Process: 159/2015-T

Date: November 2, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

In Process 159/2015-T, a financial institution challenged IUC (Imposto Único de Circulação - Unique Road Tax) assessments totaling €14,284.22 for tax years 2009-2012 before the Centro de Arbitragem Administrativa (CAAD). The claimant, a credit institution engaged in vehicle financing and leasing, contested 108 IUC assessments on three grounds: (1) sixty assessments related to vehicles already sold before the IUC maturity date, which the claimant argued should be the new owners' liability; (2) forty-six assessments concerned vehicles under financial leasing contracts, where Article 3(2) of the IUC Code equates financial lessees to owners as taxable persons; and (3) two assessments involved alleged double collection of previously paid tax. The claimant argued that Article 3(1) of the IUC Code establishes a rebuttable presumption that registered owners are taxable persons, which can be overcome by proof of actual ownership transfer. The Tax Authority (AT) raised a preliminary objection regarding the timeliness of the arbitral action, arguing the claimant failed to prove when it was notified of the dismissal of its gracious complaint, preventing assessment of compliance with the statutory deadline (caducidade). On the merits, the AT contended that Article 3 creates not a presumption but a legal fiction making registered owners the taxable persons regardless of actual ownership, that the claimant failed to provide adequate evidence of vehicle sales (lacking proof of price payment and official registration transfer forms) or leasing contracts, and that even if leasing existed, non-compliance with Article 19's notification requirements maintained the registered owner's liability. The case highlights critical issues in Portuguese tax law regarding IUC liability allocation, the nature of ownership definitions in tax statutes, procedural time limits in tax arbitration, and evidentiary requirements for challenging tax assessments.

Full Decision

ARBITRAL DECISION

I. REPORT

A… – …, S.A., a company with registered office at Building …, Avenue …, plot …, …, Lisbon, holding the unique registration number and identification number for legal persons …, hereinafter simply referred to as the Claimant, filed a request for constitution of an arbitral tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of subparagraph a) of paragraph 1 of article 2 and subparagraph a) of paragraph 1 of article 10, both of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter briefly referred to as LFATM), petitioning for the annulment of the acts of assessment of Unique Road Tax (IUC) and respective compensatory interest identified in the Table Attached to the initial request, relating to the tax years 2009 to 2012, in the total amount of € 14,284.22, as well as for the condemnation of the Tax and Customs Authority (hereinafter AT or Respondent) to reimburse the amount paid, increased by indemnificatory interest.

To substantiate its request, it alleges, in summary:

a) It is a credit financial institution that pursues its activity in the motor vehicle financing branch;

b) Within the scope of its activity, it proceeds to grant loans for the acquisition of vehicles and to enter into financial leasing contracts;

c) It was notified of several assessment notes of IUC on vehicles related to the aforementioned activity;

d) The acts of assessment of IUC contested relate to vehicles already sold by the Claimant; to vehicles whose leasing contract was in force and to tax already previously paid;

e) The first sixty assessments contested correspond to vehicles that were sold by the Claimant on a date prior to the date of maturity of the IUC;

f) In accordance with the combined provisions of paragraph 3 of article 6 and paragraph 2 of article 4, both of the IUC Code, the tax is deemed to be due from the owner on the first day of the tax period of the vehicle, that is, on the date of assignment of the registration;

g) On the date of maturity of the IUC at issue in the present proceedings, the Claimant was no longer the owner of the vehicles in question, whereby the taxable person for the tax should be the new owner of each vehicle;

h) Although the transfer of ownership of the vehicles was not registered by the acquirers of the vehicles, this does not prevent the IUC from applying to the actual owners of the vehicles;

i) In accordance with article 3 of the IUC Code, taxable persons for the tax are the owners of the vehicles, considered as such the persons in whose names they are registered;

j) Paragraph 1 of article 3 of the IUC Code contains a rebuttable presumption;

k) The following 46 assessments contested apply to vehicles that, on the date of the tax-triggering event, were under financial leasing;

l) In accordance with paragraph 2 of article 3 of the IUC Code "financial lessees, acquirers with retention of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are equated to owners";

m) In the case where the vehicle has been subject to financial leasing, the taxable person for the tax is the financial lessee, and the owner of the vehicle is not a subsidiary responsible for the payment of the IUC;

n) The last two assessments contested relate to tax that had already been paid by the Claimant, whereby there is a situation of double collection;

o) The assessments that are the subject of the request for arbitral pronouncement should not be imputed to the Claimant, being, as such, illegal.

The Claimant attached 83 documents and did not list any witnesses.

In the request for arbitral pronouncement, the Claimant chose not to appoint an arbitrator, whereby, in accordance with the provisions of article 6, paragraph 1 of the LFATM, the signatory was appointed by the Deontological Council of the Centre for Administrative Arbitration, the appointment having been accepted in accordance with legal provisions.

The arbitral tribunal was constituted on 27 May 2015.

Notified in accordance with and for the purposes of the provisions of article 17 of the LFATM, the Respondent filed a response, alleging, in summary, the following:

a) The Claimant does not provide proof of the date on which it was notified of the dismissal of the gracious complaint, the AT being unable to assess the timeliness of the present request for arbitral pronouncement;

b) The legislator expressly and intentionally established that the taxable persons for the IUC are the owners, considered as such the persons in whose names the vehicles are registered;

c) Article 3 of the IUC Code does not establish any presumption of ownership – the legislator does not say that they are presumed to be owners, but that they are considered to be owners;

d) The IUC is due by the persons who appear in the register as owners of the vehicles;

e) The invoices attached by the Claimant are not suitable to prove the execution of the purchase and sale contract;

f) The Claimant did not provide proof of receipt of the price nor attached copies of the official form for registration of motor vehicle ownership;

g) The Claimant did not provide proof of the leasing contracts that it alleges;

h) Even had it provided proof of the existence of these contracts, it did not comply with the provisions of article 19 of the IUC Code, whereby it is the taxable person for the tax;

i) The failure to comply with the obligation to update the registers makes the Claimant responsible for the arbitration costs;

j) The Claimant does not prove that the tax relating to vehicles with registration …-…-… and …-…-… had already been paid on the date of the assessment relating to these vehicles contested in the present proceedings.

It concludes by petitioning for the declaration of untimeliness of the request for arbitral pronouncement or, if not deemed so, its dismissal and consequent absolution of the Respondent from the claim and maintenance in the legal order of the contested tax acts.

The Respondent attached no document, attached a copy of the administrative file and did not list any witness.

Following the notification effected for such purpose, the Claimant attached to the file the IUC assessments contested, in which the payment of the respective tax appears.

The AT pronounced itself on the attached documents, defending their unsuitability as proof of what was invoked by the Claimant.

Given the position assumed by the parties and there being no need for the meeting to which article 18 of the LFATM refers, the same was dispensed with, and the Respondent presented written submissions, in which it maintained the position initially defended.

II. PRELIMINARY ANALYSIS

The Arbitral Tribunal is regularly constituted and is materially competent.

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

The proceedings do not suffer from defects that affect their validity.

III. QUESTIONS TO BE DECIDED

Given the positions assumed by the Parties, as expressed in the arguments put forward, it behoves:

a. To determine the timeliness of the request for arbitral pronouncement:

b. To ascertain who is the taxable person for IUC when, on the date of occurrence of the tax-triggering event, motor vehicles have been alienated or subject to financial leasing;

c. To consider the alleged double collection.

IV. STATEMENT OF FACTS

a. Facts Proven

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

  1. The Claimant was notified of the assessments relating to the tax years and vehicles identified in the Table Attached to the initial request, which is here deemed to be fully reproduced, with the exception of the assessments relating to vehicles with registration …-…-… and …-…-…;

  2. The date of payment of the IUC and compensatory interest of the assessments referred to in 1. occurred in December 2013;

  3. The Claimant filed a gracious complaint of all assessments relating to the tax years and vehicles identified in the Table Attached to the initial request, which is here deemed to be fully reproduced, to which was assigned the number …2014…;

  4. By deed dated 13/11/2014, the Claimant was notified to exercise the right to prior hearing, with respect to the draft decision that fell upon the gracious complaint No. …2014…;

  5. By order dated 10/12/2014, the gracious complaint was partially dismissed;

  6. The request for arbitral pronouncement and constitution of the arbitral tribunal was presented on 10/03/2015;

  7. None of the vehicles referred to in 1. belongs to categories F or G, to which article 4 of the IUC Code refers;

  8. On the date of the tax-triggering event, the Claimant had issued sale invoices for vehicles with registration …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-… and …-…-…;

  9. The Claimant entered into financial leasing contracts with respect to vehicles with registration …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-…; …-…-… and …-…-…;

  10. The Claimant paid the taxes corresponding to the assessments referred to in 1, in the total amount of € 12,856.12.

b. Facts Not Proven

With relevance for the decision, the following facts were not proven:

  1. That the Claimant was notified and paid the assessments relating to the tax year 2009 concerning vehicles with registration …-…-… and …-…-…;

  2. That the Claimant paid the compensatory interest assessed;

  3. That on the date of the tax-triggering event an invoice for the sale of the vehicle with registration …-…-… had been issued by the Claimant;

  4. That the vehicles with registration …-…-…; …-…-… and …-…-… were under financial leasing on the date of the tax-triggering event;

  5. That the tax for the year 2011 relating to vehicles with registration …-…-… and …-…-… was paid in duplicate.

c) Reasoning of the Statement of Facts

The conviction regarding the facts deemed proven was formed on the basis of the documentary evidence attached by the Claimant, indicated with respect to each of the points, as well as the matters alleged and not contested appearing in the requests attached to the file.

With respect to the statement of facts not proven, the same was based on the complete absence of proof in that regard.

V. ON THE LAW

a. Preliminary Question:

Prior to analysis of each of the questions to be decided, it is necessary to verify the possible existence of peremptory exceptions of ex officio knowledge.

And, having examined the file, the occurrence of the peremptory exception of expiration of the right of action appears evident.

To wit:

Upon examination of the request for arbitral pronouncement, it is verified that the Claimant formulates the following request:

"In these terms, and in all other respects of Law, it is requested that an arbitral tribunal be constituted to pronounce on the request for annulment of the IUC assessments identified in the Attached Table, for violation of the provisions of article 3 of the IUC Code as regards the subjective incidence requirements of the tax, and the consequent reimbursement of the amount of 14,284.22 Euros, corresponding to 12,917.92 Euros of tax paid unduly and 1,366.30 Euros of undue compensatory interest, as well as the payment of indemnificatory interest, for the deprivation of the aforementioned amount, in accordance with article 43 of the General Tax Law."

It is verified, therefore, that the subject matter of the request is the acts of assessment of IUC, these being the acts examined in the present proceedings.

It results from the facts proven – cf. point 2 – that the final payment date of the IUC and compensatory interest occurred in December 2013.

In turn, it is also proven that the request for arbitral pronouncement and constitution of the arbitral tribunal was presented on 10/03/2015 – cf. point 6.

In accordance with the provisions of article 10, paragraph 1, subparagraph a) of the LFATM, the time limit for presentation of the request for constitution of an arbitral tribunal is 90 days, counted from the facts provided for in paragraph 1 of article 102 of the Tax Procedure and Process Code, among which is included the expiry of the time limit for voluntary payment of the tax liabilities legally notified to the taxpayer.

It is thereby verified that, having the Claimant limited its request to the annulment of the tax acts of assessment of IUC and compensatory interest, it had for that purpose a time limit of 90 days counted from the final date of voluntary payment of those assessments.

A time limit which, at the date of presentation of the request for constitution of the arbitral tribunal, had already been exceeded.

The 90-day time limit established in law for the challenge of assessments is a peremptory time limit, and, as follows from the provisions of article 139, paragraph 3 of the Code of Civil Procedure, its expiry extinguishes the right to perform the act.

Thus, having at the date of presentation of the request for arbitral pronouncement already elapsed the 90-day period referred to in articles 10, paragraph 1 of the LFATM and 102, paragraph 1 of the Tax Procedure and Process Code, the right of the Claimant to contest through the presentation of the request for constitution of the arbitral tribunal the assessments in question has lapsed.

The powers of the tribunal are limited to the request formulated by the Claimant – in this case, annulment of the acts of assessment of IUC and compensatory interest – whereby this tribunal lacks legitimacy to consider anything whatsoever beyond the expressed request formulated.

The expiration of the Claimant's right of action being verified, the consideration of the question of merit is prejudiced.

VI. OPERATIVE PART:

In view of the foregoing, it is decided that the exception of expiration of the right of arbitral action is verified, absconding the Respondent from the claim.

The value of the case is fixed at € 14,284.22, in accordance with subparagraph a) of paragraph 1 of article 97-A of the Tax Procedure and Process Code, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the LFATM and paragraph 2 of article 3 of the Regulations of Costs in Tax Arbitration Proceedings.

The arbitration fee is fixed at € 918.00, in accordance with Table I of the Regulations of Costs in Tax Arbitration Proceedings, as well as the provisions of paragraph 2 of article 12 and paragraph 4 of article 22, both of the LFATM, and paragraph 3 of article 4 of the cited Regulation, to be paid by the Claimant, as the unsuccessful party.

Register and notify.

Lisbon, 02 November 2015.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, in accordance with paragraph 5 of article 131 of the Code of Civil Procedure, applicable by reference to subparagraph e) of paragraph 1 of Decree-Law No. 10/2011, of 20/01.

Frequently Asked Questions

Automatically Created

What is the IUC (Imposto Único de Circulação) and who is liable when a vehicle has been sold or is under a leasing contract?
The IUC (Imposto Único de Circulação) is Portugal's annual road tax levied on vehicle ownership. Under Article 3 of the IUC Code, the taxable person is the vehicle owner, defined as the person in whose name the vehicle is registered. However, Article 3(2) creates an exception: financial lessees under leasing contracts are equated to owners and become the taxable persons instead of the registered owner. When a vehicle is sold, the general rule establishes that the tax is due from the owner on the first day of the tax period (registration date), but liability follows registration records. If ownership transfer is not registered, the former registered owner remains liable despite the actual sale. For leasing situations, the financial lessee assumes tax liability as the deemed owner.
Can a financial institution challenge IUC tax assessments on vehicles it no longer owns under Portuguese tax law?
Yes, a financial institution can challenge IUC assessments on vehicles it no longer owns through Portuguese tax arbitration under the RJAT (Regime Jurídico da Arbitragem em Matéria Tributária - Decree-Law 10/2011). However, success requires overcoming significant evidentiary burdens. The institution must prove: (1) for sold vehicles, that ownership was transferred before the IUC maturity date, with evidence beyond sales invoices—including proof of price payment and official registration transfer documentation; (2) for leased vehicles, the existence of valid financial leasing contracts and compliance with Article 19 notification requirements to the tax authority. The central legal question is whether Article 3(1)'s definition of owners as 'persons in whose names vehicles are registered' constitutes a rebuttable presumption or an irrebuttable legal fiction. Tax authorities typically argue it is a binding legal definition rather than a presumption, making registered owners liable regardless of actual ownership changes until registration is formally updated.
What does caducidade do direito de acção arbitral mean in Portuguese tax arbitration proceedings?
Caducidade do direito de acção arbitral refers to the expiry or lapse of the right to file an arbitral action in Portuguese tax arbitration proceedings. It is a procedural time-bar that extinguishes the right to seek arbitration if not exercised within statutory deadlines. Under the RJAT, taxpayers must file arbitration requests within specific timeframes after notification of certain administrative decisions (such as dismissal of gracious complaints or hierarchical appeals). Unlike prescription (prescrição), which can be interrupted or suspended, caducidade is typically absolute—once the deadline passes, the right is definitively lost. In tax arbitration, the burden of proving timeliness generally falls on the claimant, who must demonstrate when they were notified of the prior administrative decision to establish that the arbitration request was filed within the applicable deadline. Failure to prove the notification date may result in the tribunal being unable to determine timeliness, potentially leading to dismissal on procedural grounds.
How does Article 3 of the CIUC define the taxable person and is the registered owner presumption rebuttable?
Article 3 of the CIUC (Código do Imposto Único de Circulação) defines taxable persons as vehicle owners, stating that owners are 'considered' to be the persons in whose names the vehicles are registered. The critical interpretative dispute concerns whether this creates a rebuttable presumption or an irrebuttable legal fiction. Taxpayers typically argue it establishes a juris tantum (rebuttable) presumption that can be overcome with proof that another person is the actual owner on the tax maturity date. Conversely, tax authorities argue the language 'are considered' (são havidos como) creates a legal fiction or normative definition that irrevocably ties tax liability to registration records, making the presumption irrebuttable (juris et de jure). Under this interpretation, only formal registration changes alter tax liability, and actual ownership transfers without registration updates do not affect IUC obligations. Portuguese tax jurisprudence has varied on this issue, with some decisions allowing evidence of actual ownership to prevail, while others strictly enforce registration-based liability, particularly when taxpayers fail to comply with statutory registration update obligations.
What are the grounds for annulment of IUC assessments and claiming compensatory interest before the CAAD?
Grounds for annulment of IUC assessments before the CAAD (Centro de Arbitragem Administrativa) include: (1) incorrect identification of the taxable person—demonstrating that the actual owner or financial lessee differs from the assessed party, supported by sales contracts, proof of payment, official registration transfer forms, or valid leasing agreements with proper notifications under Article 19 of the IUC Code; (2) double taxation—proving the same tax for the same vehicle and period was previously paid, with documentary evidence of prior payment; (3) incorrect calculation of tax amounts or application of wrong rates; (4) violation of legal requirements in the assessment procedure; and (5) assessments issued beyond statutory limitation periods. To claim reimbursement of amounts paid plus compensatory interest (juros indemnizatórios), claimants must prove payment occurred, the assessment was illegal, and payment was not due. Compensatory interest accrues when taxpayers paid amounts not legally owed, compensating for the State's unjust retention of funds. Success requires comprehensive documentary evidence, as tax authorities challenge both the legal interpretation and factual proof of ownership changes, leasing arrangements, and prior payments.