Process: 192/2015-T

Date: July 23, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

In Case 192/2015-T, a Portuguese company challenged 133 Single Vehicle Tax (IUC) assessments totaling €12,426.62, arguing violation of Article 3 of the IUC Code regarding subjective tax incidence. The claimant contended it was not the proper taxable person for vehicles in five distinct situations: (1) 60 vehicles sold before the tax due date, where the new owner should be liable under Article 3(1) and Article 6(3) of the IUC Code; (2) 7 vehicles under terminated leasing contracts not yet returned by lessees, where the lessee retained possession and rights; (3) 65 vehicles subject to active financial leasing contracts, where Article 3(2) designates the financial lessee as the taxable person; (4) one vehicle never registered in the claimant's name; and (5) one duplicate assessment for previously paid tax. The company sought annulment of all assessments, reimbursement of unduly paid taxes and compensation interest, plus indemnity interest under Article 43 of the General Tax Law (LGT) for loss of use of funds. The Tax and Customs Authority (TCA) opposed the claim. The arbitral tribunal, constituted under the Legal Framework for Tax Arbitration (RJAT), deemed oral hearings unnecessary and proceeded to written decision. The core legal issue centered on determining the correct taxable person when ownership transfers occur before the tax becomes due, and whether registration status or contractual possession determines IUC liability in leasing scenarios, with significant implications for fleet management and leasing companies managing large vehicle portfolios.

Full Decision

ARBITRAL DECISION

Case no. 192/2015-T

I – REPORT

1.1. ... -, S.A., a legal entity no. ..., with registered office …, Lisbon (hereinafter referred to as "the claimant"), having been notified of "several assessment notices for the Single Vehicle Tax ("IUC") on vehicles related to the aforementioned activity, against which it lodged an administrative appeal, with the administrative proceedings conducted under case number ...", and whose identification is contained in the Attached Table, submitted, on 17/3/2015, a request for the constitution of an arbitral tribunal and for an arbitral award, in accordance with the provisions of article 10, no. 2, of Decree-Law no. 10/2011 of 20 January (Legal Framework for Tax Arbitration, hereinafter referred to as "LFTA"), naming the Tax and Customs Authority (TCA), with a view to "the annulment of the IUC assessments identified in the Attached Table, for violation of the provisions of article 3 of the IUC Code, as regards the subjective scope of tax incidence, and the consequent reimbursement of the amount of 12,426.62 Euros, corresponding to 11,309.80 Euros of unduly paid tax and 1,116.82 Euros of unjustly paid compensation interest, as well as the payment of indemnification interest for the loss of use of the aforementioned amount, in accordance with article 43 of the General Tax Law."

1.2. On 8/6/2015, this Sole Arbitral Tribunal was constituted.

1.3. In accordance with article 17, no. 1, of the LFTA, the TCA was served, as the respondent party, to submit its reply. The TCA submitted its reply on 14/7/2015, arguing for the complete rejection of the claimant's claim.

1.4. By order of 17/7/2015, the Tribunal considered, in accordance with article 16, subsections c) and e), of the LFTA, that the meeting provided for in article 18 of the LFTA was unnecessary and that the case was ready for decision. The date of 23/7/2015 was further set for the pronouncement of the arbitral award.

1.5. The Arbitral Tribunal was regularly constituted, is materially competent, the case does not suffer from defects that invalidate it, and the Parties have legal standing and capacity, which are duly established.

II – REASONING: MATTERS OF FACT

2.1. The claimant alleges, in its initial petition, that: a) "it disagrees with all the assessment acts that are the subject of the present request [...], because the subjective requirements for tax incidence are not met"; b) "it is not the taxpayer for IUC regarding the license plates in question in any of the years in which the official assessments, which are now the subject of the arbitration request, were made"; c) "in all cases covered by the present arbitration request, the tax assessed concerns vehicles already sold by the Claimant, vehicles for which the leasing contract was still in force or tax that had already been previously paid"; d) "the first 60 situations identified in the attached table share the cause of action constituted by the fact that the vehicle associated with the assessment was sold by the Claimant prior to the IUC tax payment due date"; e) "according to [article 6, no. 3, of the IUC Code], it follows that, on the date the tax became due, the Claimant was no longer the owner of the vehicles in question, so the taxpayer should be the new owner of each vehicle, or another equivalent holder in accordance with article 3, no. 2, of the IUC Code"; f) "in light of article 3, no. 1, of the IUC Code, [...] [it follows that] the vehicles in question were sold by the Claimant prior to the occurrence of the taxable event and the subsequent tax exigibility, so it should apply to the new owners of the vehicles"; g) "the 7 following situations identified in the attached table share the cause of action constituted by the fact that the vehicle associated with the assessment was not at the Claimant's disposal on the IUC tax payment due date [being] leased to financial leasing customers of the Claimant"; h) "on the date the IUC became due [...] the Claimant was obliged to terminate the financial leasing contracts, which were terminated early (as opposed to the time contractually foreseen) without, however, the lessees having proceeded to return the goods to the lessor to which they were obliged"; i) "the Claimant resorted to the expedient provided in article 21 of Decree-Law no. 149/95 of 24 June [...], which presupposes the prior cancellation of the registration of the financial leasing"; j) "in the cases at issue, the situation exists where the lessee maintains in its sphere all the prerogatives to which the financial leasing contract entitled it, notwithstanding the registration of the leasing having been cancelled [so] the Claimant understands [...] that the tax to be assessed should be imputed to the holders of the vehicles/lessees [...]"; l) "the 65 following situations identified in the attached table fall under the same cause of action, i.e., the fact that the vehicle associated with the assessment was subject to a leasing contract that was in force on the date when the taxable event occurred and the corresponding tax became due"; m) "from the combined application [of no. 1 and 2 of article 3 of the IUC Code] it follows [...] that IUC is due on an annual basis, and, although the taxpayer is normally the owner, if the vehicle has been subject to leasing, the taxpayer should be the financial lessee"; n) "taking into account the facts presented, as well as the normative content of the aforementioned provisions of the IUC Code, it must be concluded that, with a financial leasing contract in force in the situations flagged during the taxation period of the vehicle and, in particular, at the moment when the taxable events that triggered the tax were triggered, the taxpayer was exclusively the financial lessee, and not the Claimant"; o) "the penultimate situation identified in the attached table refers to a vehicle that was not registered in the Claimant's name in the vehicle registry on the IUC tax payment due date"; p) "the ownership of the vehicle in question [...] was never registered in the Claimant's name, so, in no case, can the IUC tax liability for the same vehicle be imputed to it"; q) "it is clear that on the date the tax became due, the Claimant was not the owner of the vehicle, so the taxpayer should be the respective owner, for the purposes of article 3, no. 1, of the IUC Code"; r) "the last situation identified in the attached table concerns the cause of action based on the existence of duplicate collection, so the assessment relating to the vehicle in question is manifestly invalid, in that the tax in question, on the date of the assessment, had already been subject to assessment and payment by the Claimant in the past"; s) "once the fact extinguishing the tax obligation has occurred, the assessment made by the Tax Administration should have been considered non-existent and, as such, incapable of producing any legal-tax effect on the Claimant".

2.2. The claimant concludes that: a) "the assessments now being the subject of the arbitration request should not be imputed to it, and are, as such, unlawful"; b) should be declared admissible "the request for annulment of the IUC assessments identified in the Attached Table, for violation of the provisions of article 3 of the IUC Code, as regards the subjective scope of tax incidence, and the consequent reimbursement of the amount of 12,426.62 Euros, corresponding to 11,309.80 Euros of unduly paid tax and 1,116.82 Euros of unjustly paid compensation interest, as well as the payment of indemnification interest for the loss of use of the aforementioned amount, in accordance with article 43 of the General Tax Law."

2.3. For its part, the TCA alleges, in its reply: a) as a first preliminary issue, that "delimiting the request formulated, [...] the Claimant [...] did not [provide] any proof of the possible date on which it would have been notified of the rejection of the administrative appeal, so the TCA questions the compliance with the legally fixed deadline for the request for the constitution of the arbitral tribunal"; b) as a second preliminary issue, that "many documents submitted by the Claimant raise the greatest perplexities and others are [...] missing [and that,] after the submission of the arbitration request, the subsequent submission of documentary evidence was barred on the part of the Claimant"; c) "as a preliminary issue 3, [...] that the Claimant only submitted proof of a single tax payment, namely the 2010 IUC of the vehicle with license plate ..., in the amount of €131.90, and even as regards this assessment, the payment of compensation interest in the amount of €15.42 is missing"; d) "finally and as a preliminary issue 4, the request formulated is not even properly identified, which leads immediately to the conclusion of evident and manifest defectiveness of the initial petition [due to doubt about] the true scope and object of the present arbitration case"; e) that "the interpretation advocated by the Claimant is not only based on a skewed reading of the letter of the law, but also on the adoption of an interpretation that does not take into account the systematic element, violating the unity of the regime established throughout the IUC Code and, more broadly, throughout the entire legal-tax system and further stems from an interpretation that ignores the legislative intent of the regime established in the article in question and, as well, throughout the IUC Code"; f) that, "regarding financial leasing and for the purposes of eliminating the presumption in article 3 of the IUC Code, it is necessary that financial lessors (such as the Claimant) comply with the obligation inherent in article 19 of that Code to exempt themselves from the obligation to pay the tax. Now, the Claimant has provided no proof of compliance with this obligation with respect to the motor vehicles now under analysis"; g) that "invoices do not constitute contracts of sale" and that "the Claimant did not submit documentary proof of receipt of the price and should have done so [...] in the request for the arbitration proceeding"; h) that, "as regards the value or probative force of the invoices embodied in the documents (invoices), doubts arise in view of the discrepancies evident [because] the invoices submitted by the Claimant in the administrative appeal process contain different descriptions in their narrative [so they are] non-compliant [and, thus,] it is necessary to conclude that such documents can never benefit from the presumption of truth to which article 75 of the General Tax Law alludes"; i) that, "[as regards the assessments relating to financial leasing contracts], the copies of the contracts submitted by the Claimant raise the greatest doubts and perplexities [because] they are not accompanied by any document proving the making of any payment, [because] there is no document proving the validity of the contracts on the dates of the tax exigibility"; j) that, "[as regards vehicles that allegedly were not at the Claimant's disposal and in which] the Claimant considers that [...] the lessees had not proceeded to return the vehicles [...], the Claimant provides no proof of what it alleges in order to contradict the registration of the ownership of the vehicles in its name [so] it is also evident the lack of foundation of the Claimant's claim as regards the alleged illegality of the IUC assessments in these 7 situations"; l) that, "regarding one of the vehicles, with license plate ..., no document was submitted, e.g., the alleged existing leasing contract"; m) that, "regarding [the vehicle that, allegedly, was never owned by the claimant], the Claimant does not present a single document in order to contradict the registration of the ownership of the vehicle in its own name"; n) that "[as regards the alleged situation of duplicate collection, the claimant] does not prove the duplicate payment of IUC regarding the same assessment, referring to the same time period and same vehicle [so] its claim is manifestly unfounded"; o) that "the interpretation conveyed by the Claimant [is] contrary to the Constitution"; p) that "the transfer of ownership of motor vehicles is not subject to control by the Respondent [or] in other words, IUC is not assessed in accordance with information generated by the Respondent itself"; q) that "the legal requirements that confer the right to indemnification interest are not met".

2.4. The TCA concludes, finally, that "the present arbitration request should be decided to absolve the TCA from the instance, due to defectiveness of the initial petition, or, if not so decided, to declare the same untimely or, if another decision is made, to declare it admissible but unfounded due to manifestly lack of proof of the non-ownership of the vehicles on the dates of the IUC tax exigibility, maintaining in the legal order the tax assessment acts impugned and absolving, accordingly, the Respondent from the claim."

2.5. The following facts are deemed proven:

i) The claimant is a credit financial institution that conducts its activity in the branch of motor vehicle financing, specifically under the modality of granting loans for the acquisition of vehicles or the conclusion of financial leasing contracts.

ii) In its initial petition, the claimant states that "it received several assessment notices for [IUC] on vehicles related to [its] activity [...], against which it lodged an administrative appeal, with the administrative proceedings conducted under case number ..." (see point 2 of the initial petition), and further states that "the present request concerns the assessment acts relating to several vehicles". It does not identify, in detail, the specific assessment acts in question in these proceedings, but instead refers that, "for reasons of convenience of presentation, as a result of the vast number of situations at issue, [it refers] to the Attached Table [the identification of] each assessment act (by the number of the assessment notice), the year to which it refers, the license plate of the vehicle as well as the amount of tax associated with each act" (see point 6).

iii) Through the administrative file, it was possible to establish with certainty the tax acts in question – in fact, all the assessments indicated in the table attached to the initial petition were the subject of the aforementioned administrative appeal (although not all of those decided therein are contained in the said table). The appeal was partially granted (3 assessments annulled relating to the following vehicles and periods: ...of 2011; ...of 2012; and … of 2012) by order of 11/12/2014 (see Administrative File attached, RG 1).

iv) Thus, the IUC assessments in question (132), in the total amount of €12,426.62, concern the following vehicles and periods: … (Year 2009); … (2010); … (2010); … (2011); … (2010); … (2009); … (2012). The values of the respective assessments are contained in the table attached to the initial petition (to which reference is made here), are confirmed by the attached Administrative File, and were paid by the claimant. As for the penultimate vehicle, the claimant alleges that the vehicle "was never part of one of our contracts" and, as for the last vehicle, the claimant alleges that the "IUC was already [paid]".

v) None of the (7) situations that the claimant identified in its attached table as sharing "the cause of action constituted by the fact that the vehicle associated with the assessment was not at the Claimant's disposal on the IUC tax payment due date" is within the scope of the situations that were the subject of the administrative appeal for which the claimant itself refers.

vi) As for the (88) situations indicated in point iv) (not underlined), it is verified that the said vehicles were subject to sale to third parties, not being, therefore, the property of the present claimant, as can be seen from the copies of invoices contained in the attached Administrative File (see RG2 to RG14).

vii) As for the (44) situations that are underlined in the aforementioned point iv), the existence of the alleged leasing contracts is verified, confirming, for all these situations, the validity of these contracts on the date when the taxable event occurred and the respective tax exigibility (see the columns relating to the validity dates of the financial leases, in the table prepared by the TCA and which was attached to the information in which the partial grant of the administrative appeal no. ... was proposed). The same applies, therefore, also to the vehicle with license plate ..., which was the subject of specific contestation by the TCA.

2.6. The following are deemed not proven, due to lack of supporting documents: the allegation that the vehicle with license plate ...was never the property of the claimant; and the payment, in duplicate, of the 2011 IUC assessment relating to license plate ....

III – PRELIMINARY ISSUES

The TCA alleges, in its reply, 4 preliminary issues: a) as a first preliminary issue, the fact that the "Claimant [...] has not provided any proof of the possible date on which it would have been notified of the rejection of the administrative appeal, so the TCA questions the compliance with the legally fixed deadline for the request for the constitution of the arbitral tribunal"; b) as a second preliminary issue, the fact that "many documents submitted by the Claimant [raise] the greatest perplexities and others are [...] missing [and that,] after the submission of the arbitration request, the subsequent submission of documentary evidence was barred on the part of the Claimant"; c) "as a preliminary issue 3, [...] [the fact that] the Claimant only submitted proof of a single tax payment, namely the 2010 IUC of the vehicle with license plate ..., in the amount of €131.90, and even as regards this assessment, the payment of compensation interest in the amount of €15.42 is missing"; d) "finally and as a preliminary issue 4, the request formulated is not even properly identified, which leads immediately to the conclusion of evident and manifest defectiveness of the initial petition [due to doubt about] the true scope and object of the present arbitration case".

In summary:

a) It should be noted that the initial petition was submitted on 17/3/2015 and that there is no document in the file that allows sustaining the doubt raised by the TCA as to the deadline for the request for the constitution of the arbitral tribunal. In fact, it is known that the Official Notice ... is dated 11/12/2014 but the TCA has not presented a document that allows one to affirm that the said deadline was exceeded. From the above, verifying that the TCA has not presented elements aimed at supporting its doubt, the aforementioned deadline is deemed to have been complied with.

b) It should be noted that the fact that there are "many documents submitted by the Claimant [that] raise the greatest perplexities and others [that] are [...] missing [and that,] after the submission of the arbitration request, the subsequent submission of documentary evidence was barred on the part of the Claimant" does not bear on preliminary consideration of the claim of the present claimant, given that such documents (and the alleged inconsistency thereof) should be (and will be) considered for the purposes of rendering a substantive decision.

c) The TCA states that the present "Claimant only submitted proof of a single tax payment". Note, however, that, although the claimant asserts that it proceeded to pay "all amounts assessed by the Tax Authority relating to the acts now in question" without having submitted all the supporting elements of that payment, its assertion is supported by reading the attached Administrative File, particularly when it is verified that the order of the Head of the Section, in view of the partial grant of the appeal, determined the reimbursement of amounts relating to the vehicles and assessments that were identified with code 3.

d) Although the claimant has lodged an administrative appeal against fewer IUC assessments than those contained in the table attached to its arbitration request, there is no doubt as to the delimitation of the subject matter, given that, since the claimant's request is bound – as it itself states in the initial petition (see points 6 and 7) – to the assessments indicated in its attached table, and knowing the set of assessments that were the subject of the administrative appeal case no. ..., this makes it possible (without incurring in excess or omission of pronouncement), and contrary to what was alleged by the TCA, the identification of the assessments against which the claimant complains.

Thus, for the reasons exposed, only the assessments that, being contained in the table attached to the initial petition, have been the subject of the administrative appeal no. ... shall be considered.

In these terms, the following assessments (132), in the total amount of €12,426.62, which concern the vehicles and periods: ... (Year 2009); ... (2010); 66-58-ZF (2010); ... (2011); ... (2012);. shall be analyzed here.

(The license plates that are underlined concern assessments in which the claimant alleges "the fact that the vehicle associated with the assessment was subject to a financial leasing contract that was in force on the date when the taxable event occurred and the corresponding tax exigibility"; for all other cases – with the exception of the last two –, the present claimant alleges that "the vehicle associated with the assessment [was] sold by the Claimant prior to the IUC tax payment due date". The penultimate license plate concerns a situation in which the present claimant alleges that the vehicle was not registered in its name in the vehicle registry on the IUC tax payment due date. As for the last license plate, the claimant alleges that there was a "duplicate collection".)

In view of the above, given that all the situations identified by the claimant (in the table attached to its initial petition) are part of the set of situations that were the subject of the administrative appeal (to which it referred), it is concluded that the alleged defectiveness of the initial petition does not occur and that the value of the case remains the same.

e) An additional note to point out that none of the (7) situations that the present claimant identified in its attached table as sharing "the cause of action constituted by the fact that the vehicle associated with the assessment was not at the Claimant's disposal on the IUC tax payment due date" is within the scope of the situations that were the subject of the administrative appeal no. ... (and to which the claimant refers) – so the allegations of the claimant and the TCA relating to these 7 situations shall not be considered here.

IV – REASONING: MATTERS OF LAW

In the present case, there are six contested issues of law: 1) to know if article 3 of the IUC Code contains a presumption and if the elimination of the same was made; 2) to know if, as the TCA alleges, the interpretation of the present claimant does not take into account the systematic and teleological elements of interpretation of the law; 3) to know if, as the TCA also alleges, regarding financial leasing and for the purposes of eliminating the presumption in article 3 of the IUC Code, it is necessary that financial lessors (such as the claimant) comply with the obligation inherent in article 19 of that Code to exempt themselves from the obligation to pay the tax; 4) to know if, as the TCA also alleges, "the interpretation conveyed by the Claimant [...] proves to be contrary to the Constitution"; 5) to know if, as regards the 2010 IUC assessment (no. 2010-...; €230.47), relating to license plate ..., it is an act relating to "a vehicle that was never the property of the Claimant"; 6) to know if, as regards the 2011 IUC assessment (no. 2011-...; €32.92), relating to license plate ..., the duplicate collection that was alleged by the claimant occurs; 7) to know if indemnification interest is owed to the claimant.

Let us proceed.

  1. and 2) The first two issues of law converge in the direction of the interpretation of article 3 of the IUC Code, so it is necessary to: A) know if the norm of subjective incidence, contained in the said article 3, establishes or not a presumption; B) know if, in considering that this norm establishes a presumption, such violates the "unity of the regime", or disregards the systematic element and the teleological element; C) know – admitting that the presumption exists (and that the same is iuris tantum) – if the elimination of the same was made.

A) Article 3, nos. 1 and 2, of the IUC Code, has the following wording, which is reproduced here:

"Article 3 – Subjective Incidence

1 - The taxpayers of the tax are the owners of the vehicles, considered as such the natural or legal persons, of public or private law, in whose name the same are registered.

2 - Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are equated to owners".

The interpretation of the cited legal text is, naturally, essential for the resolution of the case under analysis. To that extent, it is necessary to resort to article 11, no. 1, of the General Tax Law, and, by reference thereto, to article 9 of the Civil Code.

Now, in accordance with the aforementioned article 9 of the Civil Code, interpretation starts from the letter of the law and aims, through it, to reconstruct the "legislative thought". The same is to say (regardless of the objectivism-subjectivism debate) that literal analysis is the basis of the interpretive task and the systematic, historical or teleological elements are guides for directing the said task.

The literal understanding of the legal text in question does not generate - even though the separation thereof as regards the determination, even minimal, of its meaning is highly debatable - the notion that the expression "considered as such" means something other than "presumed as such". In fact, we would very hardly find authors who, in a task of pre-comprehension of the said legal text, would "instinctively" reject the identity between the two expressions.

Confirming the indistinction (both literal and in meaning) of the words "considered" and "presumed" (presumption), see, for example, the following articles of the Civil Code: 314, 369, no. 2, 374, no. 1, 376, no. 2, and 1629. And, with particular interest, the case of the expression "is considered", contained in article 21, no. 2, of the Corporate Income Tax Code. As noted by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, with respect to that article of the Corporate Income Tax Code: "beyond this norm showing that what is at issue in the field of taxation of capital gains is to ascertain the real value (the market value), the limitation to the ascertainment of real value derived from the rules for determining the taxable value provided in the Income Tax Code cannot fail to be considered as a presumption regarding incidence, whose elimination is permitted by article 73 of the General Tax Law" (General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

B) These are just some examples that allow concluding that it is precisely for reasons related to the "unity of the legal system" (the systematic element) that one cannot affirm that only when the verb "presume" is used is one faced with a presumption, given that the use of other terms or expressions (literally similar) can also serve as the basis for presumptions. And, among these, the expressions "is considered as" or "considered as" assume, as seen, prominence.

If literal analysis is only the basis of the interpretive task, it is, naturally, essential to evaluate the text in light of the other elements (or sub-elements of the so-called logical element). In fact, the TCA also alleges that the interpretation of the claimant does not take into account the systematic element, violating the unity of the regime established throughout the IUC Code and, more broadly, throughout the entire legal-tax system, and that in light of a teleological interpretation of the regime established throughout the IUC Code, the interpretation advocated by the present claimant is wrong.

It is justified, therefore, to ascertain if the interpretation that considers the existence of a presumption in article 3 of the IUC Code collides with the teleological element, i.e., with the purposes (or with the sociological relevance) of what was intended with the rule in question. Now, such purposes are clearly identified at the beginning of the IUC Code: "The single vehicle tax obeys the principle of equivalence, seeking to burden the taxpayers in the measure of the environmental and road cost that they cause, in implementation of a general rule of tax equality" (see article 1 of the IUC Code).

What can be inferred from this article 1? It can be inferred that the close connection of IUC to the principle of equivalence (or principle of benefit) does not allow the exclusive association of the "taxpayers" referred to therein to the figure of owners but rather to the figure of users (or economic owners). As was well noted in the Arbitral Award rendered in case no. 73/2013-T: "in truth, the legislative intent of the tax [IUC] rather points in the direction of taxing the users of vehicles, the «economic owner» in the words of Diogo Leite de Campos, the effective owners or the financial lessees, because they are these who have the polluting potential causing environmental costs to the community."

In fact, if the said legislative intent were otherwise, how could one understand, for example, the obligation (on the part of entities that proceed to lease vehicles) - and for the purposes of the provisions of article 3 of the IUC Code and article 3, no. 1, of Law no. 22-A/2007 of 29/6 - of providing to the Tax Authority the data concerning the tax identification of the users of the said vehicles (see article 19)? Would it be that where it says "users", should one instead read, disregarding the systematic element, "owners with registration in their name"...?

C) From the above it is concluded that limiting the taxpayers of this tax only to the owners of the vehicles in whose name the same are registered - ignoring the situations in which these no longer coincide with the real owners or the real users of the same - constitutes a restriction that, in light of the purposes of IUC, finds no basis of support. And, even if it is alleged that the intent of the legislature was that, for the purposes of IUC, those considered owners are those who, as such, appear in the vehicle registry, it is necessary to keep in mind that such registry, in view of what was said previously, generates only a rebuttable presumption, i.e., a presumption that can be negated by the presentation of contrary proof. In this sense, see, for example, the Judgment of the Administrative Court of Appeal of 19/3/2015, case 8300/14: "The [...] article 3, no. 1, of the IUC Code, establishes a legal presumption that the holder of the vehicle registry is its owner, and such presumption is rebuttable".

It would, moreover, be unjustified the imposition of a kind of irrebuttable presumption, since, without an apparent reason, one would be imposing a (admittedly debatable) formal truth to the detriment of what could actually be and would have been proven; and, on the other hand, it would go against the duty of the TCA to comply with the principle of official investigation established in article 58 of the General Tax Law, i.e., the duty to conduct the necessary proceedings for a correct determination of the factual reality on which its decision should be based (which means, in the present case, the determination of the current and actual owner of the vehicle).

Furthermore, if the seller were not allowed to rebut the presumption contained in article 3 of the IUC Code, one would be benefiting, without a plausible reason, the acquirers who, in possession of correctly completed and signed purchase contract forms, and enjoying the advantages associated with their condition as owners, would attempt to exempt themselves from the payment of tolls or fines through a "registration formalism".

In this regard, it should also be noted that the registration of vehicles does not have constitutive effect, functioning, as stated before, as a rebuttable presumption that the holder of the registry is, effectively, the owner of the vehicle. In this sense, see, for example, the Judgment of the Supreme Court of Justice of 19/2/2004, case 03B4639: "The registry does not have constitutive effect, since it is intended to give publicity to the registered act, functioning (only) as mere presumption, rebuttable, (presumption «iuris tantum») of the existence of the right (articles 1, no. 1 and 7, of the Constitution and article 350, no. 2, of the Civil Code) as well as of the respective ownership, all as provided therein."

In the same sense, the Arbitral Award rendered in case no. 14/2013-T referred, in this regard, in terms that are accompanied here: "the essential function of the vehicle registry is to give publicity to the legal situation of the vehicles, the registration not having constitutive effect, functioning (only) as mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all as provided therein. The presumption that the registered right belongs to the person in whose name it is inscribed can be rebutted by contrary proof. Not meeting the TCA the requirements of the notion of third party for the purposes of registration [circumstance that could prevent the full effectiveness of the contracts of sale executed], it cannot avail itself of the absence of updating of the registration of the property right to challenge the full effectiveness of the purchase contract and to require from the seller (previous owner) the payment of the IUC due by the purchaser (new owner) as long as the presumption of the respective ownership is rebutted through sufficient proof of the sale."

Now, in the case under analysis, it is verified that the rebuttal of the presumption (by means of "sufficient proof" of the sales) was carried out. In fact, despite what the TCA alleges in points 106 to 137 of its reply, the Tribunal sees no reason to question the invoices presented by the claimant, given that they are considered clearly demonstrative that this was not, on the date of the tax, the owner of the vehicles. It should also be noted that the TCA, despite raising doubts about some of the invoices (points 125 to 129), did not challenge them, invoking, in particular, their falsity or the simulation of the sales.

It is concluded, therefore – and as referred to in the proven facts [see point vi)] – that, in a moment prior to the year and month of the taxation of the tax, the vehicles in question were subject to sale to third parties, not being, thus, property of the present claimant, as can be observed from the copies of invoices contained in the attached Administrative File (see RG2 to RG14).

With respect to this, it is also appropriate to note that, as was well emphasized in the Arbitral Award rendered in case no. 27/2013-T of 10/9/2013, "the documents presented, particularly the copies of the invoices that support, from the outset, the sales [...] of the [aforementioned] vehicles [...], [constitute] means of proof with sufficient force and suitable for rebutting the presumption founded on the registration, as established in no. 1 of article 3 of the IUC Code, documents that also enjoy, moreover, the presumption of truthfulness provided in no. 1 of article 75 of the General Tax Law."

Finally, it should be noted that, as well stated in the Arbitral Award rendered in case no. 230/2014-T of 22/7/2014, "the documentary elements, constituted by copies of the respective sale invoices – which were not challenged by the TCA – enjoy the probative force provided in article 376 of the Civil Code and the presumption of truthfulness conferred by article 75, no. 1, of the General Tax Law, having, thus, competence and sufficient force to rebut the presumption that supported the assessments made. These property transmission operations are enforceable against the Tax and Customs Authority, because, although the facts subject to registration only produce effects against third parties when registered, given the provisions of article 5, no. 1, of the Land Registry Code [applicable by reference of the Motor Vehicle Registry Code], the Tax and Customs Authority is not a third party for the purposes of registration, since it is not in the situation provided in no. 2 of the said article 5 of the Land Registry Code, applicable by virtue of the Motor Vehicle Registry Code, that is: it has not acquired from a common author incompatible rights. As for proof of vehicle sales, it can be made by any means, since the Law does not require any specific form, in particular, written form."

  1. The respondent also alleges that, regarding financial leasing and for the purposes of eliminating the presumption in article 3 of the IUC Code, it is necessary that financial lessors (such as the claimant) comply with the obligation inherent in article 19 of that Code to exempt themselves from the obligation to pay the tax.

This conclusion of the TCA does not proceed, given that, as was well referred in the Arbitral Award rendered in case no. 14/2013-T of 15/10/2013, "the financial lessee is equated to an owner for the purposes of no. 1 of article 3 of the IUC Code, which is to say for the purpose of being a taxpayer of IUC (See no. 2 of article 3). [...] the lessor, by legal and contractual imposition, does not have the potential for use of the vehicle and the lessee has exclusive use of the automobile, [and reaffirming] the conclusion that we have already reached that [...] the legislative intent of IUC prescribes that, pursuant to the aforementioned no. 2 of article 3 of this Code, it is the lessee who is responsible for the payment of the tax, since it is the one who has the potential for use of the vehicle and causes the road and environmental costs inherent to it. The same conclusion is reached when the importance given to users of leased vehicles in article 19 of the IUC Code is verified. In fact, pursuant to the provisions of this article, entities that proceed, in particular, to the financial leasing of vehicles are obliged to provide to the TCA (former Tax Authority), the tax identification of the users of the leased vehicles for the purposes of the provisions of article 3 of the IUC Code (subjective incidence), as well as of no. 1 of article 3 of the Law of its approval, since pursuant to this norm of Law no. 22-A/2007, if the revenue generated by IUC is incidental to vehicles subject to long-term rental or operational leasing, it should be allocated to the municipality of residence of the respective user (underlined). [...] [But, despite this obligation,] on the date of the occurrence of the taxable event, a financial leasing contract [is] in force that has as its object an automobile, for the purposes of the provisions of article 3, nos. 1 and 2, of the IUC Code, [and the] taxpayer of the IUC is the lessee even if the registration of the property right of the vehicle is made in the name of the leasing entity, as long as this one provides proof of the existence of the said contract." (Italics ours).

From the above, the allegation of the TCA regarding article 19 of the IUC Code is unfounded, given that it aims to overlay a formal obligation over a substantive reality clearly demonstrative of the condition of the claimant as a leasing entity in the underlying contracts.

However, the respondent also alleges that the present claimant "has provided no proof of the existence of the alleged leasing contracts on the dates of occurrence of the taxable facts" and that "there is no proof that any of the contracts had the duration initially foreseen in the same".

However, and as referred to in point vii) of the proven facts, the existence of the leasing contracts alleged by the claimant is verified, confirming, for all these situations, the validity of the contracts on the date when the taxable event occurred and the respective tax exigibility, as can be observed from the attached Administrative File – see the table contained in RG 1, in which the TCA identifies, in all the situations in question, the validity of these contracts on the date when the taxable event occurred and the respective tax exigibility (see the columns relating to the validity dates of the financial leases, in the table prepared by the TCA and which was attached to the information in which the partial grant of the administrative appeal no. ... was proposed). As for the cases in which the TCA does not see an end date for the contract (see point 145 of its reply), it would be incumbent upon the TCA itself to present elements that would allow doubting the validity of the contracts on the date of occurrence of the taxable facts; finally, as for the allegation in point 146 of the reply of the TCA, there is nothing to say, since the assessment relating to the vehicle with license plate ...is not part of the acts that are the subject of the present case – see point iv) of the proven facts.

It is concluded, therefore, that these allegations of the respondent are also unfounded.

  1. In view of the above [see 1) and 2)], it is concluded that there is no interpretation "contrary to the Constitution", contrary to what was alleged by the respondent (see points 164 to 172 of its reply).

  2. and 6) As for the vehicle that, allegedly, was never the property of the present claimant, it is agreed – because the file confirms this – with what the TCA says in its reply. In fact, "the Claimant does not present a single document in order to contradict the registration of the ownership of the vehicle [in question, with license plate ...] in its own name", and has not raised any doubt in this regard in the administrative appeal. The same is true regarding the situation of alleged duplicate collection (vehicle with license plate ...). Also in this situation, the claimant has not proven the duplicate payment – proof which was only incumbent upon it – and, on the other hand, documents were not submitted to the present file that would allow confirming this specific allegation of the claimant.

  3. A final note to consider, under article 24, no. 5, of the LFTA, the request for payment of indemnification interest in favor of the claimant (article 43 of the General Tax Law and article 61 of the Code of Tax Procedure).

In this regard, the Arbitral Award rendered in case no. 26/2013-T of 19/7/2013 (which dealt with a situation similar to the one under consideration) recalled: "The right to indemnification interest to which the aforementioned norm of the General Tax Law refers presupposes that tax has been paid in an amount higher than that due and that such derives from an error, of fact or of law, attributable to the services of the TCA. [...] even if it is recognized that the tax paid by the claimant is not due, because it is not the taxpayer of the tax obligation, determining, as a consequence, the respective reimbursement, it is not seen that, in its origin, there is an error attributable to the services that determines such a right [to indemnification interest] in favor of the taxpayer. In fact, in promoting the official assessment of the IUC considering the claimant as the taxpayer of this tax, the TCA merely complied with the norm of no. 1 of article 3 of the IUC Code, which, as abundantly referred to above, imputes such a condition to the persons in whose name the vehicles are registered."

Considering this justification – with which it is entirely agreed – it is also concluded, as for the present case, that the aforementioned request for payment of indemnification interest is unfounded.

V – DECISION

In view of the above, it is decided:

  • To declare admissible the arbitration request as to the impugned assessments, with the consequent annulment of the said assessment acts (except the IUC assessment acts nos. 2010-... and 2011-...) and the respective reimbursement of the amounts unduly paid.

  • To declare unfounded the request insofar as it concerns the recognition of the right to indemnification interest in favor of the claimant.

The value of the case is fixed at €12,426.62 (twelve thousand four hundred twenty-six euros and sixty-two cents), in accordance with the provisions of article 32 of the Administrative Procedure Code and article 97-A of the Code of Tax Procedure, applicable by virtue of the provisions of article 29, no. 1, subsections a) and b), of the LFTA, and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs are charged to the respondent, in the amount of €918.00 (nine hundred eighteen euros), in accordance with Table I of the RCPAT, in compliance with the provisions of articles 12, no. 2, and 22, no. 4, both of the LFTA, and the provisions of article 4, no. 4, of the said Regulation.

Let notice be given.

Lisbon, 23 July 2015.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, in accordance with the provisions of article 131, no. 5, of the Code of Civil Procedure, applicable by reference of article 29, no. 1, subsection e), of the LFTA.

The rendering of this decision is governed by the spelling prior to the Spelling Agreement of 1990.

Frequently Asked Questions

Automatically Created

Who is the taxable person (sujeito passivo) for IUC on vehicles that have already been sold or are under a leasing contract?
Under Article 3 of the IUC Code, the taxable person (sujeito passivo) depends on the vehicle's status when tax becomes due. For vehicles already sold before the IUC due date (established in Article 6(3)), the new registered owner becomes the taxable person under Article 3(1), not the former owner. For vehicles under financial leasing contracts, Article 3(2) specifically designates the financial lessee (locatário financeiro) as the taxable person, not the lessor/owner, provided the leasing contract is in force when the tax becomes due. This distinction is critical: ownership determines liability for owned vehicles, while contractual possession determines liability for leased vehicles.
Can a company challenge IUC assessments on vehicles it no longer owns under Article 3 of the IUC Code?
Yes, a company can challenge IUC assessments on vehicles it no longer owns under Article 3 of the IUC Code by arguing the assessments violate the subjective incidence rules. If the company sold vehicles before the tax due date, it can contest assessments on grounds it was not the owner when the taxable event occurred under Article 6(3), making the new owner the proper taxable person per Article 3(1). Similarly, for leased vehicles, the company can argue Article 3(2) designates the lessee as the taxable person. The challenge is based on the principle that tax liability attaches to whoever holds the qualifying status (owner or lessee) at the moment the tax becomes due, not who previously owned or currently owns the vehicle registration.
What is the CAAD arbitration procedure for contesting multiple IUC tax assessments in a single request?
The CAAD (Centro de Arbitragem Administrativa) arbitration procedure for contesting multiple IUC assessments allows taxpayers to consolidate related claims in a single arbitration request under the RJAT (Legal Framework for Tax Arbitration - Decree-Law 10/2011). The claimant must identify all contested assessments (typically in an attached table), specify the amounts including tax and any compensation interest paid, and present the legal grounds (such as violation of Article 3 of the IUC Code). After the arbitral tribunal is constituted, the Tax and Customs Authority submits a reply. The tribunal then determines whether oral hearings are necessary under Article 18 of RJAT or if the case can proceed to decision based on written submissions alone, as occurred in Case 192/2015-T where 133 separate assessments were challenged together based on shared legal grounds regarding subjective incidence.
Is a taxpayer entitled to a refund and indemnity interest under Article 43 of the LGT when IUC is paid on vehicles outside subjective incidence?
Yes, a taxpayer is entitled to reimbursement and indemnity interest under Article 43 of the LGT (General Tax Law) when IUC is paid on vehicles falling outside the subjective incidence scope. When tax is assessed against someone who is not the legal taxable person under Article 3 of the IUC Code—such as a former owner who sold the vehicle before the tax due date or a lessor when the lessee should be liable—the payment is considered undue (indevido). Article 43 of the LGT establishes the right to indemnity interest (juros indemnizatórios) to compensate for loss of use of funds when the State wrongfully collected or retained tax amounts. This applies to both the principal tax amount unduly paid and any compensation interest (juros compensatórios) unjustly charged, as the entire assessment lacked legal basis due to incorrect identification of the taxable person.
How does subjective incidence (incidência subjetiva) determine IUC liability for fleet and leasing companies in Portugal?
Subjective incidence (incidência subjetiva) is fundamental for determining IUC liability for fleet and leasing companies in Portugal. Article 3 of the IUC Code establishes two distinct regimes: under Article 3(1), the vehicle owner registered at the tax due date is generally liable; under Article 3(2), when a financial leasing contract exists, liability shifts exclusively to the lessee (locatário financeiro), not the lessor-owner. For fleet companies that sell vehicles, the critical moment is the tax due date established in Article 6(3)—if sale and registration transfer occur before this date, liability passes to the new owner. For leasing companies, proper IUC management requires confirming whether leasing contracts are active or terminated when tax becomes due, as lessees bear liability during active contracts, but early termination without vehicle return creates ambiguity. Companies managing large vehicle portfolios must maintain accurate records of ownership transfers and leasing contract status synchronized with IUC annual due dates to avoid assessments against the wrong taxable person and subsequent administrative litigation for reimbursement.