Process: 226/2017-T

Date: September 22, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

In CAAD arbitration case 226/2017-T, a financial leasing company challenged IUC (Single Circulation Tax) assessments totaling €25,349.91 for years 2010-2015, arguing it should not be liable for vehicles already sold to lessees or permanently lost. The company contended that Article 3(1) of the IUC Code establishes a rebuttable legal presumption that registered owners are taxpayers, which can be overcome by proving ownership transfer through sale contracts. The claimant submitted invoices and debit notes as evidence of vehicle transfers upon completion of leasing contracts. However, the Arbitral Court found the evidence insufficient to prove actual transfer of the vehicles identified in the claim. The case highlights the critical distinction between vehicle registration and actual ownership for IUC liability purposes. Under Article 3(1) IUC Code, taxpayers are defined as vehicle owners, with registered persons presumed to be owners. While Article 73 of the General Tax Law permits rebutting this presumption with contrary evidence, the burden of proof rests on the taxpayer challenging the assessment. The decision emphasizes that financial leasing companies must maintain rigorous documentation of vehicle transfers, including proper registration updates, to successfully challenge IUC assessments. The case also demonstrates that ex officio review denials can be contested through CAAD arbitration, though success depends on substantiating ownership changes with conclusive evidence beyond internal accounting records.

Full Decision

ARBITRAL DECISION

REPORT

A… S.A., with TIN…, and registered office at …, …, …, …-…, in Porto Salvo, filed a request for the establishment of a singular Arbitral Court, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority (hereinafter AT) is the Respondent, with the objective of obtaining a declaration of illegality of the decisions denying the requests for ex officio review submitted in relation to the acts of assessment of Single Circulation Tax (IUC) identified in the case file, relating to the years 2010 to 2015, in the total amount of €25,349.91.

The request for establishment of the Arbitral Court was accepted by the Honorable President of CAAD on March 31, 2017 and was automatically notified to the AT.

In accordance with the provision in subparagraph c) of Article 11(1) of the RJAT, the singular Arbitral Court was established on June 28, 2017.

The AT responded, arguing for the dismissal of the claim.

The meeting referred to in Article 18 of the RJAT and the holding of closing arguments were waived, given the nature of the matter contained in the case file.

The Arbitral Court is regularly constituted and is materially competent, pursuant to subparagraph a) of Article 2(1) of the RJAT.

The parties have legal personality and capacity, are properly authorized and are represented (Article 4, and Article 10(2) of the RJAT and Article 1 of Order No. 112/2011, of March 22).

No nullities, exceptions, or preliminary matters exist that would prevent immediate consideration of the merits of the case.

STATEMENT OF FACTS

Based on the evidence contained in the case file, the following facts are considered proven:

  • The Claimant is a company engaged in the activity of automobile financial leasing;

  • In the course of its automobile financial leasing activity, the Claimant holds, for short periods of time, various motor vehicles registered in its name;

  • At the end of the financial leasing contracts, the lessees have the option to acquire the leased vehicle;

  • The AT assessed IUC against the Claimant in the total amount of €144,560.03, relating to the years 2009 to 2016, on various vehicles;

  • The Claimant filed requests for review of the tax acts, and the AT issued decisions denying the requests for ex officio review identified in the case file;

  • The Claimant paid the IUC assessment notices corresponding to the tax acts contested.

The Court did not consider the following facts as proven:

  • The vehicles identified in paragraphs 20, 23, and 26 of the arbitral petition and in the documents submitted by the Claimant, which constitute debit notes and invoices issued by third parties, were transferred by the Claimant to third parties.

This court formed its conviction based on consideration of the documents attached to the case file.

Taking into account the positions assumed by the parties, in light of Article 110(7) of the Code of Tax Procedure (CPPT) and the documentary evidence attached to the case file, the facts listed above are considered proven or not proven, as relevant to the decision.

STATEMENT OF LAW

The main issues raised in the present case concern whether the Claimant should be qualified as a taxpayer of the IUC with respect to the aforementioned acts of IUC assessment:

  • With respect to vehicles already disposed of on the date of verification of the respective tax event (identified in paragraphs 20 and 23 of the arbitral petition);

  • As to vehicles that are salvage or permanently lost (identified in paragraph 26 of the arbitral petition).

In this regard, the Claimant alleges in its request for arbitral determination the following:

  • The vehicles identified in paragraph 20 of the arbitral petition, on the date of the IUC assessment, were no longer owned by the Claimant, as they had already been sold upon completion of their respective financial leasing contracts, as demonstrated by the documents attached to the document now referred to as Doc. 2, which are now submitted and are hereby fully reproduced for the appropriate legal purposes;

  • The Claimant submitted to the requests for review of tax acts which it made various debit notes proving that it was owed amounts due by the subjects with whom it had executed financial leasing contracts;

  • Article 3(1) of the IUC Code, in the wording in force at the time the tax facts subject to assessment were formed, provided that: "The taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered";

  • Article 11(1) of the General Tax Law (LGT) clarifies that "In determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed".

  • As explained in the annotation to Article 73 of the LGT, "the presumptions in matters of tax incidence may be explicit, revealed by the use of the expression 'it is presumed' or similar (…). However, presumptions may also be implicit in rules of incidence, namely of objective incidence, when certain values of movable or immovable property are considered to constitute taxable matter, in situations where it is not impracticable to determine the real value", then giving some examples of rules in which the verb "to consider" is used, as in the case of Article 21(2) of the Corporate Income Tax Code.

  • Article 3(1) of the IUC Code, in the wording in force at the time the tax facts sub judicio were formed, using the expression "being considered" thus establishes a legal presumption, presuming that the taxpayers of the tax (in this case, the owners) are the persons, natural or legal, of public or private law, in whose name the vehicles are registered;

  • Pursuant to Article 73 of the General Tax Law (LGT), "The presumptions established in the rules of tax incidence always admit proof to the contrary".

  • On the other hand, a legal presumption is understood, pursuant to Article 349 of the Civil Code (C.C): "The inferences which the law or the judge draws from a known fact to establish an unknown fact".

  • The subjective incidence of IUC is thus made by the verification of a fact (the registration) from which another fact is drawn (the existence of the actual owner);

  • In this case, it is abundantly evident, given the documents referred to, that the existence and execution of contracts of sale executed between the Claimant and the subjects with whom it executed financial leasing contracts in the course of its activity is fully and unequivocally proven;

  • One of the essential effects of the execution of a contract of sale is, pursuant to Article 879, subparagraph a) of the C.C, "The transfer of ownership of the thing or the ownership of the right".

  • With the execution of contracts of sale between the Claimant and the acquirers of the vehicles previously leased, the ownership was transferred from the former to the latter, and therefore the AT can no longer avail itself of the presumption to consider the Claimant a taxpayer of IUC, pursuant to Article 3 of the IUC Code;

  • The decisions denying ex officio review requests issued by the Tax Authority, in the reasoning of the decision that is transversal to all of them, implicitly invoke the regime contained in Article 25 of Decree-Law No. 55/75 of February 12, as amended by Decree-Law No. 20/2008, of January 31, according to which it is permitted for sellers to promote subsequent registration of ownership acquired by oral contract of sale, provided that, by virtue of their commercial activity, they regularly proceed with the transfer of ownership of motor vehicles or proceed with the purchase and sale of vehicles for resale (subparagraphs c) and d) of Article 1);

  • It expressly results from the aforementioned legal provision that the registration "may be carried out" by a request subscribed by the seller in these circumstances, that is, that he is granted a mere faculty, creating no duty to proceed with registration on the seller's part;

  • To draw from a permission its contrary, that is, an obligation or duty to proceed with registration that can be invoked against the seller is absolutely devoid of any legal basis;

  • It follows from Article 8-B(1) of the Real Property Registration Code, applicable by force of Article 29 of the Motor Vehicle Registration Code, that it is the active subject of the fact subject to registration upon whom the registration obligation falls, that is, it is the buyer/acquirer/lessor who must promote registration.

  • The presumption that the registered right belongs to the person in whose name it is inscribed can thus be rebutted by proof to the contrary;

  • Article 408 of the C.C establishes that "the creation or transfer of real rights over a determined thing is made by the mere effect of the contract, except for the exceptions provided by law";

  • The debit notes submitted by the Claimant constitute conclusive evidence of the execution of contracts of sale between it and the subsequent owners of the vehicles sub judicio;

  • Such debit notes are relevant not only as communication to the recipient that it owes him a certain amount, but rather demonstrate the existence of commercial relationships that had as their object a given vehicle, specifying the license plate in question, the dates of issuance and maturity and indicating in their description "residual value" or "compensation relating to the closure of the contract";

  • It is thus manifest that, before a careful analysis of these documents, it is easily found that they refer to the execution of contracts of sale;

For its part, the AT alleges, in summary, the following:

  • The legislator expressly and intentionally established that those considered as owners are the persons in whose names the vehicles are registered, since this is the interpretation that preserves the unity of the tax legal system; to understand that the legislator established a presumption here would unequivocally be to effect an interpretation contra legem;

  • In these terms, the failure to update the registration, pursuant to Article 42 of the Motor Vehicle Registration Regulation, will be imputable to the legal sphere of the taxpayer of IUC and not to the Portuguese State, as the active subject of this Tax.

  • Even if it is admitted that, from the perspective of the rules of civil law and property registration, the absence of registration does not affect the acquisition of the status of owner and that registration is not a condition of validity of contracts with real effect, pursuant to what is established in the IUC Code (which in the present case constitutes special law, which, by general rules of law, derogates from general rules), the tax legislator intentionally and expressly wished that those considered as owners, lessees, acquirers with reservation of ownership, or holders of the right to option to purchase in long-term rental be the persons in whose names the vehicles are registered.

  • However, even if this is not understood – which is only admitted by mere academic hypothesis – and accepting that it is admissible to rebut the presumption in light of the jurisprudence already established in this arbitration center, the documents submitted by the Claimant relating to the situations of Customers, D…, and Salvage were appreciated, and their probative value with a view to such rebuttal;

  • As to sales to customers, to prove transmission of ownership of the vehicles, the Claimant submits copies of debit notes, which are contested, from which it appears in the field reserved for "description/services", "contract no. …" or "value of termination of contract no. …".

  • By way of example, let us look at doc. 55 submitted by the Claimant as Doc. 1 (customers2010), which corresponds to the copy of the debit note no. …, in the name of B…, in the field reserved for description/services states "Contract No. …", the nature of the contract referred to being unknown;

  • As another example, if we look at doc. 56 submitted by the Claimant as Doc. 1 (customers2010), which corresponds to the copy of the debit note no. …, in the name of C… Unipessoal, Lda, in the field reserved for description/services states "Value of termination relating to contract no. …", the nature of the contract being unknown, as in the previous example;

  • What type of contract is this? And what termination is this mentioned in the debit note?

  • The Claimant merely submitted the debit notes per se, intending with them to prove the transmission of ownership of the vehicles.

  • In none of these cases, of alleged sale to customers, did the Claimant submit an invoice to this process;

  • Nor does it submit a receipt or even a check as proof of payment of the price;

  • In addition to this, in the debit notes it states in the bottom left corner "Document valid as Receipt after proof of good collection".

  • Now, the Claimant, by not submitting another document other than the debit notes, does not prove payment of the amount stated therein, or, on the contrary, a subsequent dispute due to lack of that same payment.

  • Now, being the copies of debit notes submitted, unilateral and internal documents, they are not suitable and sufficient for proof of transmission of ownership, nor do they prove the execution of a bilateral contract such as sale and purchase.

  • The debit notes do not by themselves reveal an essential and unequivocal declaration of will (i.e., acceptance) on the part of the alleged acquirers.

  • Whereby it is concluded that the debit notes do not constitute documents suitable, sufficient, and apt to prove the transmission of ownership from the Claimant to third parties, whereby Doc. 1 and 2 submitted with the arbitral petition by the Claimant are contested.

  • As to the transmissions of vehicles under the D… regime (Doc. 3 to 5 submitted with the arbitral petition), to prove the transmission of ownership under financial leasing contracts, the Claimant merely submits copies of debit notes in the name of the company D…, from which it appears "contract no. …-residual value …".

  • Now, taking as an example, doc. 37 submitted by the Claimant in Doc. 3-Part 1, we verify that the company D… appears as a customer, with a contract identified by a number, the nature of which being unknown.

  • If we look, for example, at docs. 17, 18, and 19 submitted by the Claimant in Doc. 3-Part 1, we note that although in the arbitral petition, the Claimant alleges the existence of financial leasing contracts, it is certain that it also did not submit a single financial leasing contract as a sample;

  • More: there is no reference whatsoever to a financial leasing contract in the documents submitted by the Claimant with the arbitral petition, whereby the relationship between the Claimant and the company D… is unknown, with this appearing as a customer like any other;

  • Indeed, from the copies of debit notes submitted, it states in the bottom left corner "Document valid as Receipt after proof of good collection", the Claimant presenting no proof whatsoever of that good collection, whether it be a check, a bank transfer showing proof of payment and consequent transmission of ownership of the vehicle;

  • On the other hand, the Claimant submits copies of so-called invoices/receipts, issued by the company D…, which is in no way the Claimant in this process.

  • Whereby it is concluded that the documents submitted by the Claimant with the arbitral petition, identified as Doc. 3 to 5, do not prove the existence of any financial leasing contract;

  • Thus, whether the debit notes or the invoices/receipts, they do not constitute documents suitable, sufficient, and apt to prove the transmission of ownership from the Claimant to third parties, whereby the documents Doc. 3 to 5 submitted with the arbitral petition are contested;

  • As to the Salvage (Doc. 6 to 9 submitted with the arbitral petition), to prove transmission of ownership as to the vehicles called "Salvage" by the Claimant, it submits copies of debit notes;

  • The Claimant alleges in paragraph 19 of the arbitral petition that the salvage refers to vehicles which, given their total loss, enter the patrimonial sphere of an insurance company that contracts with the Claimant;

  • Now, taking as an example doc. 1 which forms part of Doc. 6 submitted by the Claimant, it is found that the document presented is the copy of a debit note issued in the name of a pharmaceutical company (E…, Lda), and not in the name of an insurance company;

  • In addition to this, in the bottom left corner, the debit note contains the inscription "document valid as Receipt after proof of good collection";

  • Now, the Claimant having presented no document that proves receipt of a price, such as a check or a document of payment thereof, it is unknown whether there was good collection;

  • To which is added the fact that the debit notes issued were not accompanied by any correspondence made by an insurance company about the alleged loss of the vehicle/salvage, to prove the alleged transmission of ownership;

  • On the other hand, the debit note refers to "salvage relating to the closure of contract no. …", the nature of said contract being unknown.

  • Therefore, the Claimant cannot claim that the debit notes, per se, without any other document, are apt to prove the transmission of ownership from the Claimant to a third party.

  • In view of the above, the documents submitted by the Claimant are contested, the debit notes not being, unaccompanied by any other document, suitable and apt to prove the transmission of ownership from the Claimant to a third party.

  • The unequivocal declaration of will of the alleged 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.

  • However, the Claimant did not submit copies of said official form for registration of motor vehicle ownership when it could and should have done so, that is, in the request for the arbitral determination, and is now precluded from doing so at a later time.

  • In summary, the Claimant failed to prove the alleged transmission of the vehicles at issue here, whereby the arguments invoked by the Claimant fail, and, let it be acknowledged, the documents which the Claimant presents are insufficient to rebut a legal presumption arising from the registration of the vehicles in its name on the dates of tax liabilities.

In view of the above, as to the position of the Parties and the arguments presented, to determine whether the Claimant should be qualified as a taxpayer of IUC with respect to the vehicles already identified, it will be necessary to verify:

  • Whether the rule of subjective incidence contained in Article 3(1) of the IUC Code establishes or does not establish a presumption;

  • Who is the taxpayer of IUC, for the purposes of Article 3(1) and (2) of the IUC Code:

  • With respect to vehicles already disposed of on the date of verification of the respective tax event;

  • As to vehicles that are salvage or permanently lost;

Let us see what is to be understood.

Interpretation of Article 3(1) of the IUC Code, as amended by Law No. 82-B/2014, of December 31

Article 3 of the IUC Code provides the following:

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

2 – Equated to owners are financial lessees, acquirers with reservation of ownership, as well as other holders of rights of option to purchase by virtue of a leasing contract."

It results from Article 11 of the General Tax Law (LGT) that the interpretation of tax law must be carried out taking into account the general principles of interpretation.

The main general principles of interpretation are established in Article 9 of the Civil Code (CC), in the following terms:

"1. Interpretation must not be confined to the letter of the law, but must reconstruct from the texts the legislative intent, having especially in mind the unity of the legal system, the circumstances in which the law was drawn up, and the specific conditions of the time in which it is applied.

  1. However, the interpreter cannot consider legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most correct solutions and knew how to express its intent in adequate terms."

It is thus established that there are three elements of interpretation of the Law, namely: the literal element, the historical and rational element, and the systematic element.

Considering the literal element of the rule discussed here, it will be important, first, to reconstruct the legislative intent through the words of the law. It is stated in Article 3(1) of the IUC Code that "the taxpayers of the tax are the owners of the vehicles, being considered as such the natural or legal persons of public or private law, in whose name the same are registered."

According to the AT, the expression "being considered" does not constitute a legal presumption, it being the intention of the legislator to expressly and intentionally establish that those considered as such (as owners) are the persons in whose names the same (vehicles) are registered, since this is the interpretation that preserves the unity of the tax legal system.

It happens that, from the point of view of literal interpretation, it is found that the expression "being considered" or "is considered" is often used with a meaning equivalent to the expression "being presumed" or "it is presumed".

Thus, by way of example, see Article 191(6) of the Code of Tax Procedure, among other articles indicated in the arbitral decisions handed down in cases nos. 14/2013-T, 27/2013-T, 73/2013-T, or 170/2013-T.

In this way, it can be said that the expression "being considered" has "a minimum of verbal correspondence, even if imperfectly expressed", and one should recognize such word a current and normal correspondence to that presumptive sense (See arbitral decision handed down, within the scope of case no. 286/2013-T).

Notwithstanding, and as is pointed out by the AT, the word "being considered" is also used outside of presumptive contexts – See Article 18 of its response.

For this reason, it is important to submit to the control of the other elements of interpretation of a logical nature Article 3(1) of the IUC Code.

Thus, considering the historical element of interpretation, it is important to consider that the bill no. 118/X, of March 7, 2007, underlying Law No. 22-A/2007, of June 29, establishes "as a structuring and unifying element (…) the principle of equivalence, thus making it clear that the tax, as a whole, is subordinate to the idea that the taxpayers must be burdened according to the cost they cause to the environment and to the road network, this being the reason for the existence of this tax figure."

In this context, it seems clear to us that the legislator intended to tax the real and actual taxpayer causing road and environmental damage and not any mere holder of motor vehicle registration.

As has been emphasized several times in various arbitral decisions, the principle of equivalence aims to internalize the negative environmental externalities resulting from the use of motor vehicles, and was established as a fundamental principle of taxation of motor vehicles in circulation.

As Sérgio Vasques argues, in Special Consumption Taxes, Almedina, Coimbra, 2001, p. 122, "Thus, a tax on automobiles based on a rule of equivalence will be equal only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different wear and environmental cost, pay different tax as well", adding that the realization of said principle "(…) dictates other requirements as well regarding the subjective incidence of the tax (…)".

Taking into account the foundations underlying the creation of the current IUC Code, in particular, the emergence of the principle of equivalence as a structuring and unifying principle of taxation of vehicles in circulation, it seems to us that Article 3(1) of the IUC Code cannot be interpreted as a closed command, but rather as a rebuttable presumption, which is based on the assumption that in reality the agent responsible for environmental damage is, as a rule, the registered owner of the automobile. An assumption that cannot but be disregarded, should it in fact be another agent responsible, that is, the taxpayer of IUC.

From the point of view of the systematic approach, it will be important to reinforce again that already in Article 1 of the IUC Code it is established that "The Single Circulation Tax complies with the principle of equivalence, seeking to burden the taxpayers according to the environmental and road cost which these cause, in the realization of a general rule of tax equality."

As A. Brigas Afonso and Manuel T. Fernandes argue, in Tax on Vehicles and Single Circulation Tax, Annotated Codes, pp. p. 183, "the legislator seeks to legitimize the taxation of motor vehicles on the basis of the negative externalities they cause (to public health, to the environment, to road safety, to the congestion of communication networks, and to the urban landscape) demystifying the idea that car taxation is very high in Portugal."

According to Batista Machado, in Introduction to Law and to the Legitimizing Discourse, p. 183, the systematic element "comprises the consideration of the other provisions that form the normative complex of the institute in which the interpreted rule is integrated, that is, that regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that corresponds to the interpreted rule in the overall legal order, as well as its consonance with the spirit or intrinsic unity of the entire legal order."

This is, moreover, the fairest solution if we consider that the unity of the tax system cannot but be found in the principle of material truth and in the principle of proportionality (See Saldanha Sanches, in Principles of Tax Litigation, pp. p. 21, and Alberto Xavier, in Concept and Nature of the Tax Act, pp. 147 et seq.).

By the above, the arguments of the AT do not stand, to the effect that "the presumption of motor vehicle ownership flows solely, directly, and exclusively from the motor vehicle registration regime itself, and not from tax legislation on vehicles which constitutes a collateral aspect of that regime."

In truth, the interpretation here defended is not only the one that best coheres with the principle of material truth, but also the only one that serves the purposes of tax justice.

Equally, contrary to what is defended by the AT, it does not seem to us defensible, in light of the constitutional principles in force, the predominance of the principle of efficiency of the tax system over the principle of material justice. Although the practical difficulties that the rebuttal of the presumption established in Article 3(1) of the IUC Code may cause in terms of immediate collection of revenues by the AT are not to be overlooked, the interpretation of the Law cannot be adjusted to those needs, but rather the procedures associated with the collection of this tax should be changed in an efficient manner and in accordance with the Law, not forgetting the legal possibility of suspension of the statute of limitations for taxes.

Considering that tax law exists to regulate the conflicts of interest between the claims of the State to pursue the public interest of obtaining revenues and the claims of taxpayers to maintain the integrity of their assets, it should not, as a rule, serve as a criterion for interpretation of the tax rule, the safeguarding of the patrimonial or financial interest of the State.

In summary: based on Article 9 of the CC, it is considered that all elements of interpretation (literal, historical, and systematic) point in the direction that Article 3(1) of the IUC Code establishes a rebuttable presumption. This means that the taxpayers of IUC, being, in principle, the owners of the vehicles, being considered as such the persons in whose names they are registered, may, after all, be others, if it is effectively others who cause the environmental damage, as users of the vehicles in circulation.

b) Taxpayer of IUC, for the purposes of Article 3(1) and (2) of the IUC Code as to:

  • vehicles already disposed of on the date of verification of the respective tax event;

  • vehicles that are salvage or permanently lost;

Taking into account the above in a), it is understood that the provision under analysis establishes a presumption of ownership in favor of the persons in whose names the vehicles are registered.

Pursuant to Article 73 of the LGT, "The presumptions established in the rules of tax incidence always admit proof to the contrary."

As Diogo Leite Campos, Benjamim Silva Rodrigues, and Jorge Lopes de Sousa argue, in General Tax Law, Annotated and Commented, pp. p. 652, 4th Edition, "what is intended 'always' is to tax actual revenues and not non-existent ones, and it is for this reason, of wanting always to tax real values, that Article 73 of the LGT allows 'always' to rebut presumptions.

This is the interpretation that is in tune, on the one hand, with the principle stated in Article 11(3) of the LGT that, in cases of doubt as to the interpretation of tax rules, "substance of the economic facts" should be considered, and, on the other hand, with the principle of equality in the distribution of public burdens, which requires that the taxation of the generality of taxpayers, whenever possible, be based on the economic reality underlying the tax facts, and is not compatible with the existence of special cases of taxation based on fictitious values in situations in which the real value of the tax facts is known or is ascertainable.

Vehicles already disposed of on the date of verification of the respective tax event;

The Claimant remained in the registry as owner and lessor of the vehicles identified in paragraph 20 of the arbitral petition – documents nos. 1 and 2 attached to the case file, and therefore the AT seeks to impute to it the responsibility for payment of IUC for the years 2010 and 2015, pursuant to Article 3(1) of the IUC Code.

However, the Claimant alleges that, in fact, the vehicles in question had already been disposed of on the date of the anniversary of their respective license plates.

To prove such transfer of the right of ownership, the Claimant submitted documents nos. 1 and 2, which are debit notes. It did not submit documents evidencing the amounts received from the sales of the vehicles (checks, bank transfers, or statements evidencing those receipts), nor any documents from which the identified acquirers result or from which the actual existence of the alleged contracts of sale can be extracted.

The Respondent alleges that the debit notes submitted by the Claimant are not sufficient to shake the (alleged) legal presumption established in Article 3 of the IUC Code.

As previously decided by the Central Administrative Court, in case no. 8300/14, of March 19, 2015, "Both the invoice and the debit note constitute accounting documents prepared within the company and intended for outside. The invoice must be viewed as an accounting document through which the seller sends to the buyer the general conditions of the transaction carried out. The debit note, in turn, consists of the document in which the issuer communicates to the recipient that the latter owes him a certain monetary amount. Both documents appear in the phase of liquidation of the amount to be paid by the buyer, thus not making proof of payment of the price by the buyer and, consequently, proof that the sale and purchase was concluded (only the issuance of invoice/receipt or receipt provides proof of payment and discharge – See Article 787 of the Civil Code).

The Court therefore understands that the documents submitted by the Claimant, which constitute debit notes, do not permit the conclusion that the vehicles subject to additional assessment were, in fact, transferred in favor of third parties.

In truth, proof of the transmission of the vehicles could be carried out by any means, including through debit notes, provided that such proof was supplemented by the presentation of other means of proof, such as, for example, the means of payment (See Decision no. 130/2014, of October 15, 2014).

For this reason, based on the documents submitted, the Court is not convinced that the acts of IUC assessment relating to the vehicles identified in paragraph 20 of the arbitral petition relate to motor vehicles that had already been transmitted on the date of the tax event of IUC, and therefore, by force of the presumption of ownership arising from Article 3(1) of the IUC Code, the responsibility for payment is imputable to the Claimant.

With respect to the vehicles identified in paragraph 23 of the arbitral petition – documents nos. 3, 4, and 5 attached to the case file, the Claimant remained in the registry as owner, and the AT seeks to impute to it the responsibility for payment of IUC for the years 2010, 2011, and 2015, pursuant to Article 3(1) of the IUC Code.

To prove such transfer of the right of ownership, the Claimant submitted documents nos. 3, 4, and 5, which are debit notes of the residual value of the vehicles and invoices/receipts of the subsequent transmission of the vehicles.

The Respondent alleges that both the debit notes and the invoices/receipts do not constitute suitable, sufficient, and apt documents to prove the transmission of ownership from the Claimant to third parties.

The Court understands that the documents submitted by the Claimant, which constitute the debit notes issued by the Claimant and the invoices issued by D…, do not permit the identification without doubt of who the acquirers of the vehicles were, in what moment, and under what contractual conditions. In truth, although the invoices issued by D… presuppose a prior transmission of the vehicles by the Claimant, no proof was made (documentary or testimonial) of the transfer of ownership of the vehicles, since no evidence of payment, declarations of sale, or other documents demonstrating the transmission of ownership of the vehicles were submitted.

Considering that the burden of proof is on the Claimant, and since it is not clear the manner of transmission of the vehicles, which it seeks to demonstrate, by force of Article 3(1) of the IUC Code, the responsibility for payment of IUC is imputable to the Claimant.

Vehicles that are salvage or permanently lost;

The Claimant remained in the registry as owner and lessor of the vehicles identified in paragraph 26 of the arbitral petition – documents nos. 7, 8, and 9 attached to the case file, and therefore the AT seeks to impute to it the responsibility for payment of IUC for the years 2009 to 2015, pursuant to Article 3(1) of the IUC Code.

However, the Claimant alleges that, in fact, the vehicles in question had already entered into the patrimonial sphere of insurance companies.

To prove such transfer of the right of ownership, the Claimant submitted documents nos. 7, 8, and 9, which are debit notes. Nor did it submit, in this case, any documents evidencing the amounts received from the transmission of the vehicles (checks, bank transfers, or statements evidencing those receipts), nor any documents from which the transmission of vehicles to insurance companies results.

The Respondent alleges that the debit notes submitted by the Claimant are not sufficient to shake the (alleged) legal presumption established in Article 3 of the IUC Code.

In fact, it is considered that the documents submitted by the Claimant, which are mere debit notes, are insufficient to prove the transmission of the right of ownership from the Claimant in favor of insurance companies, since from those documents it does not result that the transfer of the right of ownership over the vehicles was concluded.

Taking into account that the Claimant is listed in the registry as owner of the vehicles identified in paragraph 26 of the arbitral petition, the presumption of ownership provided for in Article 3(1) of the IUC Code is applicable here.

Consequently, it is considered that, pursuant to Article 4(3) of the IUC Code, the tax is due by the owner "until the cancellation of the license plate or registration by virtue of scrapping carried out in accordance with the law."

In view of the proof produced, the Court is convinced that the acts of IUC assessment contained in paragraph 26 of the arbitral petition are legal, and therefore, by force of the presumption of ownership arising from Article 3(1) of the IUC Code, the responsibility for payment is imputable to the Claimant.

DECISION

The Arbitral Court hereby decides:

  • To dismiss entirely the claim for annulment of the acts of IUC assessment identified in paragraphs 20, 23, and 26 of the arbitral petition and in the PAT attached to the case file;

  • To condemn the Claimant to pay the costs of the present proceedings, as the unsuccessful party.

VALUE OF THE PROCEEDING

In accordance with Article 306(2) of the Code of Civil Procedure, Article 97-A(1)(a) of the Code of Tax Procedure, and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the claim is fixed at €25,349.91 (Twenty-five thousand, three hundred and forty-nine euros and ninety-one cents).

COSTS

Pursuant to Articles 12(2) and 22(4) of the RJAT, and Article 4(4) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the arbitration fee is fixed at €1,530, in accordance with Table I of the aforementioned Regulation, to be borne by the Claimant.

Let it be notified.

The Arbiter,

Magda Feliciano

Lisbon, September 22, 2017

(The text of this decision was prepared by computer, pursuant to Article 131(5) of the Code of Civil Procedure, applicable by reference of Article 29(1)(e) of Decree-Law No. 10/2011, of January 20 (RJAT), governed by its drafting in accordance with the orthography prior to the 1990 Orthographic Agreement.)

Frequently Asked Questions

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Who is liable for IUC payment on vehicles under financial leasing contracts in Portugal?
Under Article 3(1) of the IUC Code, the taxpayer liable for IUC is the vehicle owner, defined as the person (natural or legal) in whose name the vehicle is registered. For financial leasing companies, this creates a legal presumption of liability based on registration. However, this presumption is rebuttable under Article 73 of the General Tax Law if the company can prove ownership was transferred to another party before the tax assessment date. In practice, leasing companies remain liable unless they provide conclusive evidence of ownership transfer and proper registration updates.
Can a leasing company challenge IUC tax assessments through arbitration at CAAD?
Yes, leasing companies can challenge IUC tax assessments through CAAD (Centro de Arbitragem Administrativa) under the Legal Framework for Arbitration in Tax Matters (RJAT). Process 226/2017-T demonstrates this right, where a leasing company contested €25,349.91 in IUC assessments after the Tax Authority denied ex officio review requests. The arbitration procedure under Articles 2 and 10 of RJAT allows taxpayers to seek declarations of illegality for tax assessments, providing an alternative dispute resolution mechanism to traditional court litigation.
What is the legal basis for IUC tax incidence on registered vehicle owners in Portugal?
The legal basis for IUC tax incidence is Article 3(1) of the IUC Code, which establishes that taxpayers are vehicle owners, with ownership determined by vehicle registration records. This creates a legal presumption linking registration to ownership. The provision uses the phrase 'being considered as such' (sendo considerados como tal), which establishes a rebuttable presumption rather than an absolute rule. Under Article 73 of the General Tax Law, presumptions in tax incidence rules always admit proof to the contrary, allowing taxpayers to demonstrate that actual ownership differs from registered ownership.
How does the official review procedure (revisão oficiosa) work for IUC tax disputes?
The ex officio review procedure (revisão oficiosa) for IUC disputes allows taxpayers to request the Tax Authority reconsider its own administrative acts under Articles 78 of the General Tax Law and 78 of the Tax Procedure Code. The taxpayer submits evidence supporting their position, and the AT issues a decision either granting or denying the review. If denied, as in Process 226/2017-T, the taxpayer can escalate to CAAD arbitration or judicial courts. The procedure requires payment of the contested amounts before challenging the assessment, as evidenced by the claimant's payment of IUC notices before arbitration.
Does transferring a leased vehicle to a third party affect IUC liability for the leasing company?
Transferring a leased vehicle to a third party should terminate IUC liability for the leasing company, but only if properly documented and registered. In Process 226/2017-T, the leasing company argued that sale contracts transferred ownership under Article 879(a) of the Civil Code, rebutting the registration-based presumption of liability. However, the Arbitral Court found insufficient evidence to prove transfers actually occurred. This demonstrates that leasing companies must maintain comprehensive documentation including sale contracts, registration transfer records, and proof of ownership change—mere invoices and debit notes were deemed insufficient to rebut the IUC liability presumption.