Process: 179/2014-T

Date: October 15, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral case (Process 179/2014-T) concerns a dispute over IUC (Single Vehicle Circulation Tax) liability for leased vehicles. A financial leasing institution challenged IUC assessments totaling €3,476.18 for tax periods 2009-2012, arguing it should not be liable for vehicles sold before the relevant tax dates. The claimant contended that Article 3(1) of the IUC Code establishes a rebuttable legal presumption: while registered owners are 'considered' taxpayers, this presumption can be overcome with proof that ownership transferred before the tax triggering date. The institution argued that vehicle registration has merely declarative effect, not constitutive value, and that the equivalence principle underlying IUC means the tax should burden actual vehicle users, not former owners. Documentary evidence allegedly proved all contested vehicles were sold prior to the assessment dates. The Tax Authority raised procedural exceptions, arguing that no official assessments existed—only self-generated collection notices extracted voluntarily from the Tax Portal—thus depriving the arbitral court of subject matter jurisdiction and ratione materiae competence. On the merits, the Authority contended that Article 3(1) intentionally establishes a legal qualification, not a presumption: the registered person IS the taxpayer by legislative design. The expression 'is considered' appears throughout Portuguese tax legislation (IMT, CIRS, CIRC) as definitional language, not presumptive. The Authority argued this represents the legislator's deliberate policy choice within its constitutional margin of legislative configuration. The case raises fundamental questions about the nature of IUC taxpayer identification, the distinction between legal presumptions and legal qualifications, whether registration constitutes determinative or merely evidentiary proof of tax liability, and the procedural requirements for challenging self-assessed taxes through tax arbitration.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 179/2014–T

Subject: IUC – Court Jurisdiction; Taxpayer

I - REPORT

"A" – Financial Credit Institution, S.A. (hereinafter referred to as Claimant), legal entity no. …, with registered office at … Street …, in Lisbon, filed, on 24-02-2014, pursuant to paragraph a) of No. 1 of article 2 and articles 10 and following of Decree-Law No. 10/2011, of 20 January, which approves the Legal Regime of Arbitration in Tax Matters (RJAT), in conjunction with paragraph a) of article 99 and paragraph d) of No. 1 of article 102 of the Code of Tax Procedure and Process (CPPT) – applicable by virtue of paragraph a) of No. 1 of article 10 of the aforementioned decree-law, a request for arbitral decision, in which AT - TAX AND CUSTOMS AUTHORITY is Respondent, in its capacity as successor to the GENERAL DIRECTORATE OF TAXES, with the purpose of:

  • Declaration of the illegality of the Single Vehicle Circulation Tax assessments being contested (identified in documents nos. 2 to 54 attached to the initial petition) relating to the tax periods 2009, 2010, 2011 and 2012, in the amount of 3,476.18 euros, with its consequent annulment;

  • Condemning AT – Tax and Customs Authority to reimburse the Claimant the amount of tax unduly paid and the corresponding indemnity interest.

The Claimant alleges, in essence, the following:

  • The Claimant is a financial institution whose corporate purpose is the practice of operations permitted to banks, with the exception of the receipt of deposits, having, for this purpose, all legally required authorizations;

  • In the scope of its activity, the Claimant enters into contracts with its clients for Long-Term Lease and Financial Lease Contracts of motor vehicles, at the end of which it transfers ownership of the same to the respective lessees or to third parties;

  • The Claimant was notified of Official Assessments of IUC relating to the vehicles identified in the request for arbitral decision (copies attached to the initial petition) and to the tax periods 2009, 2010, 2011 and 2012;

  • The Claimant proceeded to voluntary payment of the IUC allegedly outstanding (Documents no. 2 to no. 54 attached to the initial petition);

  • Notwithstanding the above, the Claimant cannot fail to express its disagreement with respect to the said assessment acts, insofar as the vehicles in relation to which the payment of IUC was owed were not its property on the date identified by AT – Tax and Customs Administration as the date of the occurrence of the taxable event;

  • In accordance with the provisions of article 3, No. 1 of the Code of IUC, "the taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered;"

  • Although the current text has not used the term "are presumed to be", contrary to what was contained in the repealed Regulation of Tax on Vehicles (article 3, No. 1 of the Regulation of Tax on Vehicles, approved by Decree-Law No. 143/78, of 12 June and repealed by Law No. 22-A/2007, of 29 June provided: "the tax is due by the owners of the vehicles, being presumed to be so, until proof to the contrary, the persons in whose name the same are registered or recorded", article 3, No. 1 of the CIUC continues to contain a legal presumption regarding subjective scope;

  • In the Portuguese legal system there are various examples of norms that establish presumptions using the verb "to consider", examples of which are, in the Civil Code, among others, articles 314, 369 No. 2, 374 No. 1, 376 No. 2 and 1629; In the Industrial Property Code, article 98;

  • Also in the tax legal system the verb "to consider" can be found with a presumptive sense, such as, for example, article 89-A, No. 4 of the General Tax Law (LGT);

  • On the other hand, article 3 of the CIUC should also be interpreted in light of the principle of equivalence, established in article 1 of the same Code and which is a structuring principle of the tax in question. From the outset it should be understood that the tax aims to tax the actual users of the vehicles;

  • Understanding that article 3 of the CIUC establishes a presumption, this is necessarily rebuttable, by virtue of article 73 of the LGT;

  • From the documents presented by the Claimant, it follows that all vehicles on which the assessments now being contested fall were sold on a date prior to that to which the tax relates;

  • The motor vehicle registration does not have constitutive value but only declarative effect, so the absence of registration cannot affect the quality of owner;

  • The absence of registration also does not prevent the full effectiveness of the contracts of sale of the vehicles, in accordance with the combined provisions of article 5, No. 1 and No. 4 of the Code of Land Registration (CRPred.);

In its response to the request for arbitral decision presented by the Claimant, the Respondent AT - Tax and Customs Authority raises defensive exceptions and counterclaim, alleging, in summary, the following:

A - By Exception

  • Contrary to what the Claimant states, in the cases of the vehicles in question, official assessments were not issued, but rather mere collection notices, generated by the Claimant itself through the Internet on the Tax Portal;

  • Therefore, since official assessment acts were not issued by the Respondent entity, but collection documents that the Claimant fully voluntarily extracted from the Tax Portal, the present request for arbitral decision lacks subject matter given that tax assessment acts are not being challenged;

  • Thus, since the collection notice does not constitute a tax act, there is in the present case a situation of lack of subject matter of the arbitral proceedings, which constitutes a peremptory exception that should lead to the dismissal of the Respondent from the instance, in accordance with article 576, No. 3 of the Code of Civil Procedure;

  • Furthermore, given the absence of assessment acts, the Arbitral Court is also incompetent ratione materiae to hear the claim, which constitutes a dilatory exception imperative of hearing the merits of the case;

  • To the extent that it is understood that these are self-assessments generated by the Claimant on the Tax Portal through the Internet, for such self-assessments to be subject to judicial challenge it was necessary that the challenge be preceded by administrative appeal of the same self-assessments, which does not occur, the consequence of this fact being the non-impugnability of such acts.

B - By Counterclaim

  • The tax legislator in establishing in article 3, No. 1 who are the taxpayers of the IUC expressly and intentionally established that these are the owners (or, in the situations provided for in No. 2, the persons enumerated there), being considered as such the persons in whose name the same [vehicles] are registered;

  • The tax rule is replete with provisions analogous to that established in the final part of No. 1 of article 3, in which the tax legislator, within its freedom of legislative configuration, expressly and intentionally, establishes what should be considered legally, for purposes of scope, of income, of exemption, of determination and of periodization of taxable profit, of residence, of location, among many others;

  • By way of example, the Respondent points to articles 2 of the Code of Municipal Tax on Onerous Transfers of Real Estate (CIMT), 2, 3 and 4 of the Code of Personal Income Tax (CIRS) and 4, 17, 18 and 20 of the Code of Corporate Income Tax (CIRC), in which the expression "is considered" is used to qualify a situation for tax purposes, without such expression being able to be viewed as a presumption;

  • In these terms, it is imperative to conclude that, in the case of the present arbitral proceedings, the legislator expressly and intentionally established that are considered as such (as owners or, in the situations provided for in No. 2, the holders enumerated there) the persons in whose name the vehicles are registered, because this is the interpretation that preserves the unity of the legal-tax system;

  • The aforementioned understanding corresponds to that adopted in the jurisprudence of our courts, having been upheld by the Administrative and Tax Court of Penafiel, in Case No. 210/13.0BEPNF;

  • The aforementioned understanding is the only one that, given the systematic element of interpretation, is compatible with the unity of the IUC regime;

  • The interpretation that the Claimant makes of article 3 violates the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

  • The Claimant cannot prove that the facts resulting from the presumption of registration are not true, because the documents presented as evidence do not have sufficient probative force to rebut the presumption of registration.

On July 15, 2014, a meeting was held at the offices of the Administrative Arbitration Center, as provided for in article 18 of the RJAT.

At this meeting, it was agreed that the parties would be granted a period of ten successive days to submit written final arguments.

The Claimant submitted arguments, arguing the following:

  • The current Single Vehicle Circulation Tax collection process, in which the taxpayer of the tax is not the one who circulates with the vehicle, is not the one who has possession and effective control of it, is not the one who is its effective owner but simply the one who, in the motor vehicle registration, appears as owner, is a process in which the pursuit of tax effectiveness results in tax injustice;

  • This injustice is even greater as the possibility for the taxpayer, who is not the effective owner, to refuse payment of the tax is limited;

  • Indeed, once the tax collection document is issued, the less onerous conduct for the taxpayer is the respective voluntary payment, with reduction of the amount of penalties;

  • Without voluntary payment, opposition to subsequent tax assessment implies, either payment of the tax without reduction of penalties and with increased associated costs, or the filing of a guarantee to stay the enforcement proceedings;

  • Even accepting that the documents submitted by the Claimant do not assume the quality of official assessments stricto sensu, the same are tax collection documents effectively assessed by the Tax Administration, which determined the taxable event, the taxpayer and the amount of the tax;

  • The documents submitted by the Claimant are, thus, assessments by the Tax Administration, and, in any case, reveal the existence of an assessment of the full responsibility of the Tax Administration, since it was not the Claimant that invented or in any way parameterized that assessment;

  • Consequently it is the Arbitral Court that is materially competent to decide the dispute;

  • The invoices are accounting documents and, as such, in accordance with article 75 of the LGT, are presumed to be true until proof to the contrary, proof that the Tax Administration did not make;

  • With the submission of these invoices, the Claimant rebutted the presumption of article 3, No. 1 of the CIUC.

The Respondent did not submit written final arguments.

The sole arbitral tribunal was regularly constituted on 30-04-2014, with the arbitrator designated by the Deontological Council of the CAAD, with the respective legal and regulatory formalities fulfilled (articles 11, No. 1, paragraphs a) and b) of the RJAT and 6 and 7 of the Deontological Code of the CAAD).

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

The cumulation of claims is legal, given that the requirements of article 3, No. 1 of the RJAT are met.

No nullities were identified in the proceedings.

II – QUESTIONS TO BE DECIDED

The following are the questions to be decided by the Court:

  • The existence of assessment or self-assessment acts whose challenge is the object of the request;

  • The jurisdiction of the Arbitral Court to hear the claim;

  • If it is concluded that the exceptions relating to the foregoing questions are unfounded, the interpretation of article 3, No. 1 of the Code of Single Vehicle Circulation Tax (CIUC) as establishing or not a presumption regarding the qualification, as owner of a vehicle, of the entity in whose name the ownership of the same is registered;

  • If it is concluded that the qualification of that norm as a presumption, its effective rebuttal in the case of these proceedings.

III – SUBSTANTIATION

A. RELEVANT FACTS PROVEN

1st: The Claimant was notified to proceed with payment of 42 IUC assessments relating to the years 2009, 2010, 2011 and 2012, and relating to 29 vehicles, whose property registration was recorded in its name;

3rd: The Claimant issued invoices relating to the sale of the 29 vehicles to which the IUC assessments being contested relate;

There are no unproven facts with relevance to the decision of the case.

B. SUBSTANTIATION OF LAW

  1. Question of the existence of assessment or self-assessment acts whose challenge is the object of the request

In its exception defense, the Respondent raises the following questions:

  • The documents submitted by the Claimant as evidence of the IUC assessments constitute collection notices and not assessments. Being collection notices, they are not tax acts, and as such cannot be subject to challenge, so the present arbitral proceedings lack subject matter.

  • There are no assessment acts in this case, so the arbitral tribunal is incompetent ratione materiae to hear the claim;

  • To the extent that it is understood that these are self-assessments generated by the Claimant on the Finance portal through the Internet, for such self-assessments to be subject to judicial challenge it was necessary that the challenge be preceded by administrative appeal of the same self-assessments, which does not occur, the consequence of this being the non-impugnability of such acts.

The Respondent alleges that the documents submitted by the Respondent are mere collection notices, which do not constitute tax acts.

We do not believe that the Respondent is right on this point.

The collection notices submitted by the Claimant do not embody assessment acts, but prove that there were assessment acts of the tax, or these collection notices could not have been issued (in the same sense, the arbitral decision rendered in case No. 183/2014-T, not yet published and submitted by the Respondent to the proceedings).

What the Claimant challenges are the assessment acts that were at the origin of the collection documents submitted to the proceedings as means of proof of the assessments.

Therefore, the exception of lack of subject matter of the proceedings does not apply.

  1. The jurisdiction of the Arbitral Court to hear the claim

The Respondent further alleges that, when it is not considered that there are no assessment acts of any kind, then there will be, at most, and in all cases, self-assessments, whose challenge is dependent on prior administrative appeal, which, in the present cases, did not exist.

It is a fact, recognized by the Claimant, that no administrative appeals of the assessments being contested were made.

The Court understands, however, contrary to what the Claimant claims, that the latter effectively carried out self-assessments, through the electronic communication platform of AT – Tax and Customs Authority.

Portuguese majority doctrine considers that assessment is the part or phase of the tax act that consists in the application of the rate to the taxable matter.[1] Doctrine recognizes the existence of a broader sense of "assessment," which would include the acts of the so-called levy and assessment in the strict sense.[2] But even if it were certain that the rule of article 131 of the CPPT has underlying a broad concept of assessment – which cannot be considered free of doubt – there would always be to consider that assessment would not be complete without the strict sense assessment act.

Now, in the present case, if it is certain that the Tax Administration carried out the objective and subjective levy acts, the strict sense assessment act, which led to the issuance of the collection notice, was carried out by the taxpayer, through the electronic communication platform of the Respondent. The fact that this assessment – application of the rate to the taxable matter – is done through a computer application available on the same platform for this purpose does not invalidate this statement. The fundamental aspect is, in the Court's view, that the Claimant had the possibility of not having triggered the assessment, i.e. the application of the rate to the taxable matter, without which the tax debt would not become liquid and exigible, unless there was an official assessment.

Now, in accordance with article 2, paragraph a) of the "Binding Regulation,"[3] are excluded from the scope of the binding obligation of AT – Tax and Customs Authority to arbitration the self-assessments that were not preceded by recourse to the administrative remedy, in accordance with article 31 of the CPPT.

In turn, article 131 of the CPPT provides that "in case of error in the self-assessment, the challenge will be necessarily preceded by administrative appeal directed to the head of the regional peripheral body of the tax administration".

And thus, it must be concluded that a self-assessment of a tax on which there has been no recourse to the administrative remedy is not challengeable before arbitral courts, so the Court is incompetent to assess the legality of the self-assessments being contested.

V. DECISION

For the reasons stated, the Court decides:

  • To uphold the exception of material incompetence of the Court to assess and decide on the legality of the self-assessment acts being contested, dismissing, in consequence, the Respondent from the instance.

Economic utility value of the proceedings: The economic utility value of the proceedings is fixed at 3,476.98 euros.

Costs: In accordance with article 22, No. 4, of the RJAT, the amount of costs is fixed at 612.00 euros, in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, borne by the Claimant.

Let this arbitral decision be registered and notified to the parties.

Lisbon, Administrative Arbitration Center, 15 October 2014

The Arbitrator

(Nina Aguiar)

Text prepared by computer, in accordance with No. 5 of article 131 of the CPC, applicable by referral of paragraph e) of No. 1 of Decree-Law No. 10/2011, of 20/01.

The drafting of this decision follows old spelling.

[1] Cardoso da Costa, J. M., Course of Tax Law, Coimbra, 1970, p. 397; Faveiro, V., Fundamental Notions of Portuguese Tax Law, Vol. I, Coimbra, 1984, p. 398; Cimourdain de Oliveira, C., Lessons of Tax Law, 6th ed., Porto, 1997, p. 122; Soares Martinez, Tax Law, Coimbra, 1996, p. 308.

[2] Casalta Nabais, J. Tax Law, 2nd ed., Coimbra, 2003, p. 304.

[3] Regulation No. 112-A/2011, of 22 March.

Frequently Asked Questions

Automatically Created

Who is the taxable person responsible for paying IUC on leased vehicles in Portugal?
Under Article 3(1) of the IUC Code, the taxable persons are the owners of vehicles, with those registered in whose name the vehicles stand being 'considered' as such owners. For leased vehicles, this creates a dispute: leasing companies argue this language establishes a rebuttable presumption allowing proof that ownership transferred before the tax date, while the Tax Authority contends it creates an irrebuttable legal qualification making the registered person the taxpayer regardless of actual ownership transfer. The resolution depends on whether 'considered' creates a presumption under Article 73 of the General Tax Law or constitutes a definitive legal classification. Financial leasing institutions typically transfer ownership at lease termination, creating potential liability gaps if registration updates lag behind actual transfers.
Can a financial institution challenge IUC tax assessments through arbitration at CAAD?
A financial institution's ability to challenge IUC assessments through CAAD arbitration faces significant procedural hurdles. The Tax Authority argued that when taxpayers self-generate collection notices through the Tax Portal rather than receiving official assessments, no challengeable 'tax act' exists, potentially depriving arbitral courts of subject matter jurisdiction under Article 2(1)(a) of the RJAT. Additionally, self-assessments may require prior administrative appeals before judicial challenge, a prerequisite not met if the institution directly sought arbitration. The arbitral court must first resolve whether voluntarily extracted collection documents constitute assessable acts under Articles 99(a) and 102(1)(d) of the CPPT. This jurisdictional question is fundamental: without a proper tax act, arbitral proceedings lack an object and face dismissal as a peremptory exception under Article 576(3) of the Civil Procedure Code.
Does vehicle registration determine IUC tax liability when ownership has been transferred?
Vehicle registration's role in determining IUC liability is the core legal dispute. The claimant argues registration has only declarative effect under Article 5 of the Land Registration Code, meaning actual ownership transfers are effective regardless of registration status. Consequently, once vehicles are sold, the former registered owner should not bear IUC liability even if registration remains unchanged. However, the Tax Authority maintains that Article 3(1) of the IUC Code intentionally establishes registration as the determinative criterion for taxpayer identification—a legislative policy choice within constitutional bounds. Analogous provisions in IMT, CIRS, and CIRC codes use 'is considered' as definitional language, not presumptive. Under this interpretation, registration conclusively determines tax liability irrespective of underlying ownership reality, placing the burden on registered owners to update records promptly or bear the tax consequences.
What are the grounds for annulling official IUC tax assessments on leasing companies?
Grounds for annulling IUC assessments on leasing companies depend on proving the assessments were issued against non-owners. Key arguments include: (1) demonstrating vehicles were sold before the tax triggering date through purchase agreements and transfer documentation; (2) establishing that Article 3(1) creates a rebuttable presumption under Article 73 LGT, allowing contrary proof; (3) invoking the equivalence principle in Article 1 CIUC, arguing the tax should burden actual users, not former owners; (4) showing registration is merely declaratory under Article 5 CRPred, so ownership transfer effectiveness doesn't depend on registration; and (5) demonstrating the assessment violates substantive tax law by imposing liability on non-owners. Procedurally, claimants must overcome jurisdictional obstacles if assessments are self-generated collection notices rather than official acts, potentially requiring prior administrative appeals.
Are compensatory interest and tax refunds available when IUC is wrongfully charged to the registered keeper?
Compensatory interest and tax refunds are statutorily available when IUC is wrongfully charged, but obtaining them requires successfully establishing the illegality of the underlying assessments. If an arbitral tribunal or court declares IUC assessments illegal and annuls them, Article 43 of the General Tax Law and Article 61 of the CPPT mandate reimbursement of unduly paid amounts plus compensatory interest calculated from payment date until refund. However, this remedy depends entirely on prevailing on the merits—proving the registered keeper was not the true taxpayer when the tax event occurred. The Tax Authority's jurisdictional objections create an additional barrier: if the tribunal finds no challengeable tax act existed (only self-generated collection notices), the claim fails procedurally without reaching the merits, precluding any refund or interest award regardless of the substantive merits of ownership transfer.