Process: 202/2015-T

Date: July 30, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

Case 202/2015-T addresses the subjective incidence of Vehicle Circulation Tax (IUC) when vehicles remain registered to a commercial dealer despite no longer being in their ownership. The claimant, a vehicle trading company, challenged IUC assessments totaling €14,059.49 for the 2014 tax year on vehicles that had been sold to third parties or declared total losses before the tax period began. The Tax Authority rejected nine gracious objections, basing assessments solely on Motor Vehicle Registry records showing the company as registered owner. The company paid under protest to avoid enforcement proceedings and sought arbitral review under Decree-Law 10/2011. The central legal question concerns whether Article 3 of the Vehicle Circulation Tax Code establishes an irrebuttable or rebuttable presumption of ownership. The claimant argued that registration creates only a rebuttable presumption under Article 73 of the General Tax Law, which permits proof to the contrary for all tax incidence presumptions. Supporting evidence included sales invoices and salvage documentation dated before the tax obligation arose, which under Article 75 GTL carry presumption of veracity. The company contended that registration serves merely declaratory purposes to publicize legal situations, not constitutively create ownership rights. Drawing parallels to real property registration principles (applicable by reference under Article 29 of Motor Vehicle Registry regulations), the claimant emphasized that Article 7 of the Real Property Registry Code treats registration as presumptive, not conclusive. The case exemplifies tensions between administrative efficiency in tax collection versus substantive justice when registration records lag behind actual ownership transfers. Tax arbitration provided the forum for challenging assessments after exhausting administrative remedies, with the company also seeking restitution of unduly paid amounts plus compensatory interest under tax reimbursement provisions.

Full Decision

Case 202/2015

Arbitral Decision

I. Report

  1. On 20-03-2015, the company A...INDIVIDUAL LLC, NIPC ... submitted a petition for the constitution of a single arbitral tribunal, pursuant to the combined provisions of articles 2 and 10 of Decree-Law no. 10/2011, of January 20 (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as LRAT), with a view to the annulment of the decisions of the Tax Authority rejecting the gracious objections nos. … 2014…., … 2014 …, … 2014 …, … 2014 …, … 2014…., … 2014 …, … 2015 …, … 2015 …, … 2015 …, relating to the liquidations of Vehicle Circulation Tax (VCT), concerning the year 2014, which it attached as documents 2 to 10, in the total amount payable of 14,059.49 euros and the recognition of the right to restitution of the tax paid unduly, increased by indemnificatory interest, calculated on the aforementioned amount.

  2. Pursuant to article 6, paragraph 1 of the LRAT, the Deontological Council of the Arbitration Center appointed the undersigned arbitrator, notifying the parties.

  3. The tribunal is regularly constituted to assess and decide on the subject matter of the case.

  4. The allegations supporting the claimant's petition for arbitral pronouncement are, in summary, as follows:

4.1. The claimant has as its corporate purpose the purchase, sale and rental of machines and motor vehicles.

4.2. The claimant was notified, on December 30, 2014, of the rejection of the following gracious objections (relating to Vehicle Circulation Taxes):

a) Gracious objection no. … 2014 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

b) Gracious objection no. … 2014 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

c) Gracious objection no. … 2014 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

d) Gracious objection no. … 2014 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

e) Gracious objection no. … 2014…., relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

f) Gracious objection no. … 2014 … relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

4.3. The claimant was notified, on March 9, 2015, of the rejection of the following gracious objections (relating to Vehicle Circulation Taxes):

a) Gracious objection no. … 2015 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

b) Gracious objection no. … 2015 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

c) Gracious objection no. … 2015 …, relating to the official liquidations of Vehicle Circulation Tax of the year 2014, concerning the DUCs identified below

4.4 The DUCs identified below are at issue, relating to vehicles with the registration numbers indicated therein, in the following amounts:

[Tables of Collection Notes, Collection Note Dates, Vehicle Registration Plates, Registration Dates, Categories, and VCT Values are preserved as presented in the original document]

4.5. The ownership of the vehicles was verified based on the elements that the Tax and Customs Authority possesses, that is, the Tax Administration, based on the letter of the law, taxed under Vehicle Circulation Tax, the vehicles that were in the name of the claimant, registered in the Motor Vehicle Registry, even though they were no longer the property of the claimant as of the date of the tax event.

4.6. At issue is the payment of vehicle circulation tax, concerning the year 2014, relating to the vehicles identified in the administrative proceedings, which were the subject of sale to third parties (customers of the claimant) at a time prior to the taxation period.

4.7. At issue is also the vehicle circulation tax, of the year 2014, relating to vehicles that were declared total loss and in relation to which their respective registrations were already cancelled, at a time prior to the taxation period.

4.8. The claimant, in order to avoid future tax enforcement proceedings and the costs inherent to the provision of guarantees for the suspension of the aforementioned proceedings, chose to liquidate the tax, having paid the total amount of € 14,059.49 (fourteen thousand and fifty-nine euros and forty-nine cents).

4.9. Pursuant to article 3 of the Vehicle Circulation Tax Code, "the taxable persons of the tax are the owners of the vehicles, being considered as such the natural and legal persons, of public or private law, in whose names they are registered".

4.10. Whereas the fact that generates the taxation obligation is the ownership of the vehicle, the presumption from registration is rebuttable.

4.11. Pursuant to paragraph (a) of article 5, paragraph 1, and article 5, paragraph 2, of the Motor Vehicle Registry, the right of ownership over motor vehicles is subject to compulsory registration.

4.12. Furthermore, pursuant to article 29 of the same legal instrument, the provisions relating to real property registration are applicable to motor vehicle registration, with the necessary adaptations, insofar as indispensable to filling gaps in the specific regulation (and compatible with the nature of motor vehicles).

4.13. Pursuant to article 7 of the Real Property Registry Code, final registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it.

4.14. It is the tax norms themselves that use the expression "shall be considered," and the same constitutes a mere legal presumption.

4.15. According to the general rules of interpretation provided for in article 9, paragraph 2 of the Civil Code, and considering the literal and historical elements, fundamental to determine the legislative intent, we are, in article 3, paragraph 1 of the VCTC, before a mere presumption, which can only be considered irrebuttable when the law so determines — cf. article 350, paragraph 2 of the Civil Code.

4.16. The registration of ownership of the motor vehicle is compulsory (articles 1 and 5 of the instrument regulating Motor Vehicle Registration) and aims only to "publicize" the legal situation of assets, with no norm in Portuguese legal order regarding the constitutive character of motor vehicle ownership registration.

4.17. Now, the claimant demonstrated that it was no longer the holder of the vehicles by attaching sales invoices for the vehicles and their respective salvage, contained in the VCTs, all dated months prior to the required tax obligation.

4.18. Pursuant to article 73 of the General Tax Law, the presumptions enshrined in the norms of tax incidence always admit proof to the contrary.

4.19. Now, the sales invoices presented enjoy a presumption of veracity and sufficient strength to rebut the presumption resulting from the liquidations, in accordance with article 75 of the GTL.

4.20. Pursuant to article 64 of the TAP Code, the presumptions of tax incidence can be rebutted through gracious objection of the tax acts (in this case the liquidation acts) based on them, which the claimant did, with the presentation of the gracious objections supra identified.

4.21. To rebut such presumption, in relation to the vehicles whose taxation was the subject, it attached copies of all sales invoices for the vehicles and salvage.

4.21. From the copies of the invoices, we can extract that the sale of the vehicles took place at a time prior to the occurrence of the tax event and the consequent exigibility of the tax (cf. articles 4 and 6 of the VCTC).

  1. For its part, the respondent Tax and Customs Authority presented its response, in which it defended itself in the following terms:

5.1 The interpretation advocated by the claimant is related to a biased reading of the letter of the law.

5.2. The tax legislator, in establishing in article 3, paragraph 1, who are the taxable persons of the VCT, established expressly and intentionally that these are the owners (or in the situations provided for in paragraph 2, the persons enumerated there), being considered as such the persons in whose names they are registered, never having used the expression "are presumed."

5.3. On the other hand, the tax norm is full of provisions analogous to those enshrined in the final part of paragraph 1 of article 3, in which the tax legislator, within his legislative freedom of action, expressly and intentionally, establishes what must be legally considered, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others.

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

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

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

5.7. From the articulation between the scope of the subjective incidence of the VCT and the constitutive fact of the corresponding tax obligation flows unequivocally that only the legal situations subject to registration (notwithstanding the permanence of a vehicle in national territory for a period exceeding 183 days, provided for in paragraph 2 of article 6) generate the birth of the tax obligation.

5.8. For its part, paragraph 3 of the same article provides that "the tax is considered exigible on the first day of the taxation period referred to in paragraph 2 of article 4."

5.9. That is, the moment from which the tax obligation becomes constituted has a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear.

5.10. In the same sense, the legislative solution adopted by the tax legislator in paragraph 2 of article 3 of the VCTC works, by making the equiparations enshrined there coincide with the situations in which motor vehicle registration obliges the respective registration.

5.11. In the absence of such registration, naturally, the owner will be notified to fulfill the corresponding tax obligation, as the Tax Administration, taking into account the current configuration of the legal system, will not have to proceed with the liquidation of the Tax based on elements that do not appear in records and public documents and, as such, authentic.

5.12. In these terms, the non-updating of the registration, in accordance with article 42 of the Motor Vehicle Registration Regulation, will be imputable in the legal sphere of the taxable person of the VCT and not in that of the State, as the active subject of this Tax.

5.13. Even admitting that, from the point of view of the rules of civil law and real property registration, the absence of registration does not affect the acquisition of the quality of owner, the tax legislator intentionally and expressly wanted those to be considered as owners, lessees, acquirers with reservation of ownership, or holders of the right of purchase option in long-term rental, the persons in whose names the vehicles are registered.

5.14. It is still important to demonstrate that, in light of a teleological interpretation of the regime enshrined in the entire Vehicle Circulation Tax Code, the interpretation advocated by the claimant in the sense that the taxable person of the VCT is the actual owner, regardless of not appearing in the motor vehicle registry, the registration of that quality, is manifestly wrong, inasmuch as it is the very ratio of the regime enshrined in the Vehicle Circulation Tax Code that constitutes clear proof that what the tax legislator intended was to create a Vehicle Circulation Tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle registry.

5.15. Indeed, the VCTC carried out a reform of the vehicle taxation regime in Portugal, substantially altering the vehicle taxation regime, with the taxable persons of the tax becoming the owners appearing in the ownership registry, regardless of the circulation of the vehicles on the public highway.

5.16. And this, precisely because the new vehicle taxation regime under the Vehicle Circulation Tax substantially altered the vehicle taxation regime, with the taxable persons of the tax becoming the owners appearing in the ownership registry, regardless of the circulation of the vehicles on the public highway.

5.17. It should also be noted that the interpretation conveyed by the claimant shows itself to be contrary to the Constitution.

5.18. Effectively, the argumentation conveyed by the claimant represents a violation of the principle of proportionality, inasmuch as it disregards it entirely when confronted with the principle of contributory capacity, when in reality the claimant has the necessary and adequate legal mechanisms at its disposal to safeguard that its contributory capacity (e.g., motor vehicle registration), without, however, having exercised them in due time.

5.19. With a view to such objective, the claimant came, in the gracious objections whose decision it impugns arbitrally, to attach copies of sales invoices of the vehicles and vehicles that were declared total loss and in relation to which it alleges their respective registrations have already been cancelled.

5.20. Now, a purported invoice does not constitute a purchase and sale contract.

5.21. The unequivocal declaration of intent of the purported acquirers could be evidenced by the submission of a copy of the said official form for registration of motor vehicle ownership, as it is a document signed by the intervening parties.

5.22. The claimant, however, did not attach copies of the said official form for registration of motor vehicle ownership when it could and should have done so, and now finds itself precluded from the possibility of doing so at a later time.

5.23. As is known, the law determines deadlines for the submission of documents intended to prove facts, with article 423 of the New Code of Civil Procedure establishing that they should be presented with the pleading in which the corresponding facts are alleged.

5.24. Accordingly, after the submission of the petition for arbitral pronouncement, the submission of further documentary evidence was precluded on the part of the claimant.

5.25. Furthermore, the synallagmatic character of the invoice could also be evidenced by proof of receipt of the price contained therein by the claimant, especially when the invoices themselves attached to the petition for arbitral pronouncement expressly state that they are valid as a receipt "after good collection."

5.26. However, the claimant did not attach documentary proof of receipt of the price, such as copies of checks, bank transfers and/or any other suitable means of payment, when it could and should have done so, that is, in the petition for arbitral pronouncement, and now finds itself precluded from the possibility of doing so at a later time.

5.27. There are still documents to which it is important to pay attention and which are embodied in "invoices" appearing in the administrative proceedings that cannot be considered fiscally relevant and admissible as means of proof for, and namely:

  • invoices that do not comply with the formal requirements contained in article 35 of the VAT Code, and which for that reason cannot be considered fiscally relevant, much less serve as proof of anything — and many are;

  • invoices issued by third parties that are not procedural parties;

  • documents with no identification whatsoever as to the respective issuer and its tax identification.

5.28. Now, as seems all too evident, given documents of this nature — and even if the collection notes, by themselves, were sufficient to prove the sale, which we have already concluded they are not — the claimant can never have the presumption of rebutting the legal presumption of ownership of the vehicles resulting from registrations made in its name as of the date of the tax liquidations.

5.29. In light of the above, despite what is alleged by the claimant, it fails to demonstrate which vehicles were the subject of sale to third parties and which vehicles were declared total loss, and which it asserts have already had their respective registrations cancelled (at a date prior to the taxation period).

5.30. And if the claimant does not demonstrate which are the vehicles that were declared total loss, this presumption should not be considered rebutted as regards the salvage, leaving, as a result, the remainder of the evidence presented tainted, since it is not possible to segregate it, and should therefore be considered as not proven.

5.31. As mentioned above, the VCT aims to tax the owner of the automobile, with ownership being revealed through its registration.

5.32. However, the competence for motor vehicle registration is not in the sphere of the respondent, but rather assigned to various external entities, namely the Institute of Registries and Notaries to which it falls to transmit to the respondent the changes that may occur regarding the ownership of motor vehicles.

5.33. On the other hand, the transmission of ownership of motor vehicles is not susceptible to being controlled by the respondent, as there is no declarative ancillary obligation regarding this matter, unlike the control that is capable of being performed, for example, through the prior payment of Municipal Tax on Real Estate Transmission in relation to the transmission of real property.

5.34. Now, not having the claimant cared for the updating of the motor vehicle registration, as indeed it could have and it was its responsibility to having ordered the cancellation of the vehicle's registration here in question at a time much earlier than when it did, it is inevitable to conclude that the claimant did not proceed with the care that was required of it.

5.35. And in not having proceeded with the care that was required of it, it led inexorably the respondent to limit itself to giving effect to the legal obligations to which it is bound and, in parallel, to follow the registration information that was provided to it by those entitled to do so.

5.36. Therefore, it was not the respondent who gave rise to the submission of the petition for arbitral pronouncement, but rather the claimant itself, who, moreover, only now submitted documentary evidence relating to the purported transmission of ownership, which did not occur in the course of the prior administrative procedure.

5.37. Consequently, the claimant should be condemned to pay the arbitration costs resulting from this petition for arbitral pronouncement, in accordance with article 527, paragraph 1 of the New Code of Civil Procedure, as applied by article 29, paragraph 1, subsection (e) of the LRAT.

5.38. In light of articles 43 of the GTL and 61 of the TAP Code, the right to indemnificatory interest depends on the verification of the following prerequisites: the tax being paid, its liquidation having been annulled, wholly or partially, in gracious or judicial proceedings, determination, in gracious or judicial proceedings, that the annulment is founded on error attributable to the services.

5.39. From all that was set forth above, it is clear that the tax acts in question are valid and lawful, as they conform to the legal regime in force as of the date of the tax facts, with no error attributable to the services having occurred in this case.

5.40 Accordingly, the legal prerequisites that confer the right to the claimed indemnificatory interest are not met.

  1. On 30/06/2015, an arbitral order was issued, in the following terms:

In light of subsection (c) of article 16 of the LRAT, taking into account that the subject matter of the dispute relates fundamentally to a matter of law, no exceptions were raised, the pertinent documents appear in the proceedings, and the PA is attached, the Court considers that:

  1. it is not necessary to promote the meeting provided for in article 18 of the LRAT, as the circumstances covered by the various paragraphs of paragraph 1 of this provision are not present;

  2. it is not necessary, in accordance with paragraph 2 of article 18 of the LRAT, for oral arguments to be produced, as the positions of the parties in their respective pleadings are perfectly defined.

In these terms, in light of subsection (f) of article 16 of the LRAT, the parties are invited to communicate to the proceedings, within ten (10) days, whether, notwithstanding the above, they nevertheless wish the meeting referred to in article 18 to be held, substantiating that request.

  1. The parties did not request that the meeting provided for in article 18 of the LRAT be held.

II - Procedural Requisites

  1. The prerequisites necessary for an arbitral decision to be issued are met. Effectively:

8.1. The single Arbitral Tribunal is regularly constituted. It is materially competent, pursuant to article 2, paragraph 1, subsection (a) of the LRAT.

8.2. The parties have legal personality and capacity, are legitimate and are legally represented (cf. articles 4 and 10, paragraph 2, of the LRAT and article 1 of Ordinance 112/2011, of March 22.

8.3. With the requirements established by paragraph 1 of article 3 of the LRAT being fulfilled, the cumulation of petitions for annulment of the tax acts that are its subject matter is admitted in the present proceedings.

8.4. The proceedings do not suffer from vices that invalidate it.

III - Proven Facts

  1. Taking into account the statements of the parties, the administrative tax proceedings and the documentary evidence attached to the proceedings, the factual matter relevant to the decision is fixed in the following terms:

9.1. The claimant was notified to pay the following liquidations of VCT, relating to the year 2014:

[The tables of Collection Notes, Collection Note Dates, Vehicle Registration Plates, Registration Dates, Categories, and VCT Values are preserved as presented in the original document]

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when vehicles are registered to a dealer but no longer in their possession?
Under Article 3 of the Vehicle Circulation Tax Code, IUC liability falls on vehicle owners, defined as persons in whose names vehicles are registered. However, this constitutes a rebuttable presumption under Article 73 of the General Tax Law. Commercial dealers who have sold vehicles but remain registered owners can challenge liability by providing documentary evidence of ownership transfer, such as sales invoices dated before the tax period. The registration creates only a presumption, not conclusive proof of ownership for tax purposes. Dealers must actively rebut this presumption through administrative or judicial procedures, demonstrating they were not the actual owners when the tax obligation arose on January 1st of the relevant year.
Can a vehicle trading company challenge IUC assessments through tax arbitration in Portugal?
Yes, vehicle trading companies can challenge IUC assessments through tax arbitration in Portugal under Decree-Law 10/2011 (Legal Regime of Arbitration in Tax Matters). The procedure requires first filing gracious objections with the Tax Authority. If these administrative appeals are rejected, companies may petition for constitution of an arbitral tribunal within the statutory deadline. The arbitration process offers an alternative to judicial courts for resolving tax disputes, with decisions having binding effect. Companies must specify the contested liquidations, amounts involved, and legal grounds for annulment. Tax arbitration is particularly suitable for challenging presumptions based on registry data when actual ownership differs from registered ownership.
What is the subjective incidence rule for IUC on vehicles registered to commercial dealers?
The subjective incidence rule for IUC on commercial dealers follows Article 3 of the Vehicle Circulation Tax Code: taxable persons are those in whose names vehicles are registered in the Motor Vehicle Registry. For dealers, this creates practical challenges when inventory turnover results in sales before updating registrations. While registration establishes prima facie liability, Article 73 of the General Tax Law permits rebuttal of this presumption. Dealers can demonstrate non-ownership through sales documentation, delivery records, and registration cancellations. The rule operates as a legal presumption ('shall be considered') rather than an absolute determination. Courts and arbitral tribunals examine whether dealers retained actual ownership on January 1st when the annual tax obligation crystallizes, regardless of registry status on assessment dates.
How can taxpayers reclaim unduly paid IUC and obtain compensatory interest in Portugal?
Taxpayers can reclaim unduly paid IUC by first filing gracious objections under Article 64 of the Tax Procedure Code, presenting evidence that rebuts the tax assessment's legal or factual basis. If objections succeed or if subsequent arbitral/judicial decisions annul assessments, the Tax Authority must refund overpaid amounts. Compensatory interest accrues automatically on restitutions under Article 43 of the General Tax Law, calculated from payment date until reimbursement. The interest rate applies to amounts paid in excess of what was legally due. Taxpayers should maintain comprehensive documentation of payments made under protest and evidence supporting their claims. If administrative remedies fail, arbitration or judicial proceedings can compel restitution with interest. The right to reimbursement includes both principal amounts and compensatory interest for the period funds were improperly retained.
What is the procedure for filing a gracious complaint against IUC tax assessments in Portugal?
Filing a gracious complaint (reclamação graciosa) against IUC assessments follows procedures in Articles 68-75 of the Tax Procedure Code. Taxpayers must submit written objections within 120 days of notification of the assessment or payment, specifying the contested liquidations and legal/factual grounds. Supporting documentation proving the assessment's invalidity must be attached, such as sales invoices, registration cancellations, or ownership transfer evidence. The complaint should reference applicable legal provisions (Articles 3 and 73 GTL for IUC presumption challenges) and request specific relief including annulment and restitution. The Tax Authority has 4 months to decide, though extensions occur. Rejections can be appealed through hierarchical appeals or, alternatively, through tax arbitration within 90 days. Gracious objections suspend enforcement proceedings only if guarantees are provided, though payment under protest preserves rights while avoiding collection measures.