costs caused by motor vehicle circulation, that is, whoever pollutes must pay (a principle which also underlies Article 66, no. 2, paragraph h) of the CRP and the provision of Community Law[32]).

8.43. Indeed, what is sought to be achieved through the establishment of the said principle is to cause the losses that befall the community, resulting from the use of motor vehicles, to be borne by their owner-users, as costs that only they should bear.

8.44. Being known the magnitude of environmental damage caused by motor vehicles, the logic and coherence of the system of motor vehicle taxation in general, and of the regime established in the IUC Code in particular, point in the direction that whoever pollutes must pay, thus associating the tax with environmentally-caused damage.

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

8.46. These are, therefore, concerns with significant importance, in the economy of IUC, and which cannot fail to be, coherently, taken into account in the interpretation of Article 3, concerning the subjective scope of that tax.

8.47. In these terms, the fact that taxation (with respect to IUC) of the actual polluters corresponds to an important purpose aimed at by law, in light of the rational and teleological elements of interpretation, it is necessary to conclude that no. 1, of Article 3 of the IUC Code establishes a rebuttable presumption.[33]

8.48. In summary, it is important to emphasize that the aforementioned elements of interpretation, whether those related to literal interpretation, or those relating to logical elements of interpretation, make clear that Article 3, no. 1, of the IUC Code establishes a rebuttable presumption, which may be rebutted by evidence to the contrary, in the terms of Article 349 of the Civil Code.

8.49. Accordingly, having established that the said provision establishes a rebuttable presumption of ownership, it is necessary to proceed to verify whether the Claimant has, on the facts proven as alleged in the proceeding, succeeded in rebutting this presumption by showing that it was not the owner of the vehicles at the time of the tax-generating facts (2009 and 2010), which is the main question at issue.

8.50. For this verification it is essential to take into account what was established as proven at points 7.2. to 7.10. and, especially, the circumstances relating to (i) the activity carried out by the Claimant, (ii) the requests for registration and prior registration in its name, (iii) the date of the sales and (iv) the evidence relating to the ownership status of the Claimant with respect to the vehicles.

On the Evidence for the Rebuttal of Presumption

8.51. The doctrine on rebuttable legal presumptions clearly establishes that in order to rebut a presumption of law that constitutes full proof, what is required is evidence to the contrary that demonstrates, in such a manner, that there is no doubt that the presumed fact is not true.

8.52. This doctrine, which is aligned with the case law in the arbitral field, is clearly reflected in the decision referenced by the Respondent[34], in which the Collective Arbitral Tribunal very clearly stated that "in this situation full legal proof can only be contradicted by means of proof that shows that the fact which is its subject is not true. Which means that it is not enough for the opposing party to present counterproof. It must show that the presumed fact is not true, so that there is no doubt that the facts resulting from the presumption are not true".

8.53. Accordingly, in order to rebut the presumption of ownership established in Article 3, no. 1 of the IUC Code it is necessary that the Claimant demonstrate, through evidence, that it did not own the vehicles in question at the moment of the tax-generating facts (2009 and 2010).

8.54. However, it is also relevant to consider, by analogy, the provisions of Article 340, no. 1 of the Civil Code, which refers to the conditions for the rebuttal of the presumption of ownership in the case of property recorded in real property registry, whereby it is necessary "that the person against whom the presumption is aimed shows (…) by evidence that the thing is not, actually and in reality, his own", this providing important guidance for our assessment.

8.55. With respect to the facts established, it has been proven that:

(i) The Claimant's activity is the import and subsequent sale of motor vehicles;

(ii) As part of this activity, the Claimant requests the registration in its own name and the initial property registration of the vehicles;

(iii) Subsequently, after the sale of the vehicles to its customers, the Claimant's obligation arises to register the vehicles in the names of the new owners;

(iv) The vehicles that are the subject of the assessments in question were registered between 1966 and 1979;

(v) The Claimant requested the cancellation of the registrations on 25 January 2010;

(vi) The IUC assessments at issue relate to tax periods 2009 and 2010.

8.56. From the facts established, in particular from those identified in point 8.55. above, it logically results that:

(i) The Claimant, as a distributor of automobiles, acquired the vehicles through importation and, subsequently, sold them to its customers by way of purchase and sale contracts;

(ii) The sale of these vehicles to their customers (which must have occurred sometime between 1966 and before 25 January 2010, since the cancellation was requested on that date) means that the Claimant, by virtue of the execution of the purchase and sale contracts (which have real effect in accordance with Articles 408 and 879 of the Civil Code), ceased to be the owner of the vehicles at the moment of such sale;

(iii) Accordingly, at the time of the tax-generating facts (years 2009 and 2010), the Claimant was no longer the owner of the vehicles in question.

8.57. Accordingly, considering the facts established and the legal provisions applicable with respect to the acquisition and loss of ownership of motor vehicles, and also the importance of the principle of equivalence underlying IUC (as was analyzed at points 8.41. to 8.47. above), and the effective need to ensure that it is the actual owner-user of the vehicle, who is the real polluter, who bears the tax, the Tribunal considers that the Claimant has succeeded in rebutting the presumption of ownership established in Article 3, no. 1 of the IUC Code.

8.58. This conclusion is reinforced by the fact that the Claimant requested the cancellation of the registrations on 25 January 2010, which was a request for the official elimination of the legal presumption that the Claimant was the owner of the vehicles in question, given that the legal regime of motor vehicle registration establishes that the registration gives publicity to the legal situation of vehicles and, more importantly, the cancellation of registration is the manifestation that the Claimant was no longer the owner of the vehicles.

8.59. In the face of the above, and of the uncontested facts that the vehicles in question were manufactured and registered between 1966 and 1979 and that they were sold by the Claimant to its customers sometime between those years and 25 January 2010 (the date of the cancellation request), it is entirely reasonable that the Claimant had already ceased to be the owner of the vehicles at the time of the 2009 and 2010 tax periods.

8.60. Accordingly, the conclusion is that the Claimant was not the taxable person of the IUC in question and, therefore, the IUC assessments relating to the Claimant are illegal.

On the Legality of the IUC Assessments

8.61. Having established, on the basis of the facts proven and the applicable law, that the Claimant was not the owner of the vehicles at the time of the tax-generating facts (2009 and 2010), it is concluded that the Claimant cannot be the taxable person of the IUC in question.

8.62. Accordingly, in light of the foregoing, the Claimant is no longer required to bear the burden of the tax, and, therefore, the IUC assessments notified to the Claimant are, for this reason, illegal.

8.63. Given this conclusion, and in light of the illegality of the IUC assessments, the question relating to the potential violation of Article 2, no. 1, paragraphs c) and d) of the IUC Code, or alternatively, the unconstitutionality of Article 5, no. 3 of Decree-Law no. 78/2008, or the non-applicability of these provisions, becomes unnecessary, and therefore prejudiced.

8.64. With respect to the remaining arguments of the Claimant, particularly those relating to the fact that the vehicles in question are of category C and are not intended for the purposes provided in Article 2, no. 1, paragraph c) of the IUC Code, it is also considered that the analysis of this matter is rendered unnecessary by the conclusion that the Claimant is not the taxable person of the IUC.

8.65. Accordingly, the question of whether the Claimant had an obligation to bear the tax is resolved by the circumstance that it was not the owner of the vehicles at the time of the tax-generating facts.

On the Right to Refund and Compensatory Interest

8.66. Having established that the IUC assessments relating to the Claimant are illegal, it is necessary to proceed to examine the right of the Claimant to be reimbursed the amount unduly paid, and the right to compensatory interest.

8.67. In accordance with Article 100 of the LGT (applicable to the case pursuant to paragraph a) of no. 1 of Article 29 of RJAT), the tax administration is obliged, in the event of total or partial success of administrative complaints or administrative appeals, or of judicial proceedings, in favor of the taxable person, to proceed to the immediate and complete restoration of the situation that would exist if the illegality had not been committed, in accordance with the conditions provided in the law.

8.68. As has been verified, the Claimant has indeed succeeded in demonstrating the illegality of the IUC assessments in the proceedings before this Tribunal, which means that the administration should have recognized the illegality and proceeded to restitution from the moment of its challenge.

8.69. Furthermore, with respect to compensatory interest, pursuant to the same Article 100 of the LGT, and also Article 86 of the Code of Tax Procedure (CPPT), compensatory interest is owed from the date of the tax payment to the date on which restitution is made, at the rate established in the General Tax Law.

8.70. Accordingly, in accordance with the foregoing, the Claimant is entitled to the reimbursement of the amount of IUC unduly paid in the amount of EUR 6,476.00, plus compensatory interest calculated from the date of payment (18 December 2013) until the date of this Arbitral Decision, at the rate applicable in accordance with the General Tax Law.

9. DECISION

In light of all the foregoing, and in accordance with Article 29, no. 1, paragraph c) of the Legal Regime of Arbitration in Tax Matters (RJAT), this Tribunal, after appraising all the issues brought before it, decides as follows:

1. The Exceptions to Jurisdiction and Passive Illegitimacy raised by the Respondent are hereby REJECTED, as they are without merit, which finds support in the reasoning contained in Chapter 5 of this Decision;

2. The request for arbitral pronouncement brought by the Claimant is hereby GRANTED, in the following terms:

   a) The IUC assessments relating to the Claimant, as identified in point 7.3. of this Decision, for the years 2009 and 2010, in the total amount of EUR 6,476.00, are hereby declared ILLEGAL and are hereby ANNULLED;

   b) The Respondent is hereby condemned to reimburse to the Claimant the amount of EUR 6,476.00 unduly paid by way of IUC;

   c) The Respondent is hereby condemned to pay compensatory interest in accordance with the applicable provisions of the General Tax Law, calculated from 18 December 2013 (the date of payment) until the date on which this Decision becomes enforceable, at the rate applicable in accordance with the General Tax Law.

3. Each party shall bear its own arbitral costs.

This is the decision we hereby render.

Lisbon, 27 May 2015

Dr. Sílvia Oliveira
Arbitrator