Process: 166/2015-T

Date: July 9, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral decision addresses the competence of Portuguese tax arbitral tribunals (CAAD) to decide disputes concerning the Single Motor Vehicle Tax (IUC) and the liability of registered vehicle owners for IUC assessments after selling vehicles without updating registration records. The applicant challenged 14 IUC assessment acts for three vehicles covering tax years 2008-2012, arguing they had sold the vehicles years earlier (in 1991, 1997, and 2005) and were no longer the actual owners. The applicant contended that Article 3(1) of the IUC Code establishes a rebuttable presumption, allowing proof that the registered owner is not the actual owner. The Tax Authority raised procedural objections regarding the timeliness of the arbitration request, arguing the underlying hierarchical appeal was untimely, and substantively defended that the registered owner is definitively the IUC taxpayer as a legislative policy choice, not a rebuttable presumption. The AT argued this interpretation balances constitutional principles including contributive capacity, legal certainty, trust, efficiency, and proportionality. The case illustrates the tension between formal registration requirements and actual vehicle ownership, the procedural requirements for accessing tax arbitration following tacit denials of administrative appeals, and whether multiple tax years can be consolidated in a single arbitral proceeding. The decision has significant implications for vehicle owners who fail to update registration records after sale.

Full Decision

ARBITRAL DECISION

I. REPORT

A…., hereinafter the Applicant, with residence at Rua …, lot …, …-…, in …, came, pursuant to article 10, no. 2, of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter only designated RJAT), to request the constitution of a singular Arbitral Tribunal, in which the Tax and Customs Authority is requested, hereinafter AT, with a view to the declaration of illegality and consequent annulment of 14 (fourteen) tax acts for assessment of the Single Motor Vehicle Tax.

The Applicant bases its request on the following arguments:

a) The present Applicant was notified to proceed with payment of the assessment/collection notices relating to the payment of the Single Motor Vehicle Tax for the years 2008 to 2012, concerning the motor vehicles …-…-…, mark Bedford; …-…-…, mark Seat, Model Ibiza and …-…-…, mark Nissan, as can be verified by reading the decision rendered on the administrative complaint filed, which is attached as Document no. 1;

b) The Applicant, after being notified of the dismissal of its administrative complaint, submitted a hierarchical appeal on 12 September 2014, considering that it is not the taxpayer of the tax, as can be verified by reading the appeal filed, which is attached for all legal purposes as Document no. 2;

c) Until the date of submission of the arbitral petition, on 12 March 2015, the Applicant did not obtain a decision regarding the hierarchical appeal filed, wherefore its implied dismissal is presumed as of 12 January 2015, the present petition being timely filed, pursuant to no. 1 para. a) of article 10 of Decree-Law no. 10/2011, of 20 January;

d) At the time of the assessment of the tax, the Applicant was no longer the owner of the vehicles indicated, since 12/11/1991, 10/01/1997 and 24/05/2005, that is, 24 years, 18 years and 9 years ago, respectively;

e) In fact, regarding the first two vehicles, the Applicant sold them to the company B…, Lda on 12/11/1991 and to c…, D…, Lda on 10/01/1997, for dismantling as scrap, as can be verified by reading the declarations issued respectively on 18/07/2014 and 17/07/2014, which are now attached for all legal purposes as Documents no. 3 and 4;

f) It is important to note that the first vehicle with registration …-…-… suffered an accident and repair was not possible, so the solution found was to sell it for scrap;

g) With regard to the third vehicle, the Applicant sold it to Ms. e… on 24/05/2005, and on that day a purchase declaration was issued by the respective purchaser, which is attached for all legal purposes as Document no. 5;

h) Even though on the date when the Single Motor Vehicle Taxes fell due, the Applicant was recorded in the register as the owner of the vehicles, the fact is that it was no longer the actual owner of the same for a long time;

i) In truth, the law not providing for any exception for motor vehicle purchase and sale contracts, the real effectiveness normally produces its effects, with the purchaser becoming its owner, independently of registration;

j) There is extensive arbitrary tax jurisprudence in the sense defended by the Applicant, namely, among others, cases 50/2014, 18/2014 and 52/2014 of 06/07/2014;

k) In view of the foregoing and above alleged, the Applicant intends, on the basis of a defect of violation of article 3, no. 1, of the CIUC in the sense that this does not establish a rebuttable presumption, the acts of assessment of the Single Motor Vehicle Tax and compensatory interest to which its request refers be annulled, and further annulled both the acts of assessment of IUC, referring to the years 2008, 2009, 2010, 2011 and 2012, concerning the motor vehicles with the registrations …-…-…, mark Bedford; …-…-… mark Seat, model Ibiza, and …-…-…, mark Nissan, as well as the acts of assessment of the compensatory interest associated therewith.

The request for constitution of the Arbitral Tribunal was accepted by the Honorable President of CAAD and automatically notified to the AT on 13 March 2015.

In accordance with the provision in paragraph c) of no. 1 of article 11 of the RJAT, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the singular Arbitral Tribunal was constituted on 21 May 2015.

The AT replied, defending the untimeliness of the request for arbitral decision and the inadmissibility of the request, alleging, in summary, the following grounds:

a) The Applicant considers that the request for arbitral decision is timely, counting the respective period of deduction from the considered implied dismissal of the hierarchical appeal of the dismissal of the administrative complaint;

b) However, the administrative complaint, as results from the administrative case file, was dismissed as untimely;

c) And the hierarchical appeal was likewise dismissed for untimeliness;

d) In truth, the respective petition was received in the Services on 15.09.2014 (and not, as the applicant states, on 12.09.2014), and the period for submission of the hierarchical appeal ended on 13.09.2014, since it had been notified of the dismissal of the administrative complaint on 13.08.2014;

e) Now, the Applicant can never claim to justify the timeliness of the request for arbitral decision on the basis of the dismissal, in the present case an implied one, of a hierarchical appeal manifestly and unquestionably untimely;

f) Otherwise, the path would be opened to continue to discuss the legality of tax acts for which the respective periods for objection have already ended.

g) The Applicant alleges that it does not constitute the taxpayer of IUC, since it has the understanding that the norm of subjective tax incidence inscribed in no. 1 of article 3 of the CIUC allows the person in whose name the vehicle is registered to demonstrate that it is not the owner of the vehicle in the period to which the tax relates and thus to preclude the obligation that falls upon this person;

h) With due respect, the above allegations cannot proceed at all;

i) The tax legislator, when establishing in article 3, no. 1 who are the taxpayers of IUC, established expressly and intentionally that these are the owners (or in the situations provided in no. 2, the persons enumerated therein), considering as such the persons in whose name the same are registered;

j) To understand that the legislator established here a presumption, as the applicant refers to in articles 74 to 81, would unequivocally be to effectuate an interpretation contrary to law.

k) Given this wording, it is not manifestly possible to invoke that this is a presumption, as the Applicant defends. Rather, it is a clear choice of legislative policy adopted by the legislator, whose intention, within its freedom of legislative formation, was that, for the purposes of IUC, those who appear as such in the motor vehicle register are considered owners;

l) The systematic element of interpretation of the law also demonstrates that the solution proposed by the Applicant is intolerable, with the understanding championed by the latter finding no support whatsoever in the law, since this results not only from the aforesaid no. 1 of article 3 of the CIUC, but also from other norms established in the said Code.

m) In addition, it should further be noted that the interpretation conveyed by the Applicant is contrary to the Constitution.

n) The ever-publicized principle of contributive capacity is neither the only nor the main fundamental principle that informs the tax system. Alongside this principle we find others with the same constitutional dignity, such as the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality;

o) It is therefore necessary that in the task of interpreting article 3 of the CIUC, the principle of contributive capacity be articulated, or if preferred, moderated, with those other principles.

p) Now, the interpretation proposed by the Applicant, an interpretation that fundamentally devalues the registered reality to the detriment of an "informal reality" and unsusceptible to minimal control by the Respondent, is offensive to the basic principle of trust and legal certainty that should inform any legal relationship, including here the tax relationship.

q) In parallel, the interpretation given by the Applicant is offensive to the principle of efficiency of the tax system, insofar as it results in an obstruction and increase in cost of the competencies assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Applicant and the Respondent are part.

r) As we alluded to, in light of the provision in article 3, nos. 1 and 2 of the CIUC and article 6 of the same Code, it was A…, in the capacity of owner of the vehicles recorded in the Motor Vehicle Registry, who was the taxpayer of the tax.

s) Hence, establishing the provision in article 3 of the CIUC that the owner appearing in the Motor Vehicle Registry is the taxpayer of the tax, we understand that all the reasoning proposed by the Applicant is tainted, it being impossible to rebut the "presumption" established.

t) However, even if this is not the case – which is only admitted by mere academic hypothesis – and following the principle of admissibility of the rebuttal of the presumption in light of jurisprudence already established in this Arbitration Center, it will still be necessary to examine the evidentiary documents filed by the Applicant, and their value, in order to assess their respective virtue in rebutting the presumption.

u) Well then, in order to achieve such goal, the Applicant filed copies of declarations issued by the alleged purchasers of the vehicles now under analysis.

v) These documents are by no means sufficient to prove that the Applicant was not the owner of the vehicles on the dates of the tax requirement.

w) In truth, the documents to which we have been referring are copies of declarations, which state that the vehicles …-…-… and …-…-…, without any other proof, namely the issuance of the destruction certificate, pursuant to article 17 of Decree-Law 196/2003 of 23/08, then in effect for end-of-life vehicles, or even the occurrence report regarding the second vehicle since it suffered an accident.

x) Nor was proof made regarding any of these vehicles that cancellation of their respective registrations was requested from the competent entity, as the law requires.

The meeting referred to in article 18 of the RJAT was dispensed with and the holding of final arguments was dispensed with, in view of the content of the matter contained in the case file, having relegated the knowledge of the exception invoked by the AT in its reply to the final decision to be rendered.

II. FACTUAL MATTERS

For the purposes of assessing the exception raised regarding the (lack of) material competence of the Arbitral Tribunal, the following established facts should be noted, as a result of the analysis of the instructive administrative case, the documents filed and the position of the parties in the case which, regarding this matter, do not raise any controversy:

a) The Applicant requested the assessment of the legality of the tax acts for assessment of the Single Motor Vehicle Tax (IUC), relating to the years 2008 and 2012, concerning vehicles with the registration numbers …-…-…, …-…-… and …-…-…, in the total amount of €2,813.80;

b) The Applicant filed an administrative complaint regarding the aforementioned acts of assessment of IUC;

c) The administrative complaint filed was dismissed as untimely.

d) On 15 September 2014, the Applicant filed a hierarchical appeal of the decision dismissing the administrative complaint filed, as per document no. 1 filed by the Respondent – CTT Registry no. RD … PT.

e) On 12 March 2015, the Applicant filed the present request for arbitral decision.

f) Until the date of submission of the arbitral petition, on 12 March 2015, the Applicant did not obtain a decision regarding the hierarchical appeal filed;

g) On 15 March 2015, the Applicant was notified of the decision dismissing the hierarchical appeal filed in limine, on the ground of untimeliness.

There are no facts relevant to the decision that should be considered as not established.

III. LEGAL MATTERS

PRELIMINARY QUESTION: LACK OF MATERIAL COMPETENCE

In the reply filed, the AT invokes the exception of untimeliness of the request for arbitral decision which, if verified, prevents the examination of the other issues raised.

The AT alleges in this regard that the decision on the administrative complaint from which a hierarchical appeal was filed was dismissed for untimeliness, and consequently the hierarchical appeal filed from that decision is untimely, as is the present request for arbitral decision.

Thus, it is necessary first of all to verify what is the scope of the competence of the Arbitral Tribunals in case of implied dismissal of hierarchical appeal filed from an administrative complaint dismissed as untimely. Let us see:

In accordance with the provisions in articles 16 of the Code of Tax Procedure and Process ("CPPT"), 13 of the Code of Process in the Administrative Courts ("CPTA") and 101 of the Code of Civil Procedure ("CPC"), subsidiarily applicable ex vi of no. 1 of article 29 of the RJAT, the determination of the material competence of courts is a matter of public order and its examination precedes that of any other matter.

Pursuant to no. 1 of article 124 of Law no. 3-B/2010, of 28 April, the Government was authorized "to legislate in the sense of instituting arbitration as an alternative form of jurisdictional resolution of conflicts in tax matters", and should, according to its no. 2, "constitute an alternative procedural means to the process of judicial challenge and to the action for recognition of a right or legitimate interest in tax matters."

Implementing the said legislative authorization, Decree-Law no. 10/2011, of 20 January, "instituted tax arbitration limited to certain matters, listed in its art. 2" making "the binding of the tax administration dependent on an order of the members of the Government responsible for the areas of finance and justice" (see the reasoning of the arbitral judgment handed down in Case no. 76/2012 referred to above).

The scope of tax arbitral jurisdiction was thus delimited, in the first place, by the provision in article 2 of the RJAT which enumerates, in its no. 1, the criteria for material distribution, encompassing the assessment of claims directed at the declaration of illegality of acts of tax assessment (paragraph a)).

Through the Binding Order (Order no. 112-A/2011, of 20 April), the Government, through the Ministers of State and Finance and Justice, bound the services of the Directorate-General of Taxes and the Directorate-General of Customs and Special Consumption Taxes to the jurisdiction of the arbitral tribunals operating in CAAD, and to these services now corresponds the Tax and Customs Authority, pursuant to Decree-Law no. 118/2011, of 15 December, which approves the organic structure of this Authority, resulting from the merger of various bodies.

In this Order, additional conditions and limits of binding are established taking into account the specificity of the matters and the value at stake.

Article 2 of the Binding Order provides:

Article 2

Object of the binding

The services and bodies referred to in the previous article bind themselves to the jurisdiction of the arbitral tribunals operating in CAAD that have as their object the assessment of claims relating to taxes whose administration is entrusted to them referred to in no. 1 of article 2 of Decree-Law no. 10/2011, of 20 January, with the exception of the following:

a) Claims relating to the declaration of illegality of acts of self-assessment, withholding at source and payment on account which have not been preceded by recourse to the administrative procedure pursuant to articles 131 to 133 of the Code of Tax Procedure and Process;

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

c) Claims relating to customs duties on imports and other indirect taxes levied on goods subject to import duties; and

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

It so happens that the request presented by the Applicant does not concern the declaration of illegality of an act of tax assessment, as was required in light of the provision in article 2, no. 1 a) of the RJAT.

Indeed, the matter in dispute relates, as results from the petition presented by the Applicant, to the implied dismissal of the hierarchical appeal filed from the decision dismissing the administrative complaint filed on the ground of untimeliness.

Now, as teaches Jorge Lopes de Sousa, In Commentary to the Legal Regime of Tax Arbitration, in Guide to Tax Arbitration, Editor Almedina, 2013, pp. page 123, "Limiting the competence of the arbitral tribunals operating in CAAD, as regards acts of assessment, self-assessment, withholding at source and payment on account, to the declaration of their illegality and consequences, only those acts of dismissal of administrative complaints or hierarchical appeals or requests for appeal of tax acts shall be included in this competence in cases where these acts of second or third grade actually knew of the legality of acts of assessment, self-assessment, withholding at source and payment and not also when those acts refrained from that knowledge, because it was understood that there was some obstacle to this (such as, for example, untimeliness or lack of standing, or lack of competence)."

In the case at hand, the hierarchical appeal, from which the present request for arbitral decision is filed, was filed from a decision dismissing an administrative complaint on the ground of untimeliness. Since the decision of the AT on the administrative complaint did not assess the legality of the primary act, the appropriate procedural means for examining the legality of that decision act is the special administrative action (See, among others, the Decisions of CAAD handed down in the context of cases no. 73/2012, 210/2013 and 237/2014).

Given that "the arbitral process must constitute an alternative procedural means to the process of judicial challenge and to the action for recognition of a right or legitimate interest in tax matters." – (See Decree-Law no. 10/2011, of 20 January), the request for arbitral decision formulated is outside the scope of material competence of CAAD established in the RJAT and in the Order (no. 112-A/2011, of 22-3) binding the AT to arbitration.

In light of the foregoing, given that the main request deduced by the Applicant concerns the declaration of illegality of the act dismissing the hierarchical appeal filed from the act dismissing the administrative complaint filed on the ground of untimeliness, it is concluded that the exception of lack of material competence is well founded, and consequently the examination of the request is foreclosed.

IV. DECISION

We hereby decide to find the exception of lack of material competence to be well founded and, in consequence, we absolve the Tax and Customs Authority from the instance, the examination of the matter on the merits being foreclosed.

V. VALUE OF THE CASE

In accordance with the provision in article 306, no. 2 of the Code of Civil Procedure, 97-A, no. 1 a) of the CPPT and article 3, no. 2 of the Regulation on Costs in Tax Arbitration Proceedings, the value of the claim is adjusted to €2,813.80.

VI. COSTS

Pursuant to the provisions in articles 12, no. 2 and 22, no. 4, both of the RJAT, and in article 4, no. 4 of the Regulation on Costs in Tax Arbitration Proceedings, the amount of the arbitration fee is fixed at €612.00, according to Table I of the aforementioned Regulation, to be borne by the Applicant.

Let it be notified.

Lisbon, 9 July 2015

The Arbitrator

Magda Feliciano

(The text of this decision was prepared by computer, pursuant to article 131, no. 5, of the Code of Civil Procedure, applicable by reference from article 29, no. 1, paragraph e) of Decree-Law no. 10/2011, of 20 January (RJAT), its wording being governed by the spelling prior to the Orthographic Agreement of 1990.)

Frequently Asked Questions

Automatically Created

Can the CAAD arbitral tribunal decide disputes related to Imposto Único de Circulação (IUC) tax assessments?
Yes, CAAD arbitral tribunals have jurisdiction to decide disputes related to IUC (Imposto Único de Circulação) tax assessments. Under the Legal Regime of Arbitration in Tax Matters (RJAT - Decree-Law 10/2011), taxpayers can request the constitution of an arbitral tribunal to challenge IUC assessments. In this case, the tribunal was constituted on 21 May 2015 following the applicant's request to challenge 14 IUC assessment acts, demonstrating that IUC matters fall within the subject-matter jurisdiction of tax arbitration in Portugal.
Is the registered vehicle owner liable for IUC even after selling the vehicle without updating the registration?
Yes, according to the Tax Authority's interpretation of Article 3(1) of the IUC Code, the registered vehicle owner remains liable for IUC even after selling the vehicle if the registration has not been updated. The AT argues this is not a rebuttable presumption but rather a deliberate legislative policy choice that whoever appears as owner in the motor vehicle register is considered the taxpayer for IUC purposes. This interpretation prioritizes legal certainty and administrative efficiency over actual ownership. However, the applicant's position, supported by some arbitral precedents (cases 50/2014, 18/2014, 52/2014), argues this provision should allow proof that the registered owner is no longer the actual owner.
What remedies are available to taxpayers who receive IUC assessments for vehicles they no longer own?
Taxpayers who receive IUC assessments for vehicles they no longer own have several remedies: (1) file an administrative complaint (reclamação graciosa) within the legal deadline; (2) if dismissed, file a hierarchical appeal (recurso hierárquico) within 30 days of notification; (3) after express or tacit denial of the hierarchical appeal, request arbitration before CAAD within three months; (4) proactively update the vehicle registration to reflect the current ownership to prevent future assessments. The most effective preventive measure is ensuring the vehicle registration is updated immediately upon sale. In cases of sale for scrap, obtaining proper documentation from dismantling facilities is essential to support ownership transfer claims.
What is the legal deadline to request arbitration after a tacit denial of a hierarchical appeal in Portuguese tax law?
Under Article 10(1)(a) of the RJAT (Decree-Law 10/2011), a taxpayer can request arbitration within three months following the tacit denial of a hierarchical appeal. A hierarchical appeal is considered tacitly denied after four months (120 days) from its submission without an express decision. In this case, the applicant filed the hierarchical appeal on September 12, 2014 (though the Tax Authority contends it was received September 15, 2014), which would result in tacit denial on January 12, 2015. The arbitration request filed on March 12, 2015 would be timely within the three-month window, provided the underlying hierarchical appeal itself was timely filed within 30 days of notification of the administrative complaint dismissal.
Can a taxpayer challenge multiple years of IUC assessments in a single arbitral proceeding?
Yes, a taxpayer can challenge multiple years of IUC assessments in a single arbitral proceeding. In this case, the applicant successfully consolidated 14 tax assessment acts covering five tax years (2008-2012) for three different vehicles into one arbitration request before CAAD. This procedural efficiency is permitted under the RJAT framework, allowing taxpayers to address related tax disputes arising from the same factual and legal basis in a unified proceeding. However, all challenged acts must meet the jurisdictional and procedural requirements for arbitration, including proper exhaustion of administrative remedies and compliance with statutory deadlines for each contested act.