Process: 153/2014-T

Date: October 23, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD Case 153/2014-T addressed the critical issue of IUC (Single Vehicle Circulation Tax) liability for vehicles under leasing and long-term rental (ALD) contracts. The Claimant, a major Portuguese credit institution succeeding a dissolved leasing subsidiary 'B', challenged IUC assessments totaling €10,575.98 for tax years 2009-2012. The dispute centered on whether vehicle registration alone establishes conclusive IUC liability under Article 3(1) of the IUC Code, or whether this creates a rebuttable legal presumption. The leasing company argued that despite being registered as owner, it had transferred the vehicles to lessees before the taxable event occurred, thus no longer meeting the subjective incidence requirements. The Tax Authority maintained that registration on the taxable event date definitively establishes tax liability regardless of actual ownership transfer. This arbitration raised fundamental questions about the nature of legal presumptions in Portuguese tax law, the probative value of commercial invoices demonstrating vehicle transfers, and whether financial institutions conducting leasing operations can challenge registration-based tax assessments. The case has significant implications for the financial leasing industry in Portugal, particularly regarding the allocation of IUC liability between lessors and lessees in ALD contracts where ownership transfer is mandatory at contract termination. The tribunal examined whether the registration-based presumption in IUC legislation can be overcome by documentary evidence proving ownership had passed to third parties prior to the tax assessment date.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case no. 153/2014 – T

Subject: IUC – subjective incidence; legal presumption.

I. REPORT

"A", S.A., Public Company, with registered office at Street …, no. …, in Oporto (…-…), registered in the Commercial Registration Office of Oporto under the unique registration number and legal entity number …, with share capital of € 1,190,000,000.00 (One billion one hundred ninety million euros), as legal successor to "B" – COMMERCE AND LEASING OF GOODS, LDA. (with the unique registration number and legal entity number …, hereinafter abbreviated as "B"), hereinafter referred to as the "Claimant", pursuant to the provisions of subparagraph a) of number 1 of article 2, subparagraph a) of number 3 of article 5 and subparagraph a) of number 1 of article 10, all of the Legal Regime of Arbitration in Tax Matters (RJAT) approved by Decree-Law no. 10/2011, of 20 January, has submitted a request for an arbitral decision seeking the declaration of illegality of assessments of IUC (Single Vehicle Circulation Tax) and compensatory interest "(…) on the vehicles registered in the name of the entity "B", above better identified, comprising the fiscal years 2009 to 2012 substantiated in the collection documents better detailed in the table [inserted in article 1 of the request for arbitral decision], in the total amount of € 10,575.98."

To substantiate its request, it alleges, in summary:

a) The Claimant is a credit institution, subject to the supervision of the Bank of Portugal, which heads Group "A", a financial group, multi-specialized, centered on banking activity, endowed with a complete offering of financial services and products for business, institutional and individual clients.

b) The purpose of the Claimant's business consists in the performance of the operations described in number 1 of article 4 of the General Regime of Credit Institutions and Financial Companies, approved by Decree-Law no. 298/92, of 31 December, among which stands out, as far as this case is concerned, credit operations and financial leasing;

c) The entity "B", held 100% by "A", was subject to liquidation on 26/08/2009, having been succeeded by the latter in all its rights and obligations;

d) The purpose of the business of "B" consisted, precisely, in the performance of financial leasing operations under the modality of long-term rental (ALD);

e) In the exercise of its activity, that entity entered into ALD contracts having as their object the vehicles identified in table I of the request for arbitral decision;

f) As is typical of Leasing and ALD contracts, the Claimant assumes the position of lessor and, in accordance with the terms and conditions of the respective contracts, acquires the vehicles from third-party suppliers, delivering them immediately for use and enjoyment by the lessees, who are obligated to pay the respective rent;

g) Thus, throughout the term of the Leasing and ALD contracts, the Claimant is the owner of the vehicles acquired, appearing as such in the vehicle registration, charging rents to the lessees for the transfer (leasing) of the goods;

h) Being ALD contracts, the lessee is obligated to acquire ownership of the vehicles at the end of the contract;

i) On 28/08/2013, the Claimant was notified for prior hearing concerning the ex officio assessments of IUC of the vehicles in question, based on the fact that the Claimant is registered as the owner of the vehicles in question;

j) In the hearing right, the Claimant expressed its disagreement with the projected IUC assessments because, as of the date of the occurrence of the taxable event, it was no longer the passive subject of the tax;

k) Indeed, the vehicles in question had been transferred in a moment prior to the date of the occurrence of the taxable event, whereby the Claimant was not its owner, not being, consequently, liable for the single vehicle circulation tax with respect to those;

l) The Tax and Customs Authority (AT), indifferent to the arguments put forward by the Claimant, maintained the assessments under challenge;

m) The Claimant proceeded to pay the amounts of tax assessed, not conforming, however, with the understanding underlying the action of the AT.

The Claimant attached five (5) documents and did not call witnesses.

In the request for arbitral decision, the Claimant chose not to appoint arbitrators, whereby, pursuant to the provisions of article 6 no. 2 a) of the RJAT, the undersigned was appointed by the Ethics Council of the Center for Administrative Arbitration, and the appointment was accepted in accordance with the legally provided terms.

The arbitral tribunal was constituted on 24 April 2014.

Notified in accordance with the terms and for the purposes of the provisions of article 17 of the RJAT, the Respondent submitted an answer, maintaining that the request for arbitral decision should be judged without merit and that the tax acts challenged should be maintained in the legal system, alleging, briefly, that:

a) The tax acts under challenge do not suffer from any defect of violation of law, since, in light of the provisions of no. 1 of article 3 and article 6, both of the IUC Code, it was the Claimant that was the passive subject of the tax, because the vehicles in question were registered in its name on the date of the occurrence of the taxable event;

b) Even if this were not the case, it should always be stated that from the elements in the file, attached by the Claimant, it does not follow that this, on the date of the occurrence of the tax facts, was not the owner of the said vehicles;

c) Moreover, it maintains that, even if the request for arbitral decision is judged to have merit, the Claimant should be condemned to pay the arbitral costs arising from the present request, for having been the one who gave rise to the litigation.

The Respondent did not attach any documents and did not, likewise, call any witnesses.

The Tribunal dispensed with the meeting provided for in article 18 of the RJAT, with the parties dispensing with the submission of arguments, oral or written.

II. QUESTIONS TO BE DECIDED

In light of the positions assumed by the Parties, set forth in the arguments put forward, it is necessary:

a. To determine whether the circumstance that, on the date of the occurrence of the taxable event, the party was not the owner of the vehicle and appears as such in the registration, allows, without more, to consider the one appearing in the registration as the passive subject of IUC; that is, it is necessary to determine whether the norm of subjective incidence contained in no. 1 of article 3 of the CIUC establishes or not a presumption;

b. To determine what probative value should be attributed to the invoices attached by the Claimant;

c. To determine responsibility for the arbitral costs due in the context of the present proceedings.

III. FINDINGS OF FACT

a. Proven facts

With relevance to the decision to be rendered in the present proceedings, the following facts were taken as proven:

  1. The Claimant is a credit institution, subject to the supervision of the Bank of Portugal, which heads Group "A", a financial group, multi-specialized, centered on banking activity, endowed with a complete offering of financial services and products for business, institutional and individual clients;

  2. The entity "B", held 100% by the Claimant, which succeeded it in all rights and obligations, was subject to liquidation on 26 August 2009;

  3. The purpose of the business of "B" consisted in the performance of financial leasing operations under the modality of long-term rental;

  4. In the exercise of its activity, "B" entered into ALD contracts having as their object the vehicles identified in the table inserted in article 1 of the request for arbitral decision;

  5. On 28/08/2013, the Claimant was notified for prior hearing concerning the ex officio assessments of IUC of the vehicles in question;

  6. In the hearing right, the Claimant expressed its disagreement with the projected IUC assessments;

  7. The Tax and Customs Authority (AT) maintained the assessments under challenge;

  8. The Claimant proceeded to pay the amounts of tax assessed.

  9. None of the vehicles at issue in the present proceedings belong to the categories F or G referred to in article 4 of the CIUC;

  10. On the date of the occurrence of the taxable event, an invoice for sale to a third party had been issued by the Claimant with respect to each one of the vehicles.

b. Unproven facts

With interest for the proceedings, no other fact was proven.

c. Grounds for the findings of fact

The conviction regarding the facts taken as proven was formed on the basis of the documentary evidence attached by the Claimant, indicated with respect to each point, and whose correspondence to reality was not questioned.

IV. JOINDER OF CLAIMS

The Claimant comes, invoking the principle of procedural economy, to request the joint consideration of the tax acts in question.

Verified the identity of the nature of the tax facts, of the grounds of fact and law invoked and of the tribunal competent to decide, nothing stands in the way of, pursuant to the provisions of article 3 of the RJAT and article 104 of the Code of Tax Procedure and Process, proceeding with the requested joinder of claims.

V. CLEANSING

The Arbitral Tribunal is regularly constituted and is materially competent.

The parties enjoy legal personality and capacity, are legitimate and are regularly represented.

The proceedings do not suffer from defects that affect its validity, there being no exceptions or preliminary questions that stand in the way of knowledge of the merits and that should be known ex officio.

VI. LAW

The facts being established, it is now necessary, by reference to that, to determine the applicable law.

Having examined the arguments put forward by the Parties, it is easily understood that the fundamental question consists in knowing whether the norm contained in no. 1 of article 3 of the CIUC contains or not a legal presumption.

That question has been abundantly raised, giving rise to extensive case law – also arbitral – which will be brought forward in due course; it is advanced, already, that no substantial reasons are seen for inverting what has hitherto been said on this subject matter. Let us see.

As is known, under the heading subjective incidence, article 3 of the CIUC provides that:

"1. – The passive subjects 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 name the same are registered.

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

Now, to dispel doubts about the meaning and scope to be attributed to a certain legal norm implies carrying out an interpretive task that allows to extract from the linguistic statement a concrete meaning or "content of thought"([1]). However, such a task can only be carried out – thus managing to apprehend the vis ac potestas legis – through the use of a concrete method, which is based on literal interpretation, on the one hand, and on logical or rational interpretation, on the other.

Recall, before proceeding, that according to the provisions of no. 1 of article 11 of the General Tax Law, tax norms are interpreted in accordance with the principles of legal hermeneutics commonly accepted, mainly those fixed, amongst us, in article 9 of the Civil Code. Let us proceed.

Literal interpretation presents itself, then, as the first stage of the interpretive activity. As FERRARA states, "the text of the law forms the substrate from which the interpreter must depart and on which it must rest"([2]).

In fact, since the law is expressed in words, the verbal significance that they contain must be extracted from them, according to their natural connection and the grammatical rules. However, if the words employed by the Legislator are equivocal or indeterminate, it will be necessary to resort to logical interpretation, which attends to the spirit of the provision to be interpreted.

Logical interpretation, as it has been peacefully conceived by the doctrine([3]), is based on the rational element, on the systematic element and on the historical element; weighing them and deducing from them the value of the legal norm in question.

By rational element is to be understood the raison d'être of the legal norm, that is, the purpose for which the legislator instituted it. The discovery of the ratio legis presents itself, thus, as a factor of undoubted importance for the determination of the meaning of the norm.

However, a given norm does not exist in isolation, but rather coexists with other norms and legal principles in a systematic and complex manner. Thus, it becomes natural that the meaning of a concrete norm results clearly from the confrontation of this with the others. As BAPTISTA MACHADO states, "this element comprises the consideration of the other provisions that form the normative complex of the institute in which the norm to be interpreted is integrated, that is, which regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that belongs to the norm to be interpreted in the overall legal system, as well as its consonance with the spirit or intrinsic unity of the entire legal order."([4]).

As for the historical element, in turn, it must relate to and include the materials connected with the history of the norm, such as "the evolutionary history of the institute, of the figure or of the legal regime in question (…); the so-called sources of the law, that is, the legal or doctrinal texts that inspired the legislator in the elaboration of the law (…); the preparatory works.".

Let us apply what has been said to the case at hand.

Having examined the arguments of Claimant and Respondent, and as far as the literal element is concerned, it is easily understood that the focus of dissent lies in the expression "(…) being considered as such (…)", contained in no. 1 of article 3 of the CIUC.

The question is asked – as was in fact asked in the Arbitral Decision rendered in the context of Case no. 73/2013-T([5]): "Does the fact that the legislator opted for the word 'being considered' destroy the possibility of being faced with a presumption?". No. It is the answer that is imposed. And it should not be said that such conclusion is infirmed by the circumstance that the legislator did not use the word "are presumed", which was employed in the old Regulation of the Tax on Vehicles.

Also here we cannot fail to follow what was said in that decision: "examining the Portuguese legal system, we find countless norms that enshrine presumptions using the verb to consider, many of which employed in the gerund ('considering' or even 'being considered'). Examples of this are the norms enumerated below: In the Civil Code, among others, articles 314, 369 no. 2, 374 no. 1, 376 no. 2, 1629 (…). Also in the tax legal system can be found the verb 'to consider', namely the term 'is considered' with a presumptive sense. And there is added the teaching of LEITE DE CAMPOS, SILVA RODRIGUES and LOPES DE SOUSA which, by the clarity of exposition, is likewise transcribed. Thus, the Authors write that 'presumptions in tax incidence matters may be explicit, revealed by the use of the expression is presumed or similar (…). However, presumptions may also be implicit in incidence norms, namely of objective incidence, when certain values of moveable or immoveable property are considered as constituting taxable matter, in situations in which it is not unfeasible to ascertain the real value'."

In this regard, JORGE LOPES DE SOUSA([6]) states that in no. 1 of article 40 of the Personal Income Tax Code the expression "is presumed" is used, whereas in no. 2 of article 46 of the same statute the word "is considered" is employed, with no difference whatsoever between one and the other expression, both meaning, after all, the same thing: a legal presumption.

And what is to be said of no. 4 of article 89-A? Are there any doubts that it is a presumption? And is such conclusion weakened by the fact that the verb to consider is employed there? It does not appear so to us.

Thus, and as far as concerns us here, it is permissible to assimilate the verb to consider to the verb to presume. In fact, we may be faced with a presumption even when the legislator has opted for other verbs, namely that of considering. In truth, and contrary to what is propounded by the Respondent, it is this conclusion that least damages the systematic coherence postulated by the legal system as a whole.

But more: the rational element also authorizes such conclusion.

Let us invoke the statement of reasons of the Bill no. 118/X, of 07/03/2007, which gave rise to Law no. 22-A/2007, of 29 June. It is clear what the ratio legis is.

It was intended to undertake a "global and coherent reform of the taxes linked to the acquisition and ownership of motor vehicles" due to the "imperative necessity of bringing clarity and coherence to this area of the tax system and the necessity, even more imperative, of subordinating it to the principles and concerns of an environmental and energy nature that today mark the discussion of motor vehicle taxation".

Thus, "the two new taxes now created, the tax on vehicles and the single vehicle circulation tax, constitute much more than the technical continuation of the figures created in the 70s and 80s that preceded them, turned predominantly to the raising of revenue, indifferent to the social cost resulting from motor vehicle circulation. They constitute something different, figures already of the century in which we live, with which it is certainly intended to raise public revenue, but to raise it in the measure of the cost that each individual causes to the community."

In a manner congruent with that motivation, the legislator has enshrined, in article 1 of the CIUC, the principle of equivalence, making it clear "that the tax, as a whole, is subordinated to the idea that taxpayers should be burdened in the measure of the cost they cause to the environment and to the road network, being this the reason for being of this tax figure. It is this principle that dictates the taxation of vehicles in function of their respective ownership and until the moment of scrapping".

It may, moreover, be said that environmental and energy concerns are so impressive in the context of IUC, that the principle of equivalence shapes not only the taxable base, but also, and above all, the very subjective incidence itself, provided for in article 3.

Once again, the Arbitral Decision rendered in the context of Case no. 73/2013-T is invoked: "Taking into account both the systematic place that the principle of equivalence occupies (article 1 of the CIUC) – systematic element – and the historical element embodied in Bill no. 118/X (source of law), and the rational (or teleological) just analyzed, all point in the direction of the preliminary conclusion to which we arrived when analyzing the grammatical element, it only making sense to conceive in the context of article 3 of the CIUC the expression 'being considered as such' as revealing the presence of a rebuttable presumption (…). In truth, the ratio legis of the tax rather points in the direction of taxing the users of the vehicles, the economic owner, in the words of DIOGO LEITE DE CAMPOS, the actual owners or financial lessees, since these are the ones that have the polluting potential causing environmental costs to the community".

The legal nature of the norm contained in no. 1 of article 3 of the CIUC being established, it is now necessary to clarify the question relating to the transmission of the right of ownership over the vehicles in question.

It is to be said, as a preliminary matter, that the sale to the lessee is a situation that occurs frequently in the economy of the financial leasing contract, being an imperative in the case of an ALD contract, as is indeed the case in the present proceedings.

Now, if the purchase and sale is celebrated, the lessee will be instituted, ex contractu, in the position of owner, consequently ceasing to apply to it no. 1 of article 3 of the CIUC; that is, the new owner maintains, for purposes of IUC, the position of passive subject of the tax, but no longer by way of the norm that attributed such a quality to it while lessee (no. 2 of article 3 of the CIUC).

And such a solution is imposed from the moment of the perfection of the purchase and sale contract not only because the IUC Code determines it – by stating that the passive subjects of the tax are the owners – but also by the fact that amongst us the principle of consensuality prevails, which entails that the transmission of ownership occurs by mere effect of the contract; as it results in the first instance from no. 1 of article 408 of the Civil Code. See also, reinforcing what is said above, subparagraph a) of article 879 of that statute.

It should be noted, further, that the understanding set out in the paragraph that precedes is unanimously propounded by Doctrine([7]) and Case Law([8]), not requiring, thus, additional developments.

And what has just been said is relevant to support our position with respect to the legal value of the vehicle registration. Recall, however, that according to the general rule seen above, the transfer of rights occurs ex contractu, without need of any material act or publicity([9]).

As peacefully accepted by Doctrine and Case Law, in the face of the silence of Decree-Law no. 54/75, of 12 February, as to the question of the legal value of vehicle registration, it becomes necessary to resort to the discipline of land registration; an operation moreover authorized by article 29 of that Decree-Law.

Now, having regard to the Real Estate Registration Code – approved by Decree-Law no. 125/13, of 30 August –, mainly to its article 7, and combining this norm with article 1 of Decree-Law no. 54/75, it is quickly inferred what the primary function of registration (vehicle) is: to give publicity to the legal situation of motor vehicles.

It may then be stated that registration does not have constitutive nature, rather merely declarative, allowing only to presume the existence of the right and its ownership. Note: presume and not fictionally attribute, being able thus to be rebutted by proof to the contrary.

And this is so precisely because, pursuant to the provisions of article 408 of the Civil Code, and saving the exceptions provided for in the law, the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, its validity not depending on any subsequent act, such as registration.

Thus, not providing the law with any exception for the contract of purchase and sale of a motor vehicle, the real effect produces its effects normally, with the acquirer becoming its owner, independently of the registration.

Now, if independently of the registration the acquirer becomes the owner, the registered holder ceases simultaneously to be so; albeit remaining registered as such.

In the present case, and notwithstanding the lack of registration, the transfers effected are enforceable against the Respondent, who cannot avail itself of the provisions of no. 1 of article 5 of the Real Estate Registration Code.

From the outset by the fact that the Respondent is not, for purposes of the provisions of that norm, regarded as a third party for purposes of registration.

The notion of third parties for purposes of registration is given to us by no. 4 of the same article 5: third parties, for purposes of registration, are those who have acquired from a common author rights that are incompatible with each other. This is, manifestly, not the case in these proceedings.

The same reasoning must, naturally, be applied to cases of financial leasing, with respect to which registration also has no constitutive effect, being no more than a presumption that the right exists. A rebuttable presumption, in like manner, by proof to the contrary.

Now, albeit on the date of the tax assessments the Claimant still appeared in the registration as owner of the vehicles, the truth is that it alleges not to be, on the date of the taxable event, its owner, by having already transferred them.

Thus, and since the presumption resulting from the registration is, as we have seen, rebuttable, let us see whether the documents attached by the Claimant are apt to fulfill such a desideratum.

With a view to proving that the vehicles referred to in the present proceedings were transferred by it on a date prior to the occurrence of the taxable event, the Claimant attached the respective sale invoices.

Note that the Respondent alleged that "the Claimant did not prove the facts it alleges with respect to the transmission of ownership over those vehicles."

It is verified, first of all, that the Claimant attached, for each one of the registrations in question, a sale invoice.

This being so, and as results from the proven facts, none of the vehicles at issue in the present proceedings belong to the categories F or G referred to in article 4 of the CIUC, whereby the taxable event occurs on the date of its registration or on each one of its anniversaries.

It also follows from the proven facts that, on the date of the occurrence of the taxable event, an invoice for sale to a third party had been issued by the Claimant with respect to each one of these vehicles.

Now, for want of any elements or grounds that would allow us to conclude otherwise, we must, naturally, accept the truthfulness of the documents attached.

The truthfulness of the invoices attached by the Claimant being established, we must consider, without necessity of any other considerations, these to be documents apt to prove the transfer of the vehicles in question.

In fact, not providing the law with any specific form for the celebration of a contract of purchase and sale of a moveable thing, it must, necessarily, be accepted as proof of said contract the invoice issued in accordance with the law.

Whereby it is verified that, on the date of the taxable event (date of registration or of each one of its anniversaries) the Claimant had transferred all the vehicles, albeit the said transfers were not reflected in the competent registration.

Thus, taking into account the fact that, as already set out, the presumption resulting from the registration is rebuttable by proof to the contrary, proof which is considered sufficient with the presentation of the sale invoices of the vehicles, it is verified, with respect to the vehicles in question, that the Claimant was not its owner, not being, therefore, the passive subject of the IUC assessed.

Finally, as far as the arbitral costs are concerned, the argument of the Respondent cannot proceed, according to which the Claimant should be condemned to them by virtue of having given rise to the present proceedings. And such argument cannot proceed because the AT could (and should), when faced with the argument of the Claimant, namely in the prior hearing, have annulled the assessments previously issued, thus preventing the materialization of the present proceedings.

In summary:

· The norm contained in no. 1 of article 3 of the CIUC contains a presumption;

· Being that presumption contained in a norm of tax incidence, it will always admit proof to the contrary, as results from article 73 of the General Tax Law;

· When, on the date of the occurrence of the taxable event, the motor vehicle originally subject to an ALD contract has already been transferred, albeit the right of ownership continues to be registered in the name of the original owner, the passive subject of IUC is the new owner, provided that the latter rebuts the presumption arising from the registration;

· The transmission of ownership occurs by mere effect of the contract, not requiring any subsequent act;

· The vehicle registration does not have constitutive nature, rather aiming to give publicity to the situation of vehicles through rebuttable presumptions of the existence of the right and its respective ownership;

· The AT cannot rely on the absence of updating of the registration to, by questioning the perfection of the purchase and sale contracts, attribute to the original owner the quality of passive subject of IUC and, thus, demand from it the fulfillment of the tax obligation.

From all that has been set out, it results clearly that there is no legal ground for the IUC assessment acts, imposing their annulment, as well as of the respective compensatory interest, with the other legal consequences.

VII. OPERATIVE PART

In view of the foregoing, it is decided:

a. To judge the Claimant's application to annul the IUC assessment acts and compensatory interest referred to in the request of the Claimant to have merit;

b. To annul the IUC assessment acts and compensatory interest referred to in a., with all legal consequences.

c. To condemn the Respondent to pay the costs of the proceedings.

The value of the case is set at € 10,575.98, pursuant to subparagraph a) of no. 1 of article 97-A of the Code of Tax Procedure and Process, applicable by force of subparagraphs a) and b) of no. 1 of article 29 of the RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The value of the arbitration fee is set at € 918.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Proceedings, pursuant to no. 2 of article 12 and of no. 4 of article 22, both of the RJAT, and of no. 4 of article 4 of the cited Regulation, to be paid by the Respondent as the defeated party.

Record and notify.

Lisbon, 23 October 2014.

The Arbitrator,

Alberto Amorim Pereira

Text elaborated by computer, pursuant to no. 5 of article 131 of the Code of Civil Procedure, applicable by reference of subparagraph e) of no. 1 of article 29 of Decree-Law no. 10/2011, of 20/01.

The composition of this decision follows the old orthography.

([1]) Cf. BAPTISTA MACHADO, JOÃO, Introduction to Law and Legitimating Discourse, Almedina, 1982, p. 175.

([2]) FERRARA, FRANCESCO, Interpretation and Application of Laws, 1921, Rome; Translation by MANUEL DE ANDRADE, Arménio Amado, Editor, Successor – Coimbra, 2nd Edition, 1963, p. 138 et seq.

([3]) See, by all, BAPTISTA MACHADO, JOÃO, op. cit., p. 181.

([4]) BAPTISTA MACHADO, JOÃO, op. cit., p. 183.

([5]) Cf. Arbitral Decision of 5 December 2013, rendered in the context of Case no. 73/2013, p. 21.

([6]) Cf. LOPES DE SOUSA, JORGE, Tax Procedure and Process Code Annotated and Commented, Vol. I, 6th Edition, Áreas Publisher, Lisbon, 2011, p. 589.

([7]) See, by all, PIRES DE LIMA and ANTUNES VARELA, Civil Code Annotated, Volumes I and II, Coimbra Publisher, 4th Revised and Updated Edition, Annotations to articles 408 and 79.

([8]) See, inter alios, Ruling of the Supreme Court of Justice of 3 March 1998.

([9]) Cf. EWALD HÖRSTER, HEINRICH, The General Part of the Portuguese Civil Code, Almedina, 2nd Reprint of the 1992 Edition, p. 467.

Frequently Asked Questions

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Who is liable for IUC payment on vehicles under leasing or long-term rental (ALD) contracts in Portugal?
Under Portuguese law, IUC liability for vehicles in leasing or long-term rental (ALD) contracts is primarily determined by Article 3(1) of the IUC Code, which establishes that the person registered as the vehicle owner on the taxable event date is the passive subject of the tax. In financial leasing arrangements, the leasing company typically appears as the registered owner throughout the contract term, charging rents to lessees. However, CAAD Case 153/2014-T examined whether this registration creates an absolute liability or a rebuttable presumption, particularly relevant when vehicles are transferred before the taxable event but registration updates are delayed. In ALD contracts specifically, lessees are obligated to acquire ownership at contract end, raising questions about when IUC liability transfers from lessor to lessee.
Can the legal presumption of IUC subjective incidence based on vehicle registration be challenged by leasing companies?
CAAD Case 153/2014-T directly addressed whether leasing companies can challenge the legal presumption of IUC subjective incidence based on vehicle registration. The Claimant argued that despite appearing as registered owner, it had transferred the vehicles prior to the taxable event date and therefore should not be liable for IUC. The central legal question was whether Article 3(1) of the IUC Code establishes an irrebuttable presumption or allows taxpayers to provide evidence that actual ownership had transferred despite registration records. The case required the tribunal to determine the probative value of commercial invoices and transfer documentation submitted by the financial institution to rebut the registration-based presumption. This has critical implications for leasing companies that may face IUC assessments for vehicles they no longer own due to administrative delays in updating vehicle registration databases.
What is the legal basis for IUC subjective incidence under Portuguese tax law?
The legal basis for IUC subjective incidence under Portuguese tax law is Article 3(1) of the IUC Code (Código do Imposto Único de Circulação), read in conjunction with Article 6 of the same Code. These provisions establish that the person appearing as the vehicle owner in the registration on the date of the taxable event is the passive subject (taxpayer) liable for IUC payment. The Tax and Customs Authority (AT) in Case 153/2014-T relied on this registration-based criterion to issue assessments against the Claimant, arguing that vehicle registration provides conclusive evidence of tax liability. However, the arbitration examined whether this statutory framework creates merely a legal presumption that can be rebutted with contrary evidence, or whether it establishes an absolute rule that makes registration determinative regardless of actual ownership circumstances.
How did CAAD rule on IUC assessments for vehicles registered to a dissolved leasing subsidiary?
In CAAD Case 153/2014-T, the tribunal addressed IUC assessments totaling €10,575.98 for tax years 2009-2012 against vehicles that had been registered to 'B', a dissolved leasing subsidiary succeeded by the Claimant bank. The financial institution argued that the vehicles had been transferred before the taxable event dates despite remaining in the registration under its name, and therefore it should not be liable for IUC. The Tax Authority maintained the assessments based on the registration records showing the Claimant as owner on the taxable event dates. The tribunal had to resolve whether the statutory presumption in Articles 3(1) and 6 of the IUC Code could be overcome by documentary evidence of prior ownership transfer. The case highlighted particular challenges for corporate restructurings and dissolutions where vehicle registrations may not immediately reflect ownership changes in leasing portfolios.
What are the rights of financial institutions regarding IUC refunds on leased vehicles for the 2009-2012 tax years?
Financial institutions regarding IUC refunds on leased vehicles for the 2009-2012 tax years have the right to challenge assessments through tax arbitration under the RJAT (Legal Regime of Arbitration in Tax Matters, Decree-Law 10/2011). As demonstrated in Case 153/2014-T, leasing companies can seek declarations of illegality for IUC assessments and refunds of amounts paid, including compensatory interest, when they can prove vehicles were transferred before the taxable event despite registration showing them as owners. The Claimant paid the assessed amounts under protest and pursued arbitration to recover €10,575.98. Financial institutions must provide documentary evidence such as invoices, transfer contracts, and ALD agreement terms to rebut the registration-based presumption. The case established important precedent for determining whether Article 3(1) of the IUC Code permits challenging tax liability based on actual ownership versus registered ownership, affecting recovery rights for all leasing companies facing similar retrospective IUC assessments.