Process: 215/2014-T

Date: October 30, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 215/2014-T) addresses the subjective incidence of IUC (Imposto Único de Circulação - Single Motor Vehicle Tax) when vehicles have been sold but registration has not been transferred to the new owners. Company A, SA challenged IUC assessments for 2009-2012 issued in October 2013 for three vehicles it had previously sold, providing sale declarations and debit notes as evidence. The company argued that the Tax Authority improperly applied an irrefutable presumption of ownership based solely on vehicle registration records, contending that such presumptions are inadmissible in tax law and that their documentary evidence should rebut any presumption. The Tax Authority defended its position by arguing that Article 3(1) of the SMVT Code establishes a legal fiction, not a rebuttable presumption, expressly defining taxable persons as those in whose name vehicles are registered. The AT emphasized that the legislator intentionally chose this criterion without using terminology like 'presumed,' creating a deliberate policy choice for administrative efficiency and legal certainty. The AT further argued that the company's interpretation would violate constitutional principles including legal certainty, tax system efficiency, and proportionality, while creating administrative burdens and compliance costs. The central legal question concerns whether the registration-based criterion in Article 3(1) constitutes an irrefutable legal definition or a rebuttable presumption that can be overcome by proof of actual sale. This distinction is critical because it determines whether taxpayers who sell vehicles but fail to ensure registration transfer remain liable for IUC, and whether they can challenge assessments based on documentary evidence of transfer. The case highlights the tension between administrative efficiency in tax collection and substantive tax justice based on actual economic ownership.

Full Decision

ARBITRAL DECISION

A – REPORT

  1. A, SA, legal person no. …, with registered office in … Porto, came to request the constitution of an arbitral tribunal, under the provisions of art. 2, no. 1, a) and 10, no. 1 and 2 of the Legal Framework for Tax Arbitration, provided for in DL 10/2011, of 20 January, hereinafter referred to as "LFTA" and of articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, with a view to declaring the illegality of the acts of self-assessment of Single Motor Vehicle Tax, concerning the years 2009, 2010, 2011 and 2012, and the recognition of the right to compensatory interest, with the Tax and Customs Authority being requested (hereinafter referred to as "TA").

  2. Having admitted the request for the constitution of a singular arbitral tribunal, and the claimant not having opted for the appointment of an arbitrator, in accordance with the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of the LFTA, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator.

The parties were notified of this appointment and did not manifest any will to reject the arbitrator's appointment, in accordance with the combined provisions of article 11, no. 1, subparagraphs a) and b) of the LFTA and articles 6 and 7 of the Deontological Code, and, in accordance with the provision of subparagraph c) of no. 1 of article 11 of the LFTA, as amended by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 15-04-2014.

  1. Notified, the TA presented a response in which it did not raise any exception.

  2. The holding of the meeting provided for in art. 18 of the LFTA was dispensed with, as well as the presentation of pleadings, by agreement of the parties.

  1. The claimant requests that the illegality and consequent annulment of the acts of assessment of Single Motor Vehicle Tax concerning the years 2009 to 2012 be declared, with the consequent restitution of the tax paid, increased by compensatory interest, alleging in summary:

a) It received the IUC assessments subject to the proceedings, issued on 26-10-2013 and concerning the vehicles …, … and ….
b) It proceeded to pay the tax relating to such assessments.
c) It had sold the motor vehicles to which the assessments relate on dates prior to their issuance, for which it attached copies of sale declarations and debit notes.
d) It exercised, within the framework of the assessment procedures, the right to a hearing where it presented the same documentary elements.
e) It made efforts with the Institute for Mobility and Land Transport (IMTT) to seize the vehicle documents.
f) It sustains, in summary, its request on the understanding that the TA presumes ownership of assets in the legal sphere of the claimant as the criterion for the incidence of IUC.
g) In tax law, irrefutable presumptions at the level of the incidence of taxes are not admissible.
h) The documentary evidence presented has in its favour the presumption of truthfulness conferred by no. 1 of art. 75 of the LGT which, thus, appear to be suitable and with sufficient force to rebut the presumption on which those assessments are based.
i) The TA did not undertake any measure at its disposal for the discovery of material truth, ignoring all that was invoked in the right to a hearing.

  1. For its part, the respondent came to respond, alleging in summary:

a) The claimant incurs in error, which results not only from a biased reading of the letter of the law, but also from the adoption of an interpretation that does not take into account the systematic element, violating the unity of the regime established throughout the SMVT Code and, more broadly, throughout the entire legal-fiscal system and, finally, stems from an interpretation that ignores the rationale of the regime established in the article in question, and likewise throughout the SMVT Code.
b) The tax legislator, in establishing in article 3, no. 1 who are the taxable persons of the IUC, expressly and intentionally established that these are the owners (or in the situations provided for in no. 2, the persons therein named), being considered as such the persons in whose name the same are registered.
c) It emphasises that the legislator did not use the expression "presumed", as it could have done, for example, in the following terms: "the taxable persons of the tax are the owners of the vehicles, being presumed as such the natural or legal persons, of public or private law, in whose name the same are registered."
d) The fiscal normative is full of provisions analogous to that established in the final part of no. 1 of article 3, in which the fiscal legislator, within its freedom of legislative shaping, expressly and intentionally establishes what should be considered legally, for purposes of incidence, of income, of exemption, of determination and periodization of taxable profit, for purposes of residence, of location, among many others.
e) The tax legislator intentionally and expressly wished that those be considered as owners, lessees, acquirers with reservation of ownership or holders of the right of purchase option in long-term lease, the persons in whose name [the vehicles] are registered.
f) In light of a teleological interpretation of the regime established throughout the Single Motor Vehicle Tax Code, the interpretation advocated by the claimant to the effect that the taxable person of the IUC is the effective owner, regardless of not appearing in the vehicle registry, is manifestly wrong, in that it is the very rationale of the regime established in the Single Motor Vehicle Tax Code that constitutes clear evidence that what the tax legislator intended was to create a Single Motor Vehicle Tax based on the taxation of the owner of the vehicle as recorded in the vehicle registry.
g) The interpretation conveyed by the claimant is contrary to the Constitution, in that it violates the principle of confidence and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.
h) Beyond being offensive to the principle of efficiency of the tax system, in that it results in a hampering and increase in costs of the competencies attributed to the respondent, with obvious prejudice to the interests of the Portuguese State.
i) It maintains that the tax acts in question are valid and legal, because in conformity with the legal regime in force on the date of the tax facts, so that, in this case, no error attributable to the services occurred.
j) It further argues that the legal prerequisites that confer the requested right to compensatory interest are not, in any circumstance, met.

  1. The Arbitral Tribunal was regularly constituted and is materially competent.

The parties have legal personality and capacity and are legitimate (arts. 4 and 10, no. 2, of the same instrument and art. 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from defects of nullity.

B. DECISION

  1. FACTUAL MATTERS

1.1. ESTABLISHED FACTS

The following facts are considered established:

a) The TA issued, on 26-10-2013, the IUC assessments subject to the proceedings, resulting from ex officio assessment procedures and concerning the vehicles …, … and ….
b) The claimant proceeded, on 03-12-2013, to pay the tax relating to such assessments.
c) The claimant subscribed sale declarations concerning the vehicles … and …, which have notarial recognition of signatures of 07-10-2004 and issued a debit note relating to said sale.
d) The claimant subscribed a sale declaration concerning the vehicle …, dated 19-05-2014 and issued a debit note relating to said sale.
e) However, the respective purchasers did not register their ownership.
f) The claimant requested, on 21-11-2012, from the Institute for Mobility and Land Transport (IMTT) the seizure of the documents of the motor vehicles.
g) The claimant presented, in the hearing prior to the ex officio assessment procedures, the same documents that it attached to the present proceedings.
h) The claimant presented, on 03-03-2104, the request for arbitral ruling that gave rise to the present proceedings.

1.2 The facts were established on the basis of documents attached to the proceedings by the claimant, whose authenticity was not challenged by the respondent.

1.3 UNESTABLISHED FACTS

There are no facts established as unproven with relevance for the assessment of the request.

1.4 THE LAW

The substantive question to be assessed lies in the interpretation to be given to no. 1 of art. 3 of the SMVT Code in order to ascertain whether the rule of subjective incidence contained therein establishes a legal presumption juris tantum – and, as such, susceptible of rebuttal (as the claimant maintains) or, conversely, an express and intentional definition of personal incidence, in the sense that the taxable person of the tax is necessarily the one in whose name the motor vehicle is registered as owner.

No. 1 of art. 3 of the SMVT Code provides: "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 name the same are registered".

On the basis of the wording of this provision, the respondent - TA - maintains that the basis of personal incidence which it defines does not today include any legal presumption, since it transmits in an express and intentional manner the thought of the tax legislator, in the sense of considering, in an irrefutable manner, as taxable persons of the IUC the persons in whose name the motor vehicles are registered.

It adduces in support of its thesis hermeneutical reasons of interpretation of the law, with appeal not only to its literality, but also to the systematic and teleological elements.

An invocation full of meaning, in that, in accordance with the provision of art. 11 of the LGT, "in the determination of the meaning of tax norms and in the qualification of facts to which they apply, the general rules and principles of interpretation and application of laws are observed". That is, as referred by Diogo Leite Campos, Benjamim Rodrigues, J. Lopes de Sousa – LGT 4th ed., in annotation to such article, "… without departing from the letter of the law, which must be the principal reference and point of departure of the interpreter, its automatic application is excluded, assuming that in laws there is an operative rationality that the interpreter must endeavour to reconstruct".

It is, thus, within this framework of interpretation of the tax law, in this case art. 3, no. 1 of the SMVT Code, that we must find the answer to the antagonism of positions between the claimant and the TA.

For the TA, the registration of ownership of the motor vehicle is decisive for the determination of the taxable person of the IUC, so that the person in whose name this is registered will be considered as such, in an irreversible manner.

The registration of ownership of vehicles is, in accordance with the provision of art. 5, no. 1, a) and no. 2 of DL 54/75, of 12 February, mandatory, so that any right of ownership that affects the vehicle is subject to registration, with which the security of legal commerce is intended, as well as the publicity of the legal situation of the same.

Such registration enjoys, in accordance with the provision of art. 7 of the Property Registration Code (applicable to vehicle registration by virtue of art. 29 of the said DL 54/75), the "… presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it".

We have, therefore, that the registration inscription of the ownership of the vehicle is, also, a presumption that the right of ownership over it exists in the terms contained in the registration.

That is, motor vehicle ownership registration does not constitute any condition of validity of the contracts subject to it, in the manner that occurs with property registration (whose regime, as we have already noted, is extended to vehicle registration); the registration has merely a declarative function.

It happens that art. 5, no. 1 of the Property Registration Code, imposes that "facts subject to registration only produce effect against third parties after the date of their respective registration". From which it seems to follow that this would suffice for the TA to invoke the absence of registration to immediately make art. 3, no. 1 of the SMVT Code operate, requiring payment of the tax to the one in whose name the vehicle is registered, as the taxable person of the tax.

Yet no. 4 of art. 5 of the Property Registration Code restricts this understanding, by determining that "third parties, for registration purposes, are those who have acquired from a common author incompatible rights". Whence it follows that, by that route, the TA would never be able to invoke the lack of registration, in that it does not meet the concept of third party.

Having stated this in general terms, it must be ascertained whether, notwithstanding what has just been referred to, no. 1 of art. 3 of the SMVT Code contains, or does not contain, a legal presumption.

Everything is, in short, a matter of determining whether the expression "considered as", used therein, has the nature of a legal presumption.

As a starting point, the answer seems to us to be negative.

It seems offensive to the unity of the legal system – and even, with appropriate adaptations, in opposition to nos. 2 and 3 of art. 11 of the LGT - that an individual comes to be considered as not an owner of a good for civil purposes and has to be necessarily for tax purposes.

To which is added the fact that the TA must guide its activity by observance of the principles of legality, inquisitorial procedure and discovery of material truth, implicit in the constitutional dictate of contributive capacity.

Be that as it may, it seems evident that, both from a systematic and teleological point of view, the expression "considered as", adopted in no. 1 of art. 3 of the SMVT Code contemplates a true presumption, to which the apparent literality of the expression does not oppose, nor the tax system.

To this end, refer Diogo Leite Campos, Benjamim Rodrigues, J. Lopes de Sousa – LGT 4th ed., in annotation to art. 73, p. 651: "presumptions in the matter of tax incidence may be explicit, revealed by the use of the expression 'presumed' or similar, as occurs, for example, in nos. 1 to 5 of art. 6, in subparagraph a) of no. 3 of art. 10, in art. 19 and 40, no. 1, of the PITS Code. However, presumptions may also be implicit in rules of incidence, namely of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not unfeasible to ascertain the real value …", then enumerating a series of examples.

We understand that it is precisely this case that art. 3, no. 1 of the SMVT Code contemplates: an implicit presumption. A presumption, moreover, that has always existed in the field of motor vehicle tax, despite previously having been defined in an explicit manner.

Furthermore, in compliance with the principles - with establishment in our community law - of the polluter-pays and equivalence, the SMVT Code imports concerns of an environmental and energy nature, intending that the costs arising from environmental damages caused by the use of motor vehicles be borne by the actual owners (and not by the presumed owners).

It is, thus, necessary to conclude that art. 3, no. 1 of the SMVT Code establishes a presumption of subjective incidence.

Now, no. 2 of art. 350 of the Civil Code establishes that legal presumptions may be rebutted by proof to the contrary, except in cases expressly provided for in the law.

And, as regards the rebuttal of presumptions, we find good the doctrine to which the STJ [Supreme Court of Justice] resorted in the foundation of Opinion no. 1/91 of 03-04-1991 (DR no. 114, of 18 May) - to classify as juris tantum a presumption established in a labour instrument - defended by Vaz Serra [Evidence (substantive probative law), BMJ 110-112, p. 35], as well as by Mário de Brito (Annotated Civil Code, p. 466) and Mota Pinto (General Theory of Civil Law, p. 429): "… juris tantum presumptions constitute the rule, with juris ou jure presumptions being the exception. In doubt, the legal presumption is juris tantum, since it should not be considered, absent a law reference, that it was intended to prevent the production of evidence to the contrary, imposing a formal truth to the detriment of the real proven".

For its part, within the scope of tax law, art. 73 of the LGT provides that "presumptions established in the rules of tax incidence always admit proof to the contrary". Which means that all presumptions in the matter of tax incidence, such as the one that no. 1 of art. 3 of the SMVT Code establishes, are juris tantum and, as such, rebuttable.

From the probative elements brought to the proceedings by the claimant, it results that it was no longer the owner of the vehicles to which the assessments subject to the present arbitral request relate, on the deadline dates of their respective payments.

The truthfulness of such documents was not challenged.

We therefore hold it as established that it was not questioned that the sale transactions of the motor vehicles have been concluded, it being certain that the contract of purchase and sale is consensual, not requiring any special form.

Having proved the transmission of ownership and, since the TA has no legitimacy to oppose the absence of registration, as it is not considered as a third party for such purposes, the annulment of the IUC assessments subject to the present arbitral request is imposed.

Compensatory Interest

In addition to the restitution of the tax unduly paid, the claimant requests that the right to the payment of compensatory interest be declared.

This right is established in art. 43 of the LGT, which has as its prerequisite that it be ascertained, in a gracious complaint or judicial challenge - or in tax arbitration – that there was an error attributable to the services from which results payment of the debt in an amount greater than legally due.

In the case in question, it seems to us that there is, in fact, an error attributable to the TA in the assessments in question.

In effect, the claimant had already presented, at the hearing prior to the ex officio assessment procedures, documentation sufficient for the rebuttal of the presumption that weighed on it.

Despite this being so and the TA being obliged to guide itself, as referred to above, by the principle of inquisitorial procedure, it ignored all the elements that were at its disposal and that should have prevented the completion of the challenged assessments.

Wherefore, the claimant has the right to the requested payment of compensatory interest.

  1. DECISION

In view of the foregoing, it is decided:

a) to declare the request for annulment of the tax acts subject to the arbitral request corresponding to the IUC assessments concerning the years 2009 to 2012 admissible and well-founded, due to violation of law, as well as the request for payment of compensatory interest,

b) to condemn the Tax and Customs Authority to refund to the claimant the amount of tax paid, increased by the respective compensatory interest;

c) to condemn the Tax and Customs Authority to pay the costs of the proceedings.

CASE VALUE: In accordance with the provision of art. 306, no. 2 of the Code of Civil Procedure, art. 97-A, no. 1, a) of the Code of Tax Process and Procedure and art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned a value of 643.39 € (six hundred and forty-three euros and thirty-nine cents).

COSTS: Pursuant to the provision of art. 22, no. 4, of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at 306.00 € (three hundred and six euros), in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, charged to the Tax and Customs Authority.

Let it be notified.

Lisbon, 30 October 2014

The Arbitrator

(António Alberto Franco)

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) when a vehicle has been sold but the registration was not updated?
According to Article 3(1) of the SMVT Code, the person registered as the vehicle owner remains liable for IUC even after selling the vehicle if the buyer fails to update the registration. The Tax Authority argues this is not a rebuttable presumption but a legal definition that intentionally bases tax liability on registration records rather than actual ownership. While taxpayers may present sale declarations and other evidence, the AT maintains that registration is the definitive criterion for determining the taxable person. This means sellers remain responsible for IUC until registration is formally transferred, regardless of actual possession or economic ownership.
Can the Portuguese Tax Authority (AT) use vehicle registration records as a presumption of ownership for IUC purposes?
Yes, the Portuguese Tax Authority uses vehicle registration records as the legal criterion for determining IUC liability under Article 3(1) of the SMVT Code. However, the AT argues this is not merely a presumption but an express legal definition. The legislator intentionally established that taxable persons are 'considered as such the persons in whose name the vehicles are registered,' creating a registration-based system for administrative efficiency and legal certainty. The AT contends this approach is constitutional and serves important policy objectives including tax system efficiency, reduced administrative costs, and clear legal certainty for both taxpayers and authorities.
What evidence can a taxpayer present to prove vehicle sale and challenge IUC assessments?
Taxpayers can present various forms of evidence to demonstrate vehicle sale, including: (1) sale declarations with notarized signatures; (2) debit notes or invoices documenting the transaction; (3) requests for seizure of vehicle documents submitted to IMTT (Institute for Mobility and Land Transport); and (4) other documentary proof of transfer. However, the effectiveness of such evidence depends on whether courts interpret Article 3(1) of the SMVT Code as creating a rebuttable presumption or an irrefutable legal definition. The Tax Authority argues that even with such evidence, the registered owner remains liable until registration is updated, while taxpayers contend that Article 75 of the LGT grants such documents presumption of truthfulness sufficient to rebut administrative determinations.
Are taxpayers entitled to compensatory interest (juros indemnizatórios) when IUC self-assessments are declared illegal?
Taxpayers are entitled to compensatory interest (juros indemnizatórios) when IUC assessments are declared illegal and tax has been paid, pursuant to Article 43 of the LGT (Lei Geral Tributária). Compensatory interest compensates taxpayers for the financial loss resulting from improper tax collection by the State. The right arises automatically when: (1) the tax assessment is annulled or declared illegal; (2) the taxpayer has actually paid the tax; and (3) the payment occurred due to an act later determined to be unlawful. The Tax Authority may contest entitlement if it can demonstrate that no error attributable to tax services occurred or that the taxpayer contributed to the situation through their own actions or omissions.
How does CAAD arbitration address disputes over IUC subjective incidence and the admissibility of tax presumptions?
CAAD (Centro de Arbitragem Administrativa) arbitration addresses IUC subjective incidence disputes by analyzing whether Article 3(1) of the SMVT Code creates a rebuttable presumption or an irrefutable legal fiction. The tribunal examines multiple interpretative elements: literal (the text's precise wording), systematic (consistency with the broader legal framework), teleological (the legislator's purpose), and constitutional (compliance with principles of legal certainty, proportionality, and tax system efficiency). The key issue is whether tax law permits irrefutable presumptions for determining tax incidence, or whether taxpayers can rebut registration-based liability with evidence of actual ownership transfer. Arbitrators balance administrative efficiency concerns against substantive tax justice, considering whether documentary evidence carries sufficient legal weight under Article 75 LGT to overcome registration records.