Process: 195/2015-T

Date: October 30, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Case 195/2015-T) addresses the subjective incidence of the Single Vehicle Tax (IUC) and procedural timeliness issues. A company in liquidation challenged multiple IUC ex officio assessments for tax periods 2009-2012, arguing it was not the liable taxpayer because the vehicles had been transferred to third parties through sales contracts before the tax facts occurred. The company submitted invoices as proof of the sales transactions identifying the purchasers and dates. The Tax and Customs Authority dismissed the administrative appeals, determining that at the date of tax enforceability, the vehicles remained registered in the applicant's name, making it the liable taxpayer under Article 3 of the IUC Code. The Authority then raised a timeliness exception in the arbitration proceedings, arguing the company should have directly challenged the assessment acts within 90 days from the voluntary payment deadline (December 11, 2013), rather than waiting to challenge the administrative appeal dismissals. The arbitration was filed on March 18, 2015, significantly after the alleged deadline. The tribunal consolidated multiple claims given the identity of tax facts, legal grounds, and competent jurisdiction. The central legal issues involve determining who bears IUC liability when vehicle ownership has been transferred but registration remains unchanged, and whether the arbitration request complied with procedural deadlines under Article 102(1)(a) of the Tax Procedure Code and Article 10(1)(a) of the Tax Arbitration Legal Framework.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 195/2015-T

Subject: SUT – Subjective scope

I. Report

  1. A... - …, S.A. - IN LIQUIDATION, legal entity number …, with registered office at Quinta …, Building …, Floor …, …, …, requested the constitution of an arbitral tribunal in tax matters, submitting an application for arbitral award against various ex officio assessments of the Single Vehicle Tax (IUC) relating to the tax periods 2009 to 2012 and vehicles identified by their respective registration number in a document attached to the application, petitioning:

a) The admission of the application for constitution of the Arbitral Tribunal, as it is timely;

b) The joint examination of the legality of the aforementioned ex officio assessment acts identified by documents attached to the application, as the legal requirements for the consolidation of claims are met;

c) The declaration of illegality of the ex officio assessment acts of IUC relating to the periods 2009 to 2012 and the motor vehicles identified by their respective registration numbers in a document attached to the application;

d) The ordering of the TA to pay the costs incurred by the Applicant with the application for constitution of the arbitral tribunal.

  1. As grounds for its application, the Applicant alleges, in summary, that at the date to which the tax facts relating to the questioned assessments refer, the vehicles in question were not its property, since ownership had already been transferred to third parties through sales contracts.

  2. And therefore, liability for the payment of the said tax cannot be attributed to it with reference to the periods and vehicles to which they relate.

  3. In response to the application, the Tax and Customs Authority (TA) raises the exception of untimeliness and, without conceding, pronounces itself on the merits in the sense of its lack of merit, arguing for the maintenance in the legal order of the impugned tax acts and, accordingly, for the dismissal of the Respondent entity.

  4. The application for constitution of the arbitral tribunal was accepted by the CAAD and automatically notified to the Tax and Customs Authority.

  5. Pursuant to the provisions of subparagraph a) of paragraph 2 of Article 6 and subparagraph b) of paragraph 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the sole arbitral tribunal, who communicated acceptance of the appointment within the applicable period.

  6. Duly notified of this appointment, the parties did not manifest any intention to object to the appointment of the arbitrator, in accordance with Article 11, paragraph 1, subparagraphs a) and b) of the LTAR and Articles 6 and 7 of the Deontological Code.

  7. Duly constituted, the arbitral tribunal is materially competent, in view of the provisions of Articles 2, paragraph 1, subparagraph a), of the LTAR.

  8. The parties have legal personality and capacity and have standing (Articles 4 and 10, paragraph 2, of the LTAR, and Article 1 of Ordinance No. 112-A/2011, of 22/03).

  9. Given the knowledge derived from the pleadings, deemed sufficient, the hearing referred to in Article 18 of the LTAR was dispensed with, with the parties' consent, and the parties were afforded the opportunity to submit written arguments if they so wished.

  10. Only the Respondent submitted arguments, reiterating the position taken in its reply, again arguing, on the grounds contained therein, for the lack of merit of the present challenge.

II. Facts

  1. With relevance to the examination of the issues raised, the following factual elements are highlighted which, on the basis of the documentary evidence attached to the file, are considered proven:

12.1. The Applicant was the recipient of various ex officio assessment acts of IUC, relating to the periods and vehicles identified in a document attached to the present application;

12.2. Timely, the Applicant reacted against the said assessment acts through administrative appeals in which, in essence, it alleges that it is not the liable taxpayer for the tax obligation as, at the date of occurrence of the respective taxable event, the vehicles to which they relate had already passed to the ownership of third parties through sales contracts.

12.3. To prove the alleged facts, the appellant - now Applicant - attached to the administrative appeals, copies of the sales invoices, which identify, in addition to the date of sale, the vehicle transacted and the respective purchaser.

12.4. By orders of 12 November 2014 and 12 December 2014, the administrative appeals were fully dismissed on the ground that, at the date of enforceability of the tax, the vehicles to which they relate were registered in the name of the Applicant, whereby it was the liable taxpayer for the tax, in accordance with Article 3 of the SUT Code.

12.5. The decisions dismissing the administrative appeals were notified, by mail, to the appointed representative and to the appellant - now Applicant - on various dates, the first on 18 December of that year and the remainder on subsequent dates.

  1. There are no facts relevant to the decision that have not been proven.

III. Consolidation of Claims

  1. The present application for arbitral award relates to various IUC assessments. However, given the identity of the tax facts, of the court competent to decide and of the factual and legal grounds invoked, the tribunal considers that, in view of the provisions of Articles 3 of the LTAR and 104 of the PTPC, nothing prevents the consolidation of claims.

IV. Law

  1. The Applicant submits an application for arbitral award seeking a declaration of illegality, and consequent annulment, of various ex officio assessments of Single Vehicle Tax that it identifies.

  2. For its part, the Respondent argues that the application, centered on the direct challenge of the assessment acts, is untimely and should, consequently, be declared to lack merit.

  3. Having thus raised the issue of untimeliness of the application for arbitral award, which constitutes a dilatory exception preventing examination of the merits of the case, it is necessary, in the first place, to rule on it.

On the Lapse of the Right of Action

  1. The issue of untimeliness of the present application for arbitral award is raised by the Respondent, on the following grounds:

17.1. The Applicant, in compliance with the provisions of subparagraph b) of paragraph 2 of Article 10 of the Legal Framework for Tax Arbitration (LTAR), identifies as tax acts of the application for arbitral award "... Declare the illegality of the ex officio assessment acts of the Single Vehicle Tax, relating to the fiscal years 2009 to 2012, attached as documents Nos. 1 to 197."

17.2. In its application, the Applicant petitions (solely) that the tribunal examine "the legality of the assessment acts attached as documents Nos. 1 to 197."

17.3. However, "the immediate object of the application would be, or should be, the dismissal of the administrative appeals timely submitted by the Applicant."

17.4. Wishing the Applicant to react against the ex officio assessment acts, the application for constitution of the arbitral tribunal should have been submitted within 90 days from the end of the period for voluntary payment of the tax installments legally notified to the taxpayer, in accordance with the provisions of Article 102, paragraph 1, subparagraph a) of the PTPC, to which Article 10, paragraph 1, subparagraph a), of the LTAR refers.

17.5. The contested assessments, duly notified, have as the final date for voluntary payment 11 December 2013.

17.6. The application for constitution of the arbitral tribunal was submitted on 18 March 2015.

  1. From the foregoing, the Respondent concludes that the legally defined period for the challenge of assessment acts in arbitral proceedings has clearly been exceeded and therefore, the application being untimely, the tribunal cannot rule on it.

  2. Reinforcing the grounds of the exception it raises, and referring to the period for challenge, the Respondent states that:

"This period is one of lapse, peremptory and of official knowledge, with its expiry resulting in the extinction of the right to perform the act (paragraph 3 of Article 145 of the Civil Procedure Code - CPC), running continuously without suspension or interruption, in accordance with Article 279 of the Civil Code - CC - (Article 20, paragraph 1, of the PTPC).

Indeed, in this context, having exceeded the period for direct challenge of the tax assessment acts (that is, of the primary acts), the "timeliness" of the application could only be founded on the existence of any administrative remedy against the assessment acts where a decision had been rendered denying/dismissing, totally or partially, the claims submitted by the liable taxpayer (in what would constitute a second-degree act).

...

Not having done so - that is, not having challenged the declaration of illegality of the second-degree act, that of the dismissal of the administrative appeals - there does not exist the basis that could establish the timeliness of the application and, consequently, the possibility for the Tribunal to examine the application submitted with respect to the acts that the Applicant now challenges."

  1. The Respondent concludes that, "insofar as the Court's powers of cognizance are limited by the application, and cannot obviously exceed it, the Court is prevented from examining and declaring (anything whatsoever) with respect to the application..." Such circumstance, constituting a dilatory exception preventing examination of the merits of the case, must lead to a decision which, consequently, declares the dismissal of the Respondent, which it forthwith requests.

  2. In support of the application it submits, the Respondent invokes the position of this Arbitral Tribunal expressed in an award of 5 May 2014, rendered in Case No. 261/2013-T, relating to an issue identical to that which arises in the present proceedings.

  3. Indeed, the Applicant submits an application for arbitral award which, as the Respondent affirms, has as its object the ex officio assessment acts of Single Vehicle Tax relating to the periods 2009 to 2012 and the motor vehicles identified in documents attached to the application.

  4. Although in the application it submits the Applicant makes reference to the dismissal of administrative appeals relating to the assessment acts whose legality it impugns, in the application for arbitral award that it formulates it identifies as its object, solely, the examination of such acts, expressing its claim in the following terms:

"In these terms .... Your Excellency should:

...

b) Admit the joint examination of the legality of the ex officio assessment acts attached as Documents 1 to 197, as the legal requirements allowing the consolidation of claims are met, in accordance with Articles 104 of the PTPC together with Article 3, paragraph 1, of the LTAR;

c) Declare the illegality of the Ex Officio Assessment Acts of the Single Vehicle Tax, relating to the motor vehicles with the registrations more fully described in the Table attached as Annex XXII."

  1. What is therefore at issue is exclusively the direct challenge of IUC assessment acts, duly notified to the Applicant, the voluntary payment period for which ended on 11 December 2013.

  2. As results from Article 10, paragraph 1, subparagraph a), of the LTAR, the period for submission of the application for constitution of the Arbitral Tribunal is 90 days from the facts provided for in paragraphs 1 and 2 of Article 102 of the PTPC. In the present case, this period is counted from the end of the period for voluntary payment of the tax installment, in accordance with subparagraph a) of paragraph 1 of the said legal provision, being calculated in 10 days from the date of notification of the respective assessment, as provided in Article 18 of the SUT Code and stated in the notifications.

  3. The application for constitution of the arbitral tribunal was submitted on 18 March 2015, after this period had therefore been largely exceeded.

  4. As is well pointed out in the arbitral award rendered in Case 261/2013-T: "It is settled in doctrine and in the CAAD's arbitral case law that although Article 2, paragraph 1, subparagraph a), of the LTAR, makes explicit reference to the competence of arbitral tribunals to declare the illegality of assessment acts, this competence extends to second and third-degree acts that examine the legality of primary acts, as is the case of dismissal of administrative appeals and acts of dismissal of hierarchical appeals filed against decisions of such appeals."

  5. Having exceeded the period for direct challenge of the assessment acts, a new period opened for the Applicant to challenge the acts dismissing the administrative appeals it had filed and, in this way, to bring about the consequent examination of those acts.

  6. However, as indeed the Respondent points out, "not having challenged the declaration of illegality of the second-degree act, that of the dismissal of the administrative appeals - there does not exist the basis that could establish the timeliness of the application and, consequently, the possibility for the Tribunal to examine the application submitted with respect to the acts that the Applicant now challenges."

  7. Indeed, as the Tribunal's powers of cognizance are limited by the application – Civil Procedure Code, Articles 608, paragraph 2, and 609, paragraph 1 - one cannot but recognize the sound grounds of the Respondent's position, with which we agree.

V. Decision

On these grounds, and based on the reasons stated above, the Arbitral Tribunal decides:

a) To uphold the exception of untimeliness of the application for arbitral award;

b) To declare the application to lack merit, thereby dismissing the Respondent.

Case Value: The case value is fixed at €36,785.16, in accordance with Article 97-A, paragraph 1, subparagraph a) of the PTPC, applicable by reference to Article 29, paragraph 1, subparagraphs a) and b), of the LTAR and Article 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings.

Costs: Pursuant to Article 22, paragraph 4, of the LTAR, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the costs are fixed at €1,836.00, entirely to be borne by the Applicant.

To be recorded and notified.

Lisbon, 30 October 2015

The Arbitrator, Álvaro Caneira.

Frequently Asked Questions

Automatically Created

Who is liable for IUC when vehicle ownership has been transferred to a third party?
Under Article 3 of the IUC Code, the liable taxpayer is the person in whose name the vehicle is registered at the date of tax enforceability, regardless of whether ownership has been transferred to third parties through private sales contracts. The registration in the vehicle registry determines subjective incidence, not the actual economic ownership. This means that if a company sells a vehicle but the registration remains in its name when the tax becomes due, it remains liable for IUC payment. To avoid liability, ownership transfer must be formalized through proper registration with the competent authorities.
Can a company challenge IUC assessments through tax arbitration at CAAD?
Yes, companies can challenge IUC assessments through tax arbitration at CAAD (Centre for Administrative Arbitration) under the Legal Framework for Tax Arbitration (LTAR). However, strict procedural deadlines apply. According to Article 10(1)(a) of the LTAR and Article 102(1)(a) of the Tax Procedure Code, the arbitration request must be filed within 90 days from the end of the voluntary payment period of the assessed tax. Companies must also have legal personality, capacity, and standing. Consolidation of multiple claims is possible when there is identity of tax facts, legal grounds, and competent jurisdiction.
What are the grounds for contesting official IUC tax assessments in Portugal?
The primary grounds for contesting official IUC assessments include: (1) challenging the subjective incidence by proving the taxpayer was not the registered owner at the date of tax enforceability; (2) errors in vehicle identification or classification; (3) incorrect application of tax rates or calculation; (4) substantive or procedural illegalities in the assessment act; and (5) violations of taxpayer rights. However, mere proof of vehicle sale through invoices is insufficient if the vehicle registration was not transferred to the new owner. The registered owner at the moment of tax enforceability bears the tax liability under Portuguese law.
How does vehicle registration affect IUC subjective incidence under Portuguese tax law?
Vehicle registration is the determining factor for IUC subjective incidence under Portuguese tax law. Article 3 of the IUC Code establishes that the liable taxpayer is the person in whose name the vehicle appears registered at the date the tax becomes enforceable, regardless of actual possession or economic ownership. This creates a formal criterion based on public registration rather than material ownership. Even if a vehicle has been sold through a private contract with invoice, if the registration has not been officially transferred to the new owner, the original registered owner remains liable for IUC. This emphasizes the importance of completing proper registration procedures when transferring vehicle ownership.
What is the deadline for filing an arbitration request against IUC assessments at CAAD?
The deadline for filing an arbitration request against IUC assessments at CAAD is 90 days from the end of the voluntary payment period of the assessed tax, as established by Article 10(1)(a) of the Legal Framework for Tax Arbitration (LTAR) in conjunction with Article 102(1)(a) of the Tax Procedure Code (PTPC). This deadline applies when directly challenging the assessment acts. If the taxpayer first files an administrative appeal, different deadlines may apply for challenging the dismissal decision. Failure to respect these strict procedural deadlines can result in the arbitration request being declared untimely and dismissed without examination of the merits, as the right of action lapses.