Process: 176/2015-T

Date: September 25, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 176/2015-T) concerns the subjective scope of IUC (Imposto Único de Circulação - Unique Circulation Tax) liability when vehicles are sold but registration transfers remain pending. The claimant, A... Lda, a vehicle rental and fleet management company, challenged nine IUC assessments totaling approximately €327 plus compensatory interest for tax years 2013-2014, arguing it had sold the vehicles before the tax became due and therefore was not the taxable person. The company paid the assessments and subsequently filed for administrative review, which was dismissed, leading to arbitration proceedings. The core legal dispute centers on interpreting Article 3(1) of the IUC Code, which defines taxpayers as vehicle owners 'considered as such' those in whose name vehicles are registered. The claimant argued this constitutes a rebuttable presumption under Article 73 of the General Tax Law, which could be overcome by proving actual ownership transfer. They contended that since Article 6(3) establishes tax liability arises on the first day of the tax period (vehicle registration date per Article 4(2)), and they no longer owned the vehicles at that moment, the new owners should be liable. The claimant also invoked constitutional principles of contributory capacity and equivalence. The Tax Authority countered that Article 3(1) represents a deliberate legislative policy choice, not a presumption, establishing registered ownership as the definitive criterion for IUC liability. This interpretation preserves systemic unity within the IUC Code and broader tax law framework. The Authority also raised procedural concerns about whether the arbitration request met statutory deadlines. The case highlights tensions between formal registration requirements and economic reality in vehicle taxation, addressing practical scenarios where administrative delays in registration transfers create liability disputes.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Subject Matter: Unique Circulation Tax – Subjective Scope

I – Report

  1. On 13.03.2015, the Claimant, A…, Lda, a legal entity no. …, with registered office at …, Avenue …, plot …, second floor, in Lisbon, requested from CAAD the constitution of an Arbitral Tribunal, pursuant to article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to as RJAT), in which the Tax and Customs Authority is the Respondent, petitioning for the annulment of the Unique Circulation Tax assessments hereinafter identified, which were notified to it and against which it filed a request for administrative review that was dismissed.

The assessments in question are the following:

a) Assessment no. 2014-…, for the year 2014, relating to the vehicle with registration …-…-… in the amount of €41.72, plus compensatory interest in the amount of €0.47.

b) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €17.47, plus compensatory interest in the amount of €0.96.

c) Assessment no. 2014-…, for the year 2014 and relating to the vehicle …-…-… in the amount of €20.78, plus compensatory interest in the amount of €0.31.

d) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €1.75.

e) Assessment no. 2014-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €0.47.

f) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €1.75.

g) Assessment no. 2014-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €0.47.

h) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-…, in the amount of €59.48, plus compensatory interest in the amount of €3.25.

i) Assessment no. 2014-…, for the year 2014, and relating to the vehicle …-…-…, in the amount of €60.07, plus compensatory interest in the amount of €0.89.

The Claimant, alleging that it paid the amounts of the assessments, also petitions for the reimbursement of the taxes it considers to have paid without legal ground and further indemnity interest on such amounts.

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

Pursuant to the terms and for the purposes of article 6, paragraph 1, of RJAT, by decision of the President of the Ethics Council, duly communicated to the parties within the legally applicable deadlines, the undersigned was appointed arbitrator, and communicated acceptance of the appointment to the Ethics Council and the Administrative Arbitration Centre within the regularly applicable deadline.

The Arbitral Tribunal was constituted on 27.05.2015.

  1. Noting the non-existence of any situation provided for in article 18, paragraph 1, of RJAT, which would have necessitated the arbitral hearing therein provided, the conduct of the same was dispensed with, on the ground of prohibition of useless acts.

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

a. The Claimant carries on the activity of vehicle rental and provision of services associated with fleet management.

b. The Claimant was notified of the assessments that are the subject of the present proceedings and paid all amounts relating to the acts in question.

c. The Claimant is not the taxpayer in respect of Unique Circulation Tax relating to the vehicles in question in any of the years to which the ex officio assessments now subject to arbitral determination relate, since in all cases covered by the present request for arbitral determination, the tax assessed relates to vehicles already sold by the Claimant on the date of occurrence of the tax event.

d. According to article 6, paragraph 3, of the Unique Circulation Tax Code, the tax is considered due by the owner (or other equivalent holders of the vehicle) on the first day of the vehicle's tax period, which, according to article 4, paragraph 2, of the same Code, takes place on the date the registration is assigned.

e. In this manner, pursuant to that provision, it follows that on the date of tax maturity, the Claimant was no longer the owner of the vehicles in question, and therefore the taxpayer should be the new owner of each vehicle, or the equivalent holder pursuant to article 3, paragraph 2 of the Unique Circulation Tax Code.

f. The ownership of these vehicles will not have been registered in the vehicle registration in the name of the new owner, a fact which the Claimant, in light of the regime currently in force, cannot remedy, to the extent that only the purchaser of the vehicle, armed with the respective registration certificate, has the standing to request such registration.

g. Article 3, paragraph 1 of the Unique Circulation Tax Code establishes a presumption, rebuttable by contrary proof, as results from article 73 of the General Tax Law.

h. A different interpretation would violate the constitutional principle of contributory capacity as well as the principle of equivalence enshrined in article 1 of the Unique Circulation Tax Code.

  1. The Tax and Customs Authority, called upon to state its position, contested the Claimant's claim, defending itself by exception and by impugnation.

By way of exception it alleged the following:

a. The Claimant, contrary to what it was obliged to do, provided no proof of the eventual date on which it would have been notified of the dismissal of the administrative review, and therefore the Tax Authority questions the compliance with the legally fixed deadline for the request for constitution of the arbitral tribunal.

b. To state, as the Claimant did, that "the Claimant was notified of the respective dismissal order", without stating the exact date, allows the Tax Authority, legitimately and from the outset, to raise the question of whether the present request for arbitral determination may be out of time.

By way of impugnation, the Respondent alleged, in summary:

c. The understanding 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 heed the systematic element, violating the unity of the regime enshrined in the entire Unique Circulation Tax Code and, more broadly, in the entire tax-legal system, and further derives from an interpretation that ignores the ratio of the regime enshrined in the article in question, and also in the entire Unique Circulation Tax Code.

d. Indeed, paragraph 1 of article 3 of the Unique Circulation Tax Code establishes that "The taxpayers in respect of the tax are the owners of vehicles, being considered as such natural or legal persons, of public or private law, in whose name the same are registered".

e. In these terms, it is imperative to conclude that in the case of the present arbitral proceedings, the legislator expressly and intentionally established that those [as owners or in the situations provided for in paragraph 2, the persons there mentioned] are considered as such, the persons in whose name the same [vehicles] are registered, because this is the interpretation that preserves the unity of the tax-legal system.

f. To understand that the legislator enshrined a presumption here would unequivocally be to effect an interpretation against the law.

g. In light of this wording it is manifestly not possible to invoke that this is a presumption, as the Claimant argues.

h. Rather, it is a clear choice of legislative policy adopted by the legislator, whose intention, within its legislative discretion, was that for the purposes of Unique Circulation Tax, those considered owners are those who appear as such in the vehicle registration.

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

j. This results not only from the aforementioned paragraph 1 of article 3 of the Unique Circulation Tax Code, but also from other provisions enshrined in the said Code.

k. In these terms, and in the same sense, article 6 of the Unique Circulation Tax Code establishes, under the heading "Tax Event and Exigibility", in its paragraph 1, that: "The tax event is constituted by the ownership of the vehicle, as attested by the registration in national territory."

l. From the articulation between the scope of the subjective incidence of Unique Circulation Tax and the fact constitutive of the corresponding tax obligation it follows unequivocally that only legal situations subject to registration (without prejudice to the permanence of a vehicle in national territory for a period exceeding 183 days, provided for in paragraph 2 of article 6) generate the birth of the tax obligation.

m. In addition to all that was set out above, it should further be noted that if the interpretation conveyed by the Claimant were accepted, then the same would be shown to be contrary to the Constitution, to the extent that such interpretation results in the violation of the principle of trust, of the principle of legal certainty, of the principle of efficiency of the tax system and of the principle of proportionality.

n. Indeed, the interpretation proposed by the Claimant essentially devalues the registration reality to the detriment of an informal reality and not susceptible to minimal control by the Respondent, is offensive to the basic principle of trust and legal certainty that should inform any legal relationship, here including the tax relationship.

o. In support of its thesis, the Claimant came to attach second copies of invoices with the descriptions "residual values" and "sale of vehicle not leased", documents which, for due purposes, are hereby impugned.

p. It is evident that the Claimant fails to prove anything, nor does it even attempt to do so.

q. In fact, it merely proceeds to attach second copies of invoices, without making any proof or even demonstrating any indication of the breach and, above all, of the existence of any purchase and sale contract.

r. Indeed, it does not attach any sales contract, or, as the case may be, any financial lease or operating lease contract.

s. Invoices are not suitable to prove the conclusion of a synallagmatic contract such as sale, as such documents do not reveal in themselves an essential and unequivocal declaration of will (i.e., the acceptance) on the part of the alleged purchasers.

t. With regard to the value or probative force of the invoices embodied in the present proceedings, doubts are raised in light of discrepancies which are hereby highlighted.

u. The invoices attached by the Claimant present in their description distinct mentions.

v. Thus, there are second copies of invoices attached, for example in relation to the registrations …-…-…, …-…-… and …-…-… where one can read in the description field the mention "Residual values", whereas the one relating to the registration …-…-… already refers to "Sale of vehicle not leased".

w. However, it does not attach, nor does it even allege, that the vehicles whose invoices refer to "residual values" were the subject of any lease contract, and therefore the description of these second copies of invoices is not understood.

x. In other words, faced with a supposed single type of contract (i.e., a contract for the purchase and sale of a motor vehicle) it would be expected to find the existence of a uniform description, which is not the case in the present instance, given that various invoices attached to the request for arbitral determination include different descriptions, and therefore it is necessarily concluded that there are several distinct realities.

y. Given that the invoices are non-conforming, as they are, then it must be concluded that such documents can never benefit from the presumption of truth to which article 75 of the General Tax Law alludes.

z. In sum, the Claimant failed to prove the alleged transmission of the vehicles in question here.

aa. Mere unilateral documents do not possess sufficient probative value to rebut the legal presumption contained in the registration.

The Respondent further alleges, alternatively:

bb. The transmission of ownership of motor vehicles is not susceptible to being controlled by the Respondent.

cc. In the case in question, the Respondent merely complied with the legal obligations to which it is bound and, in parallel, followed the registration information that was provided to it by the proper party, and therefore should not be condemned to pay indemnity interest, nor costs in the arbitral proceedings, since it was the Claimant who, by not having arranged for the registration to be made, gave rise to the present request for arbitral determination.

dd. Indeed, pursuant to articles 43 of the General Tax Law and 61 of the Tax Procedure and Process Code, the right to indemnity interest depends on the verification of the following requirements: (i) the tax being paid; (ii) the respective assessment having been annulled, wholly or partially, in administrative review or judicial proceedings; (iii) a determination, in administrative review or judicial proceedings, that the annulment is based on error attributable to the tax authorities.

ee. In the case of the present proceedings there is an absence of error attributable to the tax authorities and therefore the requirements necessary for the right to indemnity interest are not met.

ff. But more: whoever invokes a right must make proof of its respective grounds and in the case the Claimant did not even prove the payment of the tax from which that right could derive.

gg. In fact, the Claimant proved only that it made payment of the Unique Circulation Tax for 2013 and 2014 of the vehicle with registration …-…-…, in the amount of €66.22, on 26.12.2014.

hh. Having not made proof of the carrying out of any other payment, the right to payment of indemnity interest does not exist, nor does the reimbursement of the tax itself petitioned.

ii. Finally and in relation to the vehicle with registration …-…-…, the Claimant being unable to make proof of anything whatsoever, particularly of its "alienation" by the fact that it has no document that proves it, obviously tax is due by virtue of the registration of the vehicle in its name.

  1. The Respondent presented written pleadings in which it maintained, in substance, the positions assumed in its Answer.

The Claimant did not present pleadings.

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

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

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

  1. It is necessary to resolve the following questions:

  1. Whether the request for arbitral determination was presented out of time and, in consequence, whether the right which it seeks to assert should be declared to have lapsed.

  2. Whether the assessments under consideration are unlawful by reason of a defect of violation of law.

  3. Whether the Claimant should be recognized as having the right to reimbursement of taxes paid.

  4. Whether the Claimant should be recognized as having the right to indemnity interest on the amounts paid.

II – Relevant Factual Matter

  1. The Tribunal considers the following facts to be proven:

9.1. The Respondent made the following assessments of Unique Circulation Tax, of which it notified the Claimant:

a) Assessment no. 2014-…, for the year 2014, relating to the vehicle with registration …-…-… in the amount of €41.72, plus compensatory interest in the amount of €0.47.

b) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €17.47, plus compensatory interest in the amount of €0.96.

c) Assessment no. 2014-…, for the year 2014 and relating to the vehicle …-…-… in the amount of €20.78, plus compensatory interest in the amount of €0.31.

d) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €1.75.

e) Assessment no. 2014-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €0.47.

f) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €1.75.

g) Assessment no. 2014-…, for the year 2013 and relating to the vehicle …-…-… in the amount of €32.00, plus compensatory interest in the amount of €0.47.

h) Assessment no. 2013-…, for the year 2013 and relating to the vehicle …-…-…, in the amount of €59.48, plus compensatory interest in the amount of €3.25.

i) Assessment no. 2014-…, for the year 2014 and relating to the vehicle …-…-…, in the amount of €60.07, plus compensatory interest in the amount of €0.89.

9.2. The Claimant filed a request for administrative review of the tax debts that were assessed against it, which was dismissed by order of 9.02.2015, notified to the challenging party on 11.02.2015.

9.3. The Claimant paid all debts arising from the assessments identified.

  1. Unproven Facts

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

  1. Justification of the Decision on Factual Matter

The decision on the factual matter established as proven is based on the documents contained in the proceedings, designedly those contained in the administrative file.

Although the Claimant only attached to the proceedings the payment voucher relating to the vehicle …-…-…, the payment of the tax debt is expressly admitted in the decision which addressed the administrative review, designedly at page 54 of the administrative file.

Concerning the facts established as unproven, with potential relevance for their proof only four documents contained in the proceedings designated as "2nd copy" [of invoice], one for each vehicle, with the exception of the vehicle …-…-…, regarding which no document contained in the proceedings is potentially demonstrative of the transmission of ownership.

From these "2nd copies" are contained the dates of 23.05.2005 (vehicle …-…-….); 29.01.2007 (vehicle …-…-…); 2.10.2008 (vehicle …-…-…) and 23.03.2010 (vehicle …-…-…) not resulting expressly from the same whether such dates are the dates of the emission of the invoices or the date of the emission of the second copies thereof. However, as in all the invoices the dates inserted therein correspond to the beginning of the period to which the invoices relate, according to what is contained therein, it is to be concluded that the dates in question are those of the emission of the invoices and not of the second copies thereof.

In reinforcement of this conclusion it is to be noted that all these documents contain the following mention, "-Processed by certified program no. 580/AT". From this it results that the dates of the emissions of the second copies in question could not be the dates indicated, since at that time there was no regime in force in the Portuguese legal order for certification of invoicing programs.

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

On the other hand, neither from the documents in question nor from the request for arbitral determination results any justification for the emission of second copies of invoices, designedly loss of the duplicate or copy intended for the supplier's file, or other justifying reason.

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

Moreover, another reason would lead to the non-establishment of the facts in question as proven.

Indeed, all the alleged second copies of invoices contain the mention of: "-Valid after proper collection." It happens that the Claimant did not prove and nor did it even allege that such collection occurred and therefore, even if the invoices could be held to be validly replaced by the second copies, their content, unaccompanied by the allegation and proof of such collection, would not result in the proof of the facts in question.

III – Applicable Law

Matter of Exception

  1. The preliminary question that must be resolved consists of the hypothetical timeliness of the request for arbitral determination, alleged by the Respondent.

The Respondent alleges that the Claimant, "contrary to what it was obliged to do" did not make "any proof of the eventual date on which it would have been notified of the dismissal of the administrative review, and therefore the Tax Authority, from the outset, questions the compliance with the legally fixed deadline for the request for constitution of the arbitral tribunal" concluding that "To state only, as the Claimant does, that 'the Claimant was notified of the respective dismissal order', without stating the exact date, allows the Tax Authority, legitimately and from the outset, to raise the question of whether the present request for arbitral determination may be out of time".

It is to be observed that, inasmuch as lapse is a matter of exception (article 571, paragraph 2 of the Civil Procedure Code), it was incumbent upon the Respondent to allege and prove the hypothetical untimeliness of the request (article 342, paragraph 2 of the Civil Code) and not upon the Claimant to prove the timeliness thereof. On the other hand, inasmuch as the notification of the dismissal of the administrative review is an act carried out by the Respondent itself, it is not clear how it can allege its lack of knowledge thereof.

In any event, it results from the administrative file attached by the Respondent itself that the notification in question was effected on 11.02.2015 and the request for arbitral determination was presented on 13.03.2015, well before the lapse of the 90-day period provided for in article 10, paragraph 1, paragraph a), of RJAT.

Accordingly, the exception of lapse of the right of action raised by the Respondent is judged to be without merit.

On the Merits of the Case

  1. Pursuant to article 3, paragraph 1 of the Unique Circulation Tax Code, "the taxpayers in respect of the tax are the owners of vehicles, being considered as such natural or legal persons, of public or private law, in whose name the same are registered."[1]

The question which arises in relation to this provision concerns whether the person in whose name the ownership of the vehicles is registered can prove, despite such circumstance, that he was not the owner thereof on the date of the tax event, in order to negate the status of taxpayer in respect of the tax.

  1. In order to provide an answer to the problem in question, it appears to us pertinent to ascertain whether article 3, paragraph 1, of the Unique Circulation Tax Code establishes a presumption, a position sustained by the Claimant, or whether, differently, this is merely the configuration of the legal type of tax, within the scope of the legislator's discretion, as the Respondent argues, it being that, according to article 73 of the General Tax Law "Presumptions enshrined in provisions concerning tax incidence always admit proof to the contrary".

  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 Assessment, Publisher Almedina, collection Theses, 2007) writes:

"With regard to fictions, as a technique utilized in tax laws, and its function, Karl Larenz tells us that 'legal fictions normally have the purpose of applying the rule given for a fact provided for (F1) to another fact provided for (F2)... the law 'feigns' that F2 is a case of F1'" (p. 603).

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

Also on this question, in terms convergent with ANA PAULA DOURADO, JOÃO SÉRGIO RIBEIRO, ("PRESUMPTIVE TAXATION OF INCOME, A Contribution to Reequationing Indirect Methods of Determining Taxable Matter, Almedina, Theses, 2010, pp. 48-49) considers that the criterion of distinction 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 point of departure 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, by contrast, is born of a falsity or of something unreal, disconnected from the natural order of things. That is, in fiction a legal truth distinct from the real is created; in presumption a causal relationship is created between two realities or natural facts. (...).

Notwithstanding that both presumption and fiction constitute the result of legislative techniques, through which consequences of legal facts are drawn as taken to be true, what truly distinguishes them is the circumstance that, in legal presumption, the presumed fact has a high degree of probability of existing, and 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 distinguish situations in which we are faced with legal presumptions, in which from a known fact (real or even juridical) a naturally probable juridical fact is inferred, a case in which proof to the contrary must be admitted, to make them compatible with the principle of contributory capacity, from situations in which we are confronted with the assumption of rules of common experience as rules of taxation, there being thus the construction of juridical norms (or legal types) with the (eventual) recourse to legal fictions. In these, the principle of contributory capacity suffers the natural impact of the principles of practicability and of effective struggle against tax evasion, having to content itself with a safety valve relatively to those cases that, by reaching such rigors of iniquity, cannot fail to permit the departure from the said rules of experience".

  1. In the case in question, and in light of the authoritative legal scholarship cited, it appears clear that in article 3, paragraph 1, of the Unique Circulation Tax Code, we are confronted with a presumption, to the extent that it is (very) 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 is the basis of the presumption derived from registration set forth in article 7 of the Code of Real Property Registration, applicable by referral of article 29 of the Regulation on Vehicle Registration.

It is true that the law does not use the expression "being presumed as such, pending proof to the contrary", which was contained in article 3, paragraph 1 of the Regulation on the Municipal Tax on Vehicles[2], but such does not appear to prevent us from being materially confronted with a presumption.

As was written in the decision handed down in arbitral process no. 286/2013-T[3], "just as it has already been noted in other arbitral decisions handed down by this CAAD in relation to the same matter (see the decisions handed down in processes no. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of legislative provisions, different from those invoked above, in which the use of the expression 'being considered' or 'is considered' is likewise found with the meaning of presumption), not only is it not possible to say, in any manner, that the attribution of a presumptive meaning to the expression 'being considered' does not possess 'a minimum of verbal correspondence, albeit imperfectly expressed'" (paragraph 2 of article 9 of the Civil Code), but rather, more than that, one must even recognize such word a current and normal correspondence to that presumptive sense.

For this reason, it does not assume decisive weight the fact that, differently from what occurred with the literal enunciation "being presumed" which was previously found in article 3 of the Regulation on the Tax on Vehicles, the legislator has moved to use in the Unique Circulation Tax Code the formula "being considered" which is contained in the current article 3 thereof, since this expression has full semantic force to involve the establishment of a presumption".[4]

  1. The decision of the Supreme Administrative Court 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 appear to be applicable only to provisions concerning tax incidence in the proper sense, but also to all provisions that establish fictions that influence the determination of taxable matter (either directly, through fictitious values for taxable matter, or indirectly, by fictitiously establishing the values of income relevant to its determination). This, it appears, is the scope of the adverb 'always' utilized in article 73 of the General Tax Law, which elevates this rule to a fundamental principle of the entirety of the tax-legal order, a corollary of the principle of equality in the distribution of public burdens, based on the principle of contributory capacity".

It is true that Unique Circulation Tax is not, essentially, subordinated to the principle of contributory capacity, but rather to the principle of equivalence. However, such does not appear to require different solutions to the extent 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 appropriate to taxes"[5], whereas "The principle of equivalence represents the material criterion of equality appropriate to fees and contributions".[6]

  1. It is further to be noted that, in addition to article 1 of the Unique Circulation Tax Code providing that "The unique circulation tax complies with the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that they cause, in concretization of a general rule of tax equality", other provisions reinforce and concretize the weight of this principle in the internal system of this tax.

First and foremost, article 3, paragraph 1, of the Law that approved the Unique Circulation Tax Code (Law no. 22-A/2007, of 29 June), concretizing this idea of equivalence establishes that: "The revenue generated by Unique Circulation Tax inciding upon vehicles of categories A, E, F and G, as well as 70% of the component relating to engine displacement inciding upon vehicles of category B, belongs to the municipality of residence of the taxpayer or equivalent, except if that revenue is inciding upon vehicles that are the subject of long-term rental or operating lease, in which case it should be assigned to the municipality of residence of the respective user."

And, for purposes of effective concretization of this legislative intention, article 19 of the Unique Circulation Tax Code provides that: "For purposes of the provision of article 3 of the present Code, as well as of paragraph 1 of article 3 of the law of its approval, entities that carry out financial leasing, operating leasing, or long-term rental of vehicles are obliged to supply to the Directorate-General for Taxes the data relating to the tax identification of the users of the leased vehicles."

On the other hand, this principle of equivalence is further concretized in paragraph 2 of article 3 of the same Code by providing that "Equivalent to owners are financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the lease contract".

  1. Accordingly, the decisive importance attributed by Law to the principle of equivalence is well demonstrated, both on the side of the causer of the environmental and road cost and on the side of the Municipality that tendentially bears such costs and that, for that reason, is the beneficiary of the tax revenue.

As Sérgio Vasques emphasizes: "It is clearly commutative also the structure of the new unique circulation tax, which since 2007 burdens automobiles in function of the levels of CO2 emission, openly appealing to the principle of equivalence and to a relationship of exchange with taxpayers"[7].

Should it not be possible for the person registered as owner in the vehicle registration to negate the status of taxpayer, by demonstrating that he was not the owner on the date of the tax event, this idea of equivalence could be decisively put in question, taxing one who did not cause the environmental and road cost and potentially not assigning the revenue to the Municipality that tendentially bore those costs.

  1. The Respondent sustains that the interpretation proposed by the Claimant of article 3, paragraph 1 of the Unique Circulation Tax Code is contrary to the Constitution of the Portuguese Republic to the extent that it devalues the registration reality in the face of 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 clear, with all due respect, how the position that sustains we are, in article 3, paragraph 1, of the Unique Circulation Tax Code, faced with a rebuttable presumption, could put in question the principles of trust and legal certainty, it being that the same impose duties and restrictions on legal-public action[9].

The same can be said, in essence, of the principle of proportionality.[10]

Indeed, regarding this principle, we would even say that the question that could be raised would be whether such principle would not be violated by the interpretation advocated by the Respondent to the extent 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, this would be equivalent to suffering the consequence of the omission of an act (the vehicle registration) whose interested party in terms of legal certainty, from the civil-law perspective is another person (the purchaser).

In truth, even if it is admitted that such a solution is suitable to achieve the public end in view, it does not clearly result that there is an absence of alternative measures equally suitable.

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 private parties (in this case of former owners of vehicles) against the benefits which it is sought to achieve with public interest, considering that this fundamental requirement of the principle of proportionality is not 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 little relevant in the universe of vehicle transactions, given the natural motivation of purchasers to effect registration, since this is in their own interest.

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

However, considering, in particular, the requirements of practicability of tax administration, it is considered that the same is suitable, 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, which would not permit, even, that the citizen be allowed to make proof contrary to the presumption.

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

It appears to us that the Respondent has in mind the idea of efficiency in tax law, related to administrative efficiency[11]. It is to be observed, however, that the relevance of a principle in the solution of a concrete case should not operate in isolation but in joint weighing with the other principles and, in the sequel of what was said above, regarding the principles of equality, equivalence and proportionality, the idea of efficiency is not sufficient to relegate the possibility of the taxpayer rebutting the presumption resulting from vehicle registration. It is further to be added that efficiency and practicability are sufficiently safeguarded by the existence of a rebuttable presumption, in the terms referred to above.

  1. Accordingly, it is concluded that article 3, paragraph 1, of the Unique Circulation Tax Code, establishes a rebuttable presumption, and the interested party, in order to rebut the same, must prove that, despite the registration, he was not the real owner, having in the meanwhile sold it.

In this sense, inter alia, were the decisions handed down in arbitral processes numbers 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 hereby endorsed.

  1. In the case in question, the Respondent, anchoring itself in the basic fact of the presumption, proceeded with the assessment.

The Claimant, admitting the basic fact of the presumption, sought to rebut it, by demonstrating that it would have sold the motor vehicles in question on a date prior to that of the tax events. It happens, however, that such proof was not made, as results from the decision handed down on factual matter.

Accordingly, the presumption established in article 3, paragraph 1, of the Unique Circulation Tax Code not having been rebutted, there is no ground invoked in the request for arbitral determination 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

Accordingly, the Arbitral Tribunal decides not to decree the annulment of the assessments adjudged and, in consequence, to judge the request for arbitral determination entirely without merit.

Value of the action: €337.84 (three hundred thirty-seven euros and eighty-four cents) pursuant to the provision of article 306, paragraph 2, of the Civil Procedure Code and 97-A, paragraph 1, paragraph a), of the Tax Procedure and Process Code and 3, paragraph 2, of the Regulation of Costs in Arbitration Proceedings.

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

Notify hereof.

Lisbon, CAAD, 25.09.2015.

The Arbitrator

Marcolino Pisão Pedreiro

[1] Paragraph 2 of the same article further provides that "Equivalent to owners are financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the lease contract".

[2] Approved by Decree-Law no. 143/78, of 12 June and revoked by Law no. 22-A/2007, of 29 June. This provision had the following wording: "the tax is due by the owners of vehicles, being presumed as such, pending proof to the contrary, the persons in whose name the same are registered or matriculated".

[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] It is further to be noted that, 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 ("General Tax Law") "the presumptions in matters of tax incidence may be explicit, revealed by the use of the expression "presumed" or similar (...). However, presumptions may also be implicit in provisions concerning incidence, particularly of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations in which it is not unfeasible to ascertain the real value" (See "General Tax Law Commented and Annotated", Encuentros 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.

Also 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 generation, showing the unilateral features typical of any tax.

From the 1980s and 1990s (...), however, these tax figures came to be instrumentalized to compensate the costs that the 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 is to be noted, however, that the principle of freedom of form or consensuality (article 219 of the Civil Code) is in force in Portuguese law. Except where the law requires it, the validity of a contractual declaration does not depend on the observance of special form. The "informal reality" to which the Claimant alludes is in fact 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 power, as well as the clarity and determinability of sources of law" and that the principle of protection of trust requires "that the regulatory framework in force not change in a manner that would frustrate the expectations generated in citizens regarding its continuity, with the prohibition of intolerable retroactivity of laws, as well as the need for its alteration in accordance with 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 "is based on an internal material limitation to legal-public action of a discretionary character, containing the excessive effects which may present themselves in the issuance of public power measures of ablative character to their recipients" (op. cit. p. 839-840).

[11] And not, manifestly, the principle of efficiency of tax law, because, as write 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, the same do not function efficiently." (Course of Tax Law, Coimbra Editora, 2009, p. 28.)

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

Frequently Asked Questions

Automatically Created

Who is the taxable person (sujeito passivo) for IUC under Portuguese tax law?
Under Portuguese tax law, the taxable person (sujeito passivo) for IUC is defined in Article 3(1) of the IUC Code as vehicle owners, specifically those natural or legal persons in whose name the vehicles are registered. Article 3(2) extends this to other holders such as lessees in financial leasing, usufructuaries, and purchasers under reservation of ownership. The Tax Authority contends this is not a rebuttable presumption but a definitive legislative policy establishing that registered ownership determines IUC liability, regardless of whether actual economic ownership has transferred.
Can a company challenge IUC vehicle tax assessments through CAAD tax arbitration?
Yes, companies can challenge IUC vehicle tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration. This case demonstrates that A... Lda, a legal entity, successfully initiated arbitration proceedings under Article 10 of Decree-Law 10/2011 (RJAT - Legal Framework for Tax Arbitration). The arbitral tribunal was constituted on 27.05.2015 to review nine IUC assessments. CAAD provides an alternative dispute resolution mechanism to judicial courts for resolving tax disputes, including those involving IUC.
What is the procedure for requesting annulment of IUC liquidations after a rejected gracious complaint (reclamação graciosa)?
After a rejected gracious complaint (reclamação graciosa), taxpayers must request constitution of an arbitral tribunal from CAAD within the statutory deadline. In this case, the claimant filed the arbitration request on 13.03.2015 following dismissal of its administrative review. The Tax Authority may raise timeliness objections if the exact notification date of the dismissal is not properly documented. Once accepted by the CAAD President, an arbitrator is appointed, the tribunal is constituted, and proceedings commence. If no arbitral hearing is necessary under Article 18(1) RJAT, it may be dispensed with to avoid useless procedural acts.
Are compensatory interest (juros compensatórios) applicable to IUC tax assessments for multiple vehicles?
Yes, compensatory interest (juros compensatórios) are applicable to IUC tax assessments for multiple vehicles. This case involved nine separate assessments, each including compensatory interest calculated on the principal tax amount. The interest amounts ranged from €0.31 to €3.25 depending on the principal tax and the delay period. Compensatory interest compensates the State for the period between when tax should have been paid and when it was actually assessed or paid, and is automatically calculated on IUC debts in accordance with Portuguese tax law provisions.
Can a taxpayer claim a refund and indemnity interest (juros indemnizatórios) for unduly paid IUC amounts?
Yes, taxpayers can claim refunds and indemnity interest (juros indemnizatórios) for unduly paid IUC amounts. The claimant in this case, after paying all contested IUC assessments totaling approximately €327 plus compensatory interest, petitioned the arbitral tribunal for reimbursement of taxes it considered paid without legal ground, plus indemnity interest on those amounts. Indemnity interest compensates taxpayers for the State's use of funds that were improperly collected, calculated from the payment date until reimbursement. This right derives from general tax law principles protecting taxpayers against undue tax burdens.