Process: 115/2015-T

Date: August 31, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral decision (Process 115/2015-T) addresses the subjective incidence of Portugal's Single Motor Vehicle Tax (IUC), specifically concerning who is liable to pay the tax when vehicle ownership changes but registration remains unchanged. A vehicle rental company challenged IUC assessments for 2013-2014 totaling over €300 for vehicles it had already sold but remained registered as owner. The central legal dispute concerns whether Article 3(1) of the IUC Code creates a rebuttable presumption or establishes a definitive legislative policy. The claimant argued it should not be liable since it was not the actual owner on the tax due date (the first day of the tax period), contending that Article 3(1) establishes only a rebuttable presumption under Article 73 of the General Tax Law. The company further argued that the new owners should be liable, and that it cannot rectify the registration since only the purchaser with the registration certificate has legal authority to request the change. The Tax Authority countered that the provision is not a presumption but rather an intentional legislative choice making the registered owner the taxpayer regardless of actual ownership. The Authority emphasized systematic interpretation, noting Article 6(1) defines the taxable event as 'ownership of the vehicle, as evidenced by the registration.' This interpretation preserves unity in the tax system and reflects the legislator's freedom to shape tax policy. The Authority argued that accepting the claimant's position would violate systematic interpretation principles and undermine the coherence of the IUC Code's framework, which consistently links tax liability to registration rather than underlying ownership.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Subject Matter: Single Motor Vehicle Tax – Subjective scope of application

I – Report

  1. On 19.02.2015, the Claimant, A… – … – …, Lda, legal person no. …, with registered office at Building …, Avenue …, plot …, …, in Lisbon, requested the CAAD to constitute an Arbitral Court, pursuant to article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as RJAT), against the Tax and Customs Authority, with a view to annulling the following Single Motor Vehicle Tax assessments that were notified to it:

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 35.06 €, plus compensatory interest in the amount of 1.81 €.

  • Assessment No. …, for the year 2014, month of June and concerning vehicle …-…-… in the amount of 35.41 €, plus compensatory interest in the amount of 0.42 €.

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 32 €, plus compensatory interest in the amount of 1.66 €.

  • Assessment No. …, for the year 2014, month of June and concerning vehicle …-…-…, in the amount of 32 €, plus compensatory interest in the amount of 0.38 €.

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 54.76 € plus compensatory interest in the amount of 2.83€.

  • Assessment No. …, for the year 2014, month of June and concerning vehicle …-…-…, in the amount of 55.31 € plus compensatory interest in the amount of 0.77 €.

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 35.06 € plus compensatory interest in the amount of 1.81€.

  • Assessment No. …, for the year 2014, month of June, and concerning vehicle …-…-…, in the amount of 35.41 € plus compensatory interest in the amount of 0.49 €.

The Claimant, alleging that it paid the amount of the assessments, also petitions for the restitution of the taxes that it considers to have paid unduly and further requests indemnificatory interest on such sums.

  1. The request to constitute the arbitral court was accepted by His Excellency the President of the CAAD and notified to the Tax and Customs Authority.

Pursuant to the provisions of Article 6, paragraph 1, of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable deadlines, the undersigned was designated as arbitrator, and communicated acceptance of the assignment to the Deontological Council and the Administrative Arbitration Center within the regularly applicable deadline.

The Arbitral Court was constituted on 5.05.2015.

  1. Finding that none of the circumstances provided for in article 18, paragraph 1, of the RJAT existed that would make necessary the arbitral meeting envisaged therein, the holding of the same was dispensed with, on the grounds of the prohibition of performance of useless acts.

The presentation of arguments was also dispensed with, pursuant to article 18, paragraph 2, of the RJAT, "a contrario".

  1. The grounds presented by the Claimant in support of its claim were, in summary, as follows:

  • The Claimant engages in the activity of automobile rental and provision of services associated with fleet management.

  • The Claimant was notified of the assessments subject to these proceedings and paid all amounts relating to the acts in question.

  • The Claimant is not the taxpayer for Single Motor Vehicle Tax relating to the vehicles in question in any of the years with respect to which the official assessments now subject to this arbitral review incurred, since in all cases covered by this arbitral review request, the tax assessed relates to vehicles already sold by the Claimant on the date of the occurrence of the tax fact.

  • Pursuant to article 6, paragraph 3, of the Single Motor Vehicle Tax Code, the tax is considered due from the owner (or other vehicle holders in equivalent circumstances) on the first day of the tax period of the vehicle, which, according to article 4, paragraph 2, of the same Code, takes place on the date on which the registration is granted.

  • Therefore, pursuant to that provision, it follows that on the date of the tax due date, the Claimant was no longer the owner of the vehicles in question, whereby the taxpayer should be the new owner of each vehicle, or the equivalent holder pursuant to article 3, paragraph 2 of the Single Motor Vehicle Tax Code.

  • The ownership of these vehicles was not entered in the motor vehicle register in the name of the new owner, a fact which the Claimant, in light of the currently applicable system, cannot remedy, in that only the purchaser of the vehicle, furnished with the respective registration certificate, has the legal authority to request such entry.

  • Article 3, paragraph 1 of the Single Motor Vehicle Tax Code establishes a presumption, rebuttable by contrary proof, as follows from article 73 of the General Tax Law.

  • A different interpretation would violate the constitutional principle of contributory capacity as well as the principle of equivalence enshrined in article 1 of the Single Motor Vehicle Tax Code.

  1. The Tax and Customs Authority, called upon to respond, contested the Claimant's claim, defending itself through objection, in summary, with the following grounds:

  • The interpretation advocated by the Claimant derives not only from a biased reading of the letter of the law, but also from the adoption of an interpretation that does not take into account the systematic element, violating the unity of the system enshrined throughout the Single Motor Vehicle Tax Code and, more broadly, throughout the entire tax law system, and further derives from an interpretation that ignores the ratio of the system enshrined in the article in question, and likewise throughout the Single Motor Vehicle Tax Code.

  • Indeed, article 3, paragraph 1, of the Single Motor Vehicle Tax Code provides that "The taxpayers 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".

  • In these terms, it is imperative to conclude that, in the case of the present arbitral review proceedings, the legislator expressly and intentionally established that those persons are to be considered as such [as owners or in the situations provided for in paragraph 2, the persons enumerated therein] in whose names the same [the vehicles] are registered, because this is the interpretation that preserves the unity of the tax law system.

  • To understand that the legislator enshrined a presumption here would unequivocally be to perform an interpretation contrary to law.

  • In face of this wording it is manifestly not possible to claim that it is a presumption, as the Claimant contends.

  • Rather, it is a clear legislative policy choice adopted by the legislator, whose intention, within its freedom to shape legislation, was that for purposes of Single Motor Vehicle Tax, those who appear as such in the motor vehicle register be considered owners.

  • The systematic element of interpretation of the law also demonstrates that the solution advocated by the Claimant is intolerable, finding the understanding advocated by the Claimant no support whatsoever in the law.

  • This results not only from the aforementioned paragraph 1 of article 3 of the Single Motor Vehicle Tax Code, but also from other provisions enshrined in said Code.

  • In these terms, and in the same sense, article 6 of the Single Motor Vehicle Tax Code, under the heading "Taxable Event and Due Date", in its paragraph 1, provides that: "The taxable event of the tax is constituted by the ownership of the vehicle, as evidenced by the registration in national territory."

  • From the articulation between the scope of the subjective scope of the Single Motor Vehicle Tax and the fact constitutive of the corresponding tax obligation, it unequivocally follows that only legal situations subject to registration (without prejudice to a vehicle remaining in national territory for a period exceeding 183 days, provided for in paragraph 2 of article 6) give rise to the birth of the tax obligation.

  • In addition to everything stated above, it should also be noted that if the interpretation conveyed by the Claimant were accepted, then it would be contrary to the Constitution, in that such interpretation would result in the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

  • In fact, the interpretation proposed by the Claimant essentially devalues the registration reality to the detriment of an informal reality incapable of minimal control by the Respondent, it is offensive of the basic principle of trust and legal certainty that should inform any legal relationship, including the tax relationship.

  • In support of its thesis, the Claimant came to attach second copies of invoices with descriptions of "residual values" and "sale of non-leased vehicle", documents which, for due purposes, are hereby objected to.

  • It is clear that the Claimant has succeeded in proving nothing, nor even attempted to do so.

  • In truth, it merely attaches second copies of invoices, without making any proof or even demonstrating any indication of breach and, above all, of the existence of any purchase and sale contract.

  • Indeed, it does not attach any sales contract, or, if the case may be, any financial leasing contract.

  • Invoices are not apt to prove the conclusion of a synallagmatic contract such as purchase and sale, as such documents do not reveal in themselves an essential and unequivocal declaration of intent (i.e., acceptance) by the purported purchasers.

  • With regard to the evidentiary value or weight of the invoices in the present proceedings, doubts arise in light of the discrepancies revealed, as follows:

  • The invoices attached by the Claimant present distinct descriptions in their details.

  • Thus, there are second copies of invoices attached, for example concerning registrations …-…-…, …-…-… and …-…-… where one can read in the description field the mention "Residual values", whereas the one concerning registration …-…-… already refers to "Sale of non-leased vehicle".

  • However, it does not attach, nor even alleges, that the vehicles whose invoices refer to "residual values" were the subject of any leasing contract, whereby the description of these second copies of invoices is not understood.

  • That is, faced with a supposed single type of contract (i.e., a purchase and sale contract for a motor vehicle) it would be expected to find the existence of a uniform description, which is not the case here, given that various invoices attached to the arbitral review request include different descriptions, whereby one is inevitably led to conclude that there exist several distinct realities.

  • Since the invoices are non-conforming, as they are, then it is necessary to conclude that such documents can never benefit from the presumption of truthfulness to which article 75 of the General Tax Law alludes.

  • In summary, the Claimant has failed to prove the alleged transfer of the vehicles in question here.

  • Mere unilateral documents do not possess sufficient evidentiary value to rebut the legal presumption contained in the register.

The Respondent further alleges subsidiarily:

  • The transfer of ownership of motor vehicles is not susceptible to being controlled by the Respondent.

  • In the case in question, the Respondent merely complied with the legal obligations to which it is bound and, in parallel, followed the register information that was provided to it by the proper party, whereby it should not be condemned to pay indemnificatory interest, nor costs relating to the arbitral process, since it was the Claimant that, by not having taken steps to carry out the registration, gave rise to the present arbitral review request.

  • In effect, in light of articles 43 of the General Tax Law and 61 of the Tax Procedure Code, the right to indemnificatory interest depends on the verification of the following requirements: (i) payment of the tax; (ii) annulment of the respective assessment, wholly or partially, in administrative or judicial proceedings; (iii) determination, in administrative or judicial proceedings, that the annulment is based on error imputable to the services.

  • In the case of these proceedings there is the absence of error imputable to the services whereby the requirements necessary for the right to indemnificatory interest are not met.

  1. The court is materially competent and is regularly constituted pursuant to the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented.

The proceedings do not suffer from any defects that would invalidate them.

  1. It is necessary to resolve the following questions:

  1. Whether the assessments sub judice are illegal due to violation of law.

  2. Whether the Claimant should be recognized as having the right to restitution of taxes paid.

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

II – The Substantive Facts

  1. The Court considers the following facts as proven:

  2. The Respondent made the following assessments of Single Motor Vehicle Tax, of which it notified the Claimant:

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 35.06 €, plus compensatory interest in the amount of 1.81 €.

  • Assessment No. …, for the year 2014, month of June and concerning vehicle …-…-… in the amount of 35.41 €, plus compensatory interest in the amount of 0.42 €.

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 32 €, plus compensatory interest in the amount of 1.66 €.

  • Assessment No. …, for the year 2014, month of June and concerning vehicle …-…-…, in the amount of 32 €, plus compensatory interest in the amount of 0.38 €.

  • Assessment No. …, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 54.76 € plus compensatory interest in the amount of 2.83€.

  • Assessment No. …-…-…, for the year 2014, month of June and concerning vehicle …-…-…, in the amount of 55.31 € plus compensatory interest in the amount of 0.77 €.

  • Assessment No. …-…-…, for the year 2013, month of June and concerning vehicle …-…-…, in the amount of 35.06 € plus compensatory interest in the amount of 1.81€.

  • Assessment No. …, for the year 2014, month of June, and concerning vehicle …-…-…, in the amount of 35.41 € plus compensatory interest in the amount of 0.49 €.

  1. As the grounds for these assessments, the respective assessments contain the following:

"Assessment made pursuant to paragraph a) of paragraph 1 of article 2, combined with articles 3, 4, 6 and 9, all of the Single Motor Vehicle Tax Code, because the tax relating to the vehicle identified in the document was not assessed or paid, up to the date of assessment and in the month referred to in the table".

  1. The Claimant paid all the assessments on 19 November 2014.

  2. Facts Not Proven

The Court considers it not proven that the motor vehicles to which the assessments relate were sold by the Claimant on a date prior to the date of the occurrence of the tax fact.

  1. Reasoning on the Substantive Facts

The decision on the substantive facts given as proven is based on the documents in the file, not challenged by the parties, and it should be noted that on this matter the parties expressed no disagreement whatsoever.

With regard to the facts given as not proven, with potential relevance to the proof thereof, only four documents designated as "2nd copy" [of invoice] appear in the file (one for each vehicle).

These documents contain the dates of 23.11.2003 (vehicle …-…-…); 23.07.2007 (vehicle …-…-…); 23.06.2003 (vehicle …-…-…) and 26.05.2009 (vehicle …-…-…) with it not being expressly apparent from the documents whether such dates are the dates of issuance of the invoices or the date of issuance of the second copies thereof. However, since in all invoices the dates inserted therein correspond to the beginning of the period to which the invoices relate, in accordance with what is stated in the documents themselves, it is to be concluded that the dates in question are those of the issuance of the invoices and not those of the second copies thereof. In reinforcement of this conclusion it should be noted that all these documents contain the following mention, "-Processed by certified program No. 580/AT". From this it follows that the dates of the issuances of the second copies in question could not be those indicated, since at that time there was no system in force in the Portuguese legal order for certification of invoicing programs.

Therefore, the documents in question ("second copies") lack dating.

On the other hand, neither from the documents in question nor from the arbitral review request does any justification for the issuance of second copies of invoices result, namely loss of the duplicate or copy intended for filing with the supplier, or other justifying reason.

In these circumstances, the alleged invoices in question cannot be validly reformed and, consequently, the documents attached are not apt to prove the alleged sales.

Furthermore, another reason would lead to the facts in question not being considered as proven.

Indeed, all the alleged second copies of invoices contain the mention: "-Valid upon good collection." It happens that the Claimant neither proved nor even alleged that such collection occurred, whereby even if the invoices could be regarded as validly replaced by the second copies, their contents, unaccompanied by the allegation and proof of such collection, would not result in proof of the facts in question.

III – The Applicable Law

  1. Pursuant to article 3, paragraph 1, of the Single Motor Vehicle Tax Code, "the taxpayers 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."[1]

The question that arises with respect to this provision relates to the question of whether the person in whose name the ownership of the vehicles is registered may prove, despite that circumstance, that he was not the owner thereof on the date of the tax fact, in order to set aside the status of taxpayer of the tax.

  1. In order to respond to the problem in question, it seems to us pertinent to inquire whether article 3, paragraph 1, of the Single Motor Vehicle Tax Code enshrines a presumption, a position sustained by the Claimant or whether, differently, it is merely the configuration of the legal type of tax, within the scope of freedom to shape legislation, as the Respondent contends, and that, according to article 73 of the General Tax Law, "Presumptions enshrined in the provisions on tax scope always admit contrary proof".

  2. In legal scholarship the distinction between fictions and presumptions has been analyzed, from the perspective of tax law.

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

"With regard 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 given rule for a fact provided (F1) to another fact provided (F2)... the law "pretends" that F2 is a case of F1' (p. 603).

"The fiction is distinguished from simple presumption and absolute presumption in that it does not base itself 'on a probability that normally transforms itself into truth', as it 'deforms (a legal truth) consciously' (p. 604).

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

In spite of both presumption and fiction constituting the result of legislative techniques, through which consequences are drawn from legal facts taken as true, what truly distinguishes them is the circumstance that in legal presumption the presumed fact has a high degree of probability of existing, and that 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 "(...) one must separate the situations in which we are faced with legal presumptions, in which from a known fact (real or even legal) a naturally probable legal fact is inferred, in which case contrary proof must be admitted, to make them compatible with the principle of contributory capacity, from the situations in which we encounter the assumption of rules of common experience as rules of taxation, with the construction of legal norms (or legal types) with the (eventual) recourse to legal fictions. In these, the principle of contributory capacity suffers the natural clash of the principles of practicability and effective fight against tax evasion, having to content itself with a safety valve for those cases which, by reaching such levels of inequity, cannot but allow the setting aside of said rules of experience".

  1. In the case in question, and in light of the authorized legal scholarship cited, it seems clear that, in article 3, paragraph 1, of the Single Motor Vehicle Tax Code, we are faced with a presumption, in that it is (highly) probable from the fact that a person has a vehicle registered in his name, that he is, effectively, the owner thereof.

It is this same probability that underlies the presumption derived from registration enshrined in article 7 of the Real Property Register Code, applicable by cross-reference to article 29 of the Motor Vehicle Register Regulations.

It is true that the law does not use the expression "being presumed as such, until contrary proof", which appeared in article 3, paragraph 1 of the Regulations of the Municipal Tax on Vehicles[2], but such does not seem to prevent our being materially faced with a presumption.

As was written in the decision handed down in arbitral process No. 286/2013-T[3], "just as already noted in other arbitral decisions handed down in this CAAD with respect to the same matter (cf. the decisions handed down in processes Nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of legislative provisions, distinct from those invoked above, in which the use of the expression "considering as" or "considers itself" with the meaning of presumption also occurs), not only can it not be said, in any way, that the attribution of a presumptive meaning to the expression "considering as" does not possess "a minimum of verbal correspondence, albeit imperfectly expressed" (paragraph 2 of article 9 of the Civil Code), but, more than that, should one even recognize such word a current and normal correspondence to that presumptive meaning.

For this reason, the fact that, differently from what occurred with the literal enunciation "being presumed" that previously appeared in article 3 of the Regulations on the Tax on Vehicles, the legislator has come to use in the Single Motor Vehicle Tax Code the formula "considering as" that appears in the current article 3 of that Code, does not assume decisive weight, since this expression has perfect semantic virtuosity to encompass the enshrinement of a presumption".[4]

  1. The Administrative Supreme Court decision of 4-11-2009, handed down in process 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 seem applicable only to provisions on tax scope in the proper sense, but also to all provisions that establish fictions that influence the determination of taxable matter (whether directly, through fictitious values for taxable matter, or indirectly, by setting fictitious the values of revenues relevant for its determination). This, it seems, is the scope of the adverb 'always' used in article 73 of the General Tax Law, which elevates this rule to a basic principle of the entirety of the tax law system, corollary of the principle of equality in the distribution of public burdens, based on the principle of contributory capacity".

It is true that the Single Motor Vehicle Tax is not, essentially, subordinated to the principle of contributory capacity, but rather to the principle of equivalence. However, such does not seem to impose different solutions in that both principles are intrinsically linked to the general principle of tax equality, where they find their foundation.

In truth, "The principle of contributory 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 Single Motor Vehicle Tax Code providing that "The single motor vehicle tax complies with the principle of equivalence, seeking to burden taxpayers to the extent of the environmental and road cost that they cause, in implementation of a general rule of tax equality", other provisions reinforce and specify the weight of this principle within the system of this tax.

Foremost, article 3, paragraph 1, of the Law that approved the Single Motor Vehicle Tax Code (Law No. 22-A/2007, of 29 June), specifying this idea of equivalence, determines that: "The revenue generated by the Single Motor Vehicle Tax assessed on vehicles of categories A, E, F and G, as well as 70% of the component relating to engine capacity assessed on vehicles of category B, is the responsibility of the municipality of residence of the taxpayer or equivalent person, except if such revenue is assessed 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 purposes of effective implementation of this legislative intention, article 19 of the Single Motor Vehicle Tax Code provides that: "For purposes of the provisions of article 3 of the present code, as well as of paragraph 1 of article 3 of the law of its approval, the entities that carry out financial leasing, operational leasing or long-term rental of vehicles are obligated to provide to the Directorate General of Taxes the data relating to the tax identification of the users of the leased vehicles."

On the other hand, this also specifies the principle of equivalence in paragraph 2 of article 3 of the same Code by providing that "Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the leasing contract, are equated to owners."

  1. Thus it is well clear the decisive importance given by Law to the principle of equivalence, whether from the side of the causer of environmental and road cost, or from the side of the Municipality that tends to bear such costs and which, for that reason, is the beneficiary of the tax revenue.

As emphasized by Sérgio Vasques: "The structure of the new single motor vehicle tax is clearly commutative also, which since 2007 has burdened automobiles according to CO2 emission levels, openly appealing to the principle of equivalence and an exchange relationship with taxpayers"[7].

If it were not possible for the person entered as owner in the motor vehicle register to set aside the status of taxpayer, by proving that he was not the owner on the date of the tax fact, this idea of equivalence could be decisively put in question, taxing the person who did not cause the environmental and road cost and potentially not allocating the revenue to the Municipality that tended to bear those costs.

  1. The Respondent contends that the interpretation proposed by the Claimant of article 3, paragraph 1 of the Single Motor Vehicle Tax Code is contrary to the Constitution of the Portuguese Republic in that it devalues registration reality as against an "informal reality",[8] violating the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

It is not apparent, with all due respect, how the position that sustains that we are, in article 3, paragraph 1, of the Single Motor Vehicle Tax Code, faced with a rebuttable presumption, could put in question the principles of trust and legal certainty, given that these impose duties and restrictions on legal-public action[9].

Much 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 that might be raised would be whether such principle would not be violated by the interpretation recommended by the Respondent in that if it were admitted that the citizen could be prevented, for purposes of taxation, from proving that despite the registration he is not the effective owner of the vehicle, such would be equivalent to suffering the consequence of the omission of an act (the motor vehicle registration) the interested party in whom, in terms of legal certainty, from the civil law perspective is another person (the buyer).

In fact, even if it be admitted that such solution is apt to achieve the public purpose in view, it does not appear clear that there are no 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 individuals (in this case of the former vehicle owners) as against the benefits aimed at with the public interest, with this fundamental requirement of the principle of proportionality being found not to be met.

In reality, the benefit achieved, from the perspective of tax administration, with a rebuttable presumption is already significant, and cases of absence of registration by purchasers are surely situations in a number certainly of little relevance in the universe of vehicle transactions, given the natural motivation of purchasers in carrying out registration, since such is in their own interest.

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

However, weighing, in particular, the requirements of practicability of tax administration, 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, that would not even permit the citizen to make proof contrary to the presumption.

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

It seems to us 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 particular case should not operate in isolation but in joint consideration with the other principles and, following what was said above with respect to the principles of equality, equivalence and proportionality, the idea of efficiency is not sufficient to relegate the possibility of the taxpayer setting aside the presumption resulting from motor vehicle registration. Additionally, efficiency and practicability are sufficiently safeguarded by the existence of a rebuttable presumption, in the terms referred to above.

  1. Therefore, it is concluded that article 3, paragraph 1, of the Single Motor Vehicle Tax Code enshrines a rebuttable presumption, with the interested party, in order to set aside the same, having to prove that, despite the registration, he was not the real owner, having meanwhile sold it.

In this sense were, among others, the decisions handed down in arbitral processes Nos. 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 thus endorsed.

  1. In the case in question, the Respondent, basing itself on the fact underlying the presumption, proceeded to make the assessment.

The Claimant, admitting the fact underlying the presumption, proposed to rebut the same, with the demonstration that it would have sold the motor vehicles in question on a date prior to that of the tax facts. It happens, however, that such proof was not made, as results from the decision handed down on the substantive facts.

Therefore, the presumption established in article 3, paragraph 1, of the Single Motor Vehicle Tax Code not having been rebutted, there is no foundation to the grounds invoked in the arbitral review request for the annulment of the assessment act in question, which necessarily entails the lack of merit of the remaining claims of the Claimant.

IV – Decision

Therefore, the Arbitral Court decides not to decree the annulment of the assessments under consideration and, consequently, to judge the arbitral review request to be wholly without merit.

Value of the case: 341.35 € (three hundred and forty-one euros and thirty-five cents) pursuant to the provisions of article 306, paragraph 2, of the Code of Civil Procedure and article 97-A, paragraph 1, subparagraph a), of the Tax Procedure Code and article 3, paragraph 2, of the Regulations on Costs in Arbitration Proceedings.

Costs borne by the Claimant, in the amount of 306 € (three hundred and six euros) pursuant to paragraph 4 of article 22 of the RJAT.

Let notification be made.

Lisbon, CAAD, 31.08.2015.

The Arbitrator

Marcolino Pisão Pedreiro

[1] Paragraph 2 of the same article further provides that "Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights 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 from the owners of the vehicles, being presumed as such, until contrary proof, the persons in whose names the same are entered in the motor vehicle register or registration".

[3] Available at "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] Additionally, 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 scope may be explicit, revealed by the use of the expression 'presumed' or similar (…). However, presumptions may also be implicit in scope provisions, designedly of objective scope, when certain values of movable or immovable property are considered as constituting taxable matter, in situations in which it is not impracticable to ascertain the real value" (Cf. "General Tax Law Commented and Annotated", 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 further noted by this author 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 revenue collection, showing the unilateral contours typical of any tax.

From the 1980s and 1990s (…), however, these tax figures came to be instrumentalized to compensate for the costs that consumption of these brings to public health and the environment, with which special consumption taxes have come to gain the commutative nature that 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 applies in Portuguese law (article 219 of the Civil Code). Except when the law requires it, the validity of the legal declaration does not depend on the observance of any special form. The "informal reality" to which the Claimant alludes is in truth the material reality that results from the provisions of civil law.

[9] Jorge Bacelar Gouveia notes that the principle of legal certainty requires "the publicity of acts of public authority, as well as the clarity and determinability of the sources of law" and that the principle of protection of trust requires "that the normative framework in force not change in a way as to frustrate the expectations generated in citizens as to its continuity, with the prohibition of an intolerable retroactivity of laws, as well as the necessity of its alteration in accordance with the 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 "rests on an internal material limitation to legal-public action of a discretionary character, containing the excessive effects that may present themselves in the issuance of measures of public authority of an ablative nature for their respective addressees" (op. cit., pages 839-840).

[11] And not, manifestly, the principle of efficiency of tax law, 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, they do not function efficiently." (Course in Tax Law, Coimbra Editors, 2009, p. 28.)

[12] Viewable at https://www.caad.pt/tributario/tributario-jurisprudencia.

Frequently Asked Questions

Automatically Created

What is subjective incidence (incidência subjetiva) in Portuguese Vehicle Circulation Tax (IUC)?
Subjective incidence (incidência subjetiva) in Portuguese IUC refers to identifying who is liable to pay the tax. According to Article 3(1) of the IUC Code, taxpayers are vehicle owners, defined as natural or legal persons in whose names vehicles are registered in the national motor vehicle register. Article 6(1) reinforces this by establishing that the taxable event is constituted by vehicle ownership as evidenced by registration. The key dispute in this decision concerns whether registration creates merely a rebuttable presumption of ownership or definitively determines taxpayer status for IUC purposes, regardless of actual underlying ownership.
Can a company challenge IUC tax assessments through CAAD tax arbitration in Portugal?
Yes, companies can challenge IUC tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration in Portugal. Under Article 10 of Decree-Law No. 10/2011 (RJAT - Legal Framework for Arbitration in Tax Matters), taxpayers can request constitution of an arbitral court against the Tax and Customs Authority to seek annulment of IUC assessments. This case demonstrates that vehicle rental companies and other legal entities have standing to use this arbitration mechanism to contest IUC liquidations they consider unlawful, providing an alternative to traditional court litigation for tax disputes.
How do legal presumptions (presunções legais) affect IUC liability for registered vehicle owners?
Legal presumptions significantly impact IUC liability, though their exact nature is disputed. The claimant argued that Article 3(1) of the IUC Code establishes a rebuttable presumption under Article 73 of the General Tax Law, meaning the registered owner is presumed liable but can prove otherwise. However, the Tax Authority contended this is not a presumption but a definitive legislative policy choice: whoever appears as owner in the motor vehicle register is considered the owner for IUC purposes, period. This interpretation suggests registration creates an irrebuttable determination of tax liability, making it extremely difficult for registered owners to escape IUC obligations even after selling vehicles if registration is not transferred.
What is the procedure for requesting annulment of IUC liquidations before the CAAD arbitral tribunal?
The procedure for requesting annulment of IUC liquidations before CAAD involves several steps: (1) Submit a formal request to constitute an arbitral court under Article 10 of RJAT, identifying the specific assessments to be annulled; (2) The President of CAAD accepts the request and notifies the Tax and Customs Authority; (3) An arbitrator is designated by the President of the Deontological Council under Article 6(1) of RJAT; (4) The Arbitral Court is formally constituted; (5) Both parties submit their written arguments; (6) The arbitrator may dispense with oral hearings if unnecessary (Article 18 RJAT); (7) A final arbitral decision is issued. The process typically takes several months from initial request to final decision.
Are taxpayers entitled to a refund and compensatory interest after a successful IUC arbitration decision?
Yes, taxpayers are entitled to both refund and compensatory interest following successful IUC arbitration decisions. In this case, the claimant explicitly requested restitution of taxes paid unduly plus indemnificatory interest on those sums. This reflects the general principle in Portuguese tax law that taxpayers who successfully challenge unlawful assessments are entitled to full reimbursement of amounts paid, plus interest to compensate for the time value of money and the undue use of their funds by the State. The interest compensates taxpayers for being deprived of their money during the period between payment and refund.