Process: 194/2015-T

Date: February 1, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 194/2015-T) addresses who bears IUC (Single Vehicle Circulation Tax) liability when vehicles are acquired through financing arrangements. The applicant, a financial credit institution in liquidation, contested IUC assessments for 2009-2012 on seven vehicles financed through loan agreements. The institution argued it was merely a lender holding security interests (mortgage or retention of ownership), not the actual owner, and therefore should not be the taxable person under Article 3(1) of the IUC Code.

The applicant's core argument centered on the distinction between legal ownership and security interests. It contended that sale and purchase contracts have real effect under Portuguese Civil Code articles 879 and 408, meaning ownership transferred directly to borrowers upon purchase. The institution claimed its registration as owner was an error, asserting that Article 3 CIUC contains an implicit rebuttable presumption of tax liability based on registration, which could be overcome by proving the borrowers were true owners through sales invoices.

The Tax Authority raised procedural objections, arguing the application was filed beyond the 90-day deadline established in Article 10(1)(a) of RJAT, since the final payment date was December 11, 2013, but the arbitration request came on March 18, 2015. Additionally, the AT noted that several assessments had already been annulled, and challenged the applicant's claim of having exercised prior hearing rights, stating no invoices appeared in the administrative file.

Substantively, the AT defended the assessments based on the CIUC's clear language: the taxable person is whoever appears registered as owner in the national vehicle registry, regardless of underlying contractual arrangements. The tax authority emphasized that IUC is an annual tax on vehicle ownership independent of use, with the tax database populated from IRN and IMTT registration information. This case highlights critical issues in Portuguese tax law regarding the intersection of vehicle registration, secured lending arrangements, and tax liability attribution for IUC purposes.

Full Decision

ARBITRAL DECISION

I - REPORT

  1. Application

A..., SA, in liquidation, legal entity and taxpayer no. ..., with registered office at ..., Building ..., Floor ..., ...-..., ..., hereinafter referred to as the Applicant, filed, on 18-03-2015, pursuant to article 2, paragraph 1, letter a) and article 10 of Decree-Law no. 10/2011, of 20 January, which approves the Legal Regime for Tax Arbitration (RJAT), an application for arbitral pronouncement, in which the Respondent is the AT - Tax and Customs Authority, requesting:

  • The annulment, based on violation of law, of the following assessment acts for the Single Vehicle Circulation Tax (IUC) relating to the years 2009, 2010, 2011 and 2012, pursuant to article 2, paragraph 1, letter c) of the Single Vehicle Circulation Tax Code (CIUC):

· Assessment nos. ..., ... and ..., relating to the IUC for the years 2009, 2010 and 2011 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ... and ..., relating to the IUC for the years 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ... and ..., relating to the IUC for the years 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., .... and ..., relating to the IUC for the years 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ..., ... and ..., relating to the IUC for the years 2009, 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ..., ... and ..., relating to the IUC for the years 2009, 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ..., ... and ..., relating to the IUC for the years 2009, 2010, 2011 and 2012 for the vehicle with registration number ...-...-....

To support its application, the Applicant alleges, in summary:

  • The Applicant is a financial credit institution that engaged, among other activities, in the conclusion of credit concession contracts for the purpose of acquiring vehicles, in particular through the conclusion of loan agreements;

  • In the context of the aforementioned activity, the Applicant concluded loan agreements for the acquisition, by the borrowers, of the vehicles subject to the contested single vehicle circulation tax (IUC) assessments;

  • In these situations, the ownership of the vehicles belongs exclusively to the borrowers, with the Applicant as lender holding only a security interest over the same, which may consist of a mortgage or retention of title;

  • Article 3, paragraph 1 of the CIUC provides that the passive subjects of the tax are the owners of the vehicles subject to the same, considered as such the natural or legal persons, of public or private law, in whose name the same are registered;

  • The loan agreements concluded between the Applicant and the borrowers had as their object motor vehicles which were acquired by the latter through the conclusion of a sale and purchase contract with the supplier;

  • Sale and purchase contracts are contracts with real effect, in that the transfer of ownership or possession occurs as a consequence of the sale and purchase contract itself, pursuant to articles 879 and 408 of the Civil Code (CC);

  • Whereby the true owners of the motor vehicles were, and always have been, the borrowers;

  • The Applicant merely provides credit for the acquisition of a vehicle, not being bound to the financed asset as the creditor of the amount granted to the borrower and beneficiary of the respective mortgage or retention of title;

  • Even if merely hypothetically it is assumed that the Applicant's name appears in the Vehicle Registry as owner of the vehicles in question, such fact should be attributed to a registration error, since only an eventual retention of title should have been noted in favor of the Applicant;

  • In addition to this, article 3 of the CIUC contains a legal presumption of subjective tax incidence, albeit implicitly;

  • That the provision contains a presumption results both from the configuration of the norm which is in accordance with article 349 of the Civil Code, and from the fact that the legislature's freedom of action is limited by the fundamental principles enshrined in the Constitution of the Portuguese Republic (CRP), and in this case the principle of equality;

  • The presumption in question can be rebutted by proof to the contrary;

  • The interpretation of the aforementioned legal norm must be subordinated to the inquisitorial principle, which constitutes a fundamental principle of the actions of the Public Administration, pursuant to article 266 of the CRP and articles 55 and 58 of the General Tax Law (LGT);

  • The Applicant, in the exercise of prior hearing, proved not to be the owner of the vehicles in question, providing to the Tax Authority the sales invoices arising from the sale and purchase contracts concluded between the borrowers and the suppliers, thus rebutting the presumption of article 3, paragraph 1 of the CIUC;

  • Whereby there is an erroneous qualification of the subjective incidence of the tax in question, relating to the above-identified fiscal years, in accordance with the combined provisions of articles 3 and 19 of the CIUC with article 99, letter a) of the Tax Procedure and Process Code (CPPT);

  1. Response

In its Response, the Respondent AT – Tax and Customs Authority, alleges, in summary:

a) As a preliminary matter

  • The assessments relating to vehicles with registration numbers ...-...-... and ...-...-..., in the amounts, respectively, of EUR 110.30 and EUR 176.08, were already annulled as of the date of filing of the application for arbitral pronouncement;

  • The assessment relating to the vehicle with registration number ...-...-... was equally annulled as a consequence of the partial granting of the administrative complaint filed by the Applicant;

b) By way of exception

  • In its application for arbitral pronouncement, the Applicant petitions for the annulment of the identified assessment acts;

  • Although having filed an administrative complaint of such acts, which was partially rejected, the Applicant does not petition for the annulment of the act of partial rejection of the administrative complaint;

  • Pursuant to article 10, paragraph 1, letter a) of the RJAT, and with the Applicant seeking to challenge the acts of official assessment, the application for constitution of an arbitral tribunal is filed within 90 days from the expiry of the deadline for voluntary payment legally notified to the taxpayer, in accordance with article 102, paragraph 1, letter a) of the CPPT;

  • With the final payment date of the tax in question being 11-12-2013 and the Applicant having filed the application for constitution of the arbitral tribunal on 18-03-2015, it is concluded that it was filed out of time, and therefore the Tribunal cannot hear the application;

c) By way of challenge

  • The Applicant at no point proves that it was not the owner of the vehicles subject to the tax assessed;

  • The invoices which the Applicant claims to have presented as evidence in the context of prior hearing rights are not found in the administrative file, nor is there evidence that the applicant exercised the right of prior hearing;

  • Pursuant to the provisions of the CIUC, in force as of 01/01/2008, the IUC is an annual tax that taxes the ownership of vehicles, independently of their use or enjoyment, with its passive subjects being the persons in whose name the same are registered, with the respective database being formed with information provided by the IRN (Institute of Registries and Notary) and by the IMTT (Institute of Mobility and Land Transport).

  • Considering paragraph 1 of article 6 of the CIUC, the taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration registered in national territory, the passive subject of the tax being considered as the natural or legal person, of public or private law, in whose name the same is registered, pursuant to paragraph 1 of article 3 of the same Code;

  • In the Vehicle Registry, the Applicant appeared as owner of the vehicles subject to tax as of the date of the tax facts;

  • In the event that the Respondent's position is upheld as to the merits of the case, the Respondent could never be held responsible for payment of the arbitration fee, in that there was no error attributable to the services, which merely took the registry information as correct and proceeded in accordance with tax law.

  1. Meeting provided for in article 18 of the RJAT and submissions

With the agreement of the Parties, the Tribunal determined the dispensation of the meeting provided for in article 18 of the RJAT.

The Applicant was invited to correct the initial petition, in the sense of expressly requesting the review of the decision rejecting the administrative complaints, which it did not do.

Invited to submit written submissions, the Parties did not do so.

II. CASE MANAGEMENT

The singular Arbitral Tribunal was regularly constituted on 01-06-2015, the Arbitrator having been appointed by the Deontological Board of the CAAD, with the respective legal and regulatory formalities fulfilled (articles 11, paragraph 1, letters a) and b) of the RJAT and articles 6 and 7 of the Deontological Code of the CAAD), and is competent ratione materiae in accordance with article 2 of the RJAT.

The Parties have legal personality and capacity and are regularly represented.

No procedural nullities were identified in the case.

III. ISSUES TO BE DECIDED

The following are the issues to be decided in the present arbitral proceedings:

  1. The timeliness of the application for arbitral pronouncement;

  2. The establishment, in article 3, paragraph 1 of the CIUC, of a presumption and its rebuttability;

  3. The rebuttal, in the present case, by the Applicant, of the presumption of ownership of the vehicles subject to tax.

IV – FACTS FOUND

The following are the facts found to be relevant for the decision of the case:

1st: The Applicant was notified of the IUC assessments:

· Assessment nos. ..., ... and ..., relating to the IUC for the years 2009, 2010 and 2011 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ... and ..., relating to the IUC for the years 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ... and ..., relating to the IUC for the years 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., .... and ..., relating to the IUC for the years 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ..., .... and ..., relating to the IUC for the years 2009, 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ..., ... and ..., relating to the IUC for the years 2009, 2010, 2011 and 2012 for the vehicle with registration number ...-...-...;

· Assessment nos. ..., ..., ... and ..., relating to the IUC for the years 2009, 2010, 2011 and 2012 for the vehicle with registration number ...-...-....

2nd: The assessments relating to vehicles with registration numbers ...-...-..., ...-...-... and ...-...-... were subject to annulment by the Tax Authority prior to the filing of the application for arbitral pronouncement;

3rd: The remaining assessments relate to vehicles whose ownership was registered in the name of the Applicant as of the date of the tax facts;

4th: The final date for voluntary payment of the tax debts assessed was 11-12-2013;

There are no facts not proven with relevance to the decision of the case.

V. GROUNDS

  1. On the timeliness of the application for arbitral pronouncement

As the failure to meet the deadline for the application for arbitral pronouncement constitutes a dilatory exception which, if upheld, would prevent the tribunal from hearing the remaining issues to be decided, it is necessary to first decide this issue.

At the outset of its initial petition, the Applicant expressly states that it requires the constitution of a singular arbitral tribunal for "the declaration of illegality of the acts of official assessment of the Single Vehicle Circulation Tax relating to the fiscal years 2009 to 2012".

The Applicant concludes its application as follows: "In these terms and in accordance with applicable law, Your Excellency should: (…) c. Declare the illegality of the acts of official assessment of the Single Vehicle Circulation Tax relating to the years 2009 to 2012 (…)."

Therefore, there is no doubt whatsoever that the Applicant expressly and directly petitions for the review of the legality of the contested assessment acts.

On the other hand, at no point in the initial petition does the Applicant request from the Tribunal the declaration of illegality of the decision of partial rejection of any administrative complaint.

Article 2 of the Legal Regime for Tax Arbitration defines the jurisdiction of arbitral tribunals.

Pursuant to paragraph 1, letter a) of that provision, arbitral tribunals are competent for "the declaration of illegality of acts of assessment of taxes, of self-assessment, of withholding at source and of payment on account".

It is the uniform understanding of arbitral tribunals that this jurisdiction extends to the review of the legality of second-instance acts carried out in relation to acts of assessment, self-assessment, withholding at source and payment on account (in this sense, see for example the decision handed down in case no. 117/2013-T).

In cases involving the review of the legality of a tax assessment act, the deadline for filing the application for constitution of an arbitral tribunal, in accordance with article 10, paragraph 1, letter a) of the RJAT, is 90 days, and is calculated from the facts provided for in paragraph 1 of article 102 of the Tax Procedure and Process Code (CPPT) (paragraph 2 was subsequently repealed by article 16 of Law no. 82-E/2014, of 31-12).

Of the facts provided for in article 102, paragraph 1 of the CPPT, the fact applicable to the present case is that provided for in the respective letter a), which consists of the expiry of the deadline for voluntary payment of tax obligations legally notified to the taxpayer.

Therefore, in the case of an application for constitution of an arbitral tribunal for review of the legality of an assessment act, the deadline for filing the same is 90 days and is calculated from the expiry of the deadline for voluntary payment of the tax.

Whereas in the case of an application for constitution of an arbitral tribunal for review of the legality of an act of total or partial rejection of an administrative complaint, which is challengeable autonomously, the fact from which the calculation of the deadline begins, pursuant to letter b) of paragraph 1 of the same article 102 of the CPPT, is the notification of the act.

Had the Applicant in this case petitioned for the review of the legality of the act of rejection of the administrative complaint, the deadline for filing the application would be calculated from the notification of such rejection.

As it petitioned, as it did, for the review of the legality of the assessment acts, and only the legality of the assessment acts, the deadline for filing the application is calculated from the expiry of the deadline for voluntary payment of the tax.

The expiry of the deadline for voluntary payment of the tax, in this case, was 11-12-2013, whereby the deadline for filing the application for arbitral pronouncement expired on 11-03-2014.

As the application for arbitral pronouncement was filed on 18-03-2015, it is out of time.

The Applicant sustains the timeliness of the application, alleging that, "pursuant to article 102, paragraph 2 of the CPPT, the filing of judicial challenge is based, among others, on "the rejection of the administrative complaint" and requesting that the deadline of article 10, paragraph 1, letter a) of the RJAT be calculated from the notification of the rejection of the administrative complaint.

However, the Applicant is not correct.

It is not certain, in the first place, that article 102, paragraph 2 of the CPPT (in the wording in force until December 2014) defines a basis for challenge. Article 102 of the CPPT provides only for the deadlines for filing judicial challenge. In the case of challenge of a decision on an administrative complaint, the aforementioned provision required that the deadline be calculated from the notification of such decision, which is not at issue here.

Secondly, because what article 102, paragraph 2 apparently did was establish a deadline for the right to challenge a decision on an administrative complaint, which is challengeable autonomously pursuant to article 97, paragraph 1, letter c).

The issue which the Tribunal deems it necessary to review is whether it may be considered that there is an application for review of the decision of partial rejection of an administrative complaint when, formally and expressly, the application for arbitral pronouncement does not have as its object the review of the legality of the decision of the administrative complaint, but the direct review of the legality of the assessment acts.

We consider that the issue is not free from doubt. However, we take the decision not to depart from prior decisions of arbitral tribunals on this same matter, in particular those handed down in cases 261/2013-T and 38/2015-T, which decided that, as the Applicant did not formulate any request for review of the legality of a decision of rejection of an administrative complaint, it cannot invoke the deadline of the right of challenge that would be applicable in the case of challenge of such decision.

In line with such understanding, in this case too it is considered that the Applicant cannot benefit, to directly challenge the contested assessment acts, from the deadline it would have for challenging the decision of partial rejection of the administrative complaints filed against the same.

Consequently, the present application for arbitral pronouncement is deemed to be out of time.

VI. DECISION

Based on the grounds exposed, it is decided:

a) To uphold the exception of failure to meet the deadline for the application for arbitral pronouncement;

b) And, consequently, to dismiss the arbitral application, thereby absolving the Respondent.

Economic utility value of the case: The economic utility value of the case is set at EUR 1,080.16.

Costs: Pursuant to article 22, paragraph 4 of the RJAT, the amount of costs is set at EUR 306.00, in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, to be borne by the Applicant.

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

Lisbon, Administrative Arbitration Centre, 1 February 2016

The Arbitrator

(Nina Aguiar)

Frequently Asked Questions

Automatically Created

Who is the taxable person (sujeito passivo) for IUC when a vehicle is purchased through a loan agreement with reservation of ownership?
Under Article 3(1) of the Portuguese IUC Code, the taxable person (sujeito passivo) is the owner of the vehicle, defined as the natural or legal person in whose name the vehicle is registered. When a vehicle is purchased through a loan agreement with reservation of ownership (reserva de propriedade), the determination depends on who appears as the registered owner. In this case, the applicant financial institution argued that despite any registration in its name, true ownership belonged to the borrowers from the moment of the sale and purchase contract, which has real effect under Civil Code articles 879 and 408. The institution contended that Article 3 contains a rebuttable presumption that could be overcome by proving the borrowers were actual owners. However, the Tax Authority maintained that registration determines tax liability regardless of underlying security arrangements.
Can a financial institution be held liable for IUC on vehicles financed through mutual loan (mútuo) contracts?
Yes, according to the Tax Authority's position in this case, a financial institution can be held liable for IUC on vehicles financed through mutual loan (mútuo) contracts if the institution appears as the registered owner in the vehicle registry. The AT argued that the IUC Code establishes tax liability based on registration status, not on the underlying contractual nature of the relationship. The financial institution contested this, arguing it merely provided credit and held security interests (such as mortgage or retention of title) rather than ownership. The institution asserted that its liability would violate constitutional principles of equality and the proper interpretation of tax incidence rules. The outcome depends on whether Article 3's registration-based rule is treated as an absolute criterion or a rebuttable presumption, and whether procedural requirements for challenging the assessments were met.
What does Article 3 of the Portuguese IUC Code say about vehicle ownership and tax liability?
Article 3 of the Portuguese IUC Code establishes that the passive subjects (taxable persons) of the Single Vehicle Circulation Tax are the owners of vehicles subject to the tax, specifically defined as the natural or legal persons, whether public or private law entities, in whose name the vehicles are registered. This provision creates a direct link between vehicle registration and tax liability. The applicant in this case argued that this article contains an implicit rebuttable presumption consistent with Civil Code article 349, allowing proof that the registered person is not the true owner. The applicant contended that this interpretation aligns with constitutional principles, particularly the equality principle under the Portuguese Constitution, and with the inquisitorial principle governing tax administration under Article 266 CRP and Articles 55 and 58 of the General Tax Law. However, the Tax Authority interpreted the provision as establishing an absolute criterion based on registration data provided by the Institute of Registries and Notary (IRN) and the Institute of Mobility and Land Transport (IMTT).
How does the CAAD arbitral tribunal handle disputes over IUC assessments involving credit institutions and vehicle registration?
The CAAD arbitral tribunal handles IUC disputes involving credit institutions and vehicle registration by examining both procedural and substantive issues. Procedurally, the tribunal must verify that the arbitration request was filed within the 90-day deadline under Article 10(1)(a) RJAT, counted from the expiry of the voluntary payment period notified under Article 102(1)(a) CPPT. In this case, the Tax Authority raised a timeliness objection, arguing the application was filed significantly after the December 11, 2013 payment deadline. The tribunal also considers whether prior administrative remedies, such as administrative complaints, were properly pursued. Substantively, the tribunal must interpret Article 3 CIUC to determine whether registration creates an absolute or rebuttable presumption of tax liability. The tribunal evaluates evidence presented by the credit institution to prove it held only security interests rather than ownership, examining documentation such as sales invoices, loan agreements, and registry records. The tribunal balances the administrative efficiency of registration-based tax collection against constitutional principles and civil law ownership rules.
What are the grounds for annulment of IUC tax assessments when the registered owner is a lender holding a security interest?
The grounds for annulment of IUC tax assessments when the registered owner is a lender holding a security interest include: (1) violation of law under Article 2(1)(c) CIUC due to incorrect identification of the taxable person, arguing that Article 3 CIUC's presumption can be rebutted by proving the lender is not the true owner; (2) demonstration that the sale and purchase contract transferred ownership directly to the borrower under Civil Code articles 879 and 408, with the lender holding only a mortgage or retention of title as security; (3) proof through documentation such as sales invoices that the borrower, not the lender, was the purchaser and owner; (4) argument that the lender's registration as owner constitutes a registration error, with only the security interest (not ownership) properly registrable; and (5) violation of constitutional principles, particularly equality under the Portuguese Constitution, if the tax authority imposes liability on someone who is not the economic owner. The applicant must overcome procedural hurdles including filing deadlines and proving that evidence was properly submitted during administrative proceedings such as prior hearing rights.