Process: 243/2013-T

Date: March 31, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD Process 243/2013-T addresses the critical question of subjective incidence for Portugal's IUC (Imposto Único de Circulação - Single Circulation Tax) when registered vehicle ownership differs from actual ownership. The case involves A, Lda, which incorporated B, S.A. and contested IUC assessments totaling €39,176.40 for vehicles no longer in their possession at the time of the taxable event. The central legal dispute concerns the interpretation of Article 3, paragraph 1 of the IUC Code, which establishes that vehicle owners are 'considered' to be those in whose name the vehicles are registered. The claimant argued that vehicle registration serves merely as publicity and creates only a rebuttable presumption (praesumptio iuris tantum) of ownership, not a constitutive right. They presented invoices demonstrating that vehicles were sold before the IUC taxable event occurred, asserting they should not bear tax liability for vehicles they no longer owned. The Tax Authority countered that the legislative wording 'are considered' in Article 3 establishes an express and intentional rule, not a rebuttable presumption. The AT argued this interpretation preserves the unity of the legal-fiscal system and aligns with systematic and teleological interpretation methods. According to the AT, registration determines tax liability regardless of actual ownership transfers, ensuring administrative efficiency and legal certainty. The arbitral tribunal was requested to annul the dismissal decisions of gracious complaints and order reimbursement of unduly paid amounts plus compensatory interest and penalties. This case has significant implications for understanding whether IUC liability follows legal registration or actual economic ownership, affecting how vehicle transactions should be managed for tax compliance purposes in Portugal.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 243/2013 – T

Subject: IUC – subjective incidence, legal presumptions

Case No. 243/2013-T

I – Report

1.1. A, Lda, hereinafter referred to as the "claimant", in its capacity as the incorporating company of B, S.A., having been notified of the dismissal of gracious complaints (relating to IUC, compensatory interest and respective penalties) Nos. …, filed, on 29/10/2013, a request for the establishment of an arbitral tribunal and arbitral pronouncement, pursuant to the provisions of Article 99 of the CPPT and Article 2, paragraph 1, subsection a), and Article 10, paragraph 2, subsection c), of Decree-Law No. 10/2011, of 20/1 (Legal Regime for Tax Arbitration, hereinafter referred to only as "LRTA"), in which the Tax and Customs Authority (AT) is requested, with a view to "the annulment of the decisions of the Tax Authority and the respective IUC Collection Documents [and] the reimbursement of the amounts unduly paid by the claimant".

1.2. On 30/12/2013, the present Singular Arbitral Tribunal was established.

1.3. Pursuant to Article 17, paragraph 1, of the LRTA, the AT was cited as the respondent party to submit its response, in accordance with and for the purposes of the aforementioned article. The AT submitted its response on 4/2/2014, arguing for the total lack of merit of the claimant's request.

1.4. On 7/2/2014, the Arbitral Tribunal requested from the AT a copy of the administrative file, in accordance with and for the purposes of the provisions of Article 17, paragraph 2, of the LRTA. The said copy was sent on 19/2/2014 and attached to the present case on 20/2/2014.

1.5. On 6/3/2014, the claimant filed, considering the provisions of paragraph 2 of Article 17 of the LRTA, a request asking that the AT be notified to proceed with the joining of cases No. … and No. …. On 7/3/2014, an order was issued determining the joining to the case of the request in question and the respective notification to the respondent.

1.6. The meeting in accordance with and for the purposes of the provisions of Article 18 of the LRTA took place on 18/3/2014. The contents of the respective minutes are hereby reproduced. The date of 31/3/2014 was set for the pronouncement of the arbitral decision.

1.7. The Arbitral Tribunal was regularly established, is materially competent, the case is not affected by defects that would invalidate it, and the Parties have legal personality and capacity, being legitimate.

II – Substantiation: Matters of Fact

2.1. The claimant alleges, in its initial petition, that: a) "motor vehicle registration does not have constitutive effect, as it is intended to give publicity to the registered act, functioning (only) as a mere rebuttable presumption (presumption 'iuris tantum') of the existence of the right"; b) "the interpretation of Article 3 of the IUC Code that is consistent with registration rules is one that considers that we are dealing with a mere presumption, which is rebuttable and which admits proof to the contrary"; c) "in the case at hand, all vehicles [...] were no longer the property of the claimant and, consequently, the same should not bear the tax relating to their circulation"; d) "from copies of the invoices [it is extracted] that the sale of the vehicles took place at a moment prior to when the taxable event occurred and the consequent exigibility of the tax (see Articles 4 and 6 of the IUC Code)."

2.2. The claimant concludes that: a) it should be considered "as proven the present arbitral action and consequently annul the decisions of the Tax Authority, of dismissal of the gracious complaints above identified [...] by virtue of such decision being based on an erroneous interpretation of the law, in particular of the provisions of Article 3, paragraph 1, of the IUC Code, since the presumption resulting from this provision admits proof to the contrary, and it is certain that in view of the documentation attached in due form by the claimant and which appears in the respective administrative files, it clearly proves that the ownership of the vehicles at the date of the incidence of the Unique Circulation Tax belonged to third parties and consequently the claimant should not be considered the liable subject of the said tax obligation"; b) "as a consequence of the annulment of the decisions of the Tax Authority and the respective IUC Collection Documents above identified, a decision should be pronounced ordering the reimbursement of the amounts unduly paid by the claimant, in the total value of €39,176.40 [...], plus the respective indemnificatory interest, provided for in Articles 43 of the GTL and Article 61 of the CPPT, as well as the unduly paid penalties."

2.3. For its part, the AT alleges, in its response: a) that there is a "distorted reading of the letter of the law" because in Article 3, paragraph 1, of the IUC Code, "the legislator established expressly and intentionally that such [as owners or in the situations provided for in paragraph 2, the persons stated therein] are considered the persons in whose name the same [the vehicles] are registered, because this is the interpretation that preserves the unity of the legal-fiscal system"; b) that the claimant's interpretation "does not regard the systematic element, violating the unity of the regime"; c) that the claimant's interpretation "ignores the teleological element of interpretation of the law: the ratio of the regime established in the article in question and, as well, throughout the IUC Code". In summary, the AT maintains that "the tax acts in question are not affected by any defect of violation of law, in so far as, in light of the provisions of Article 3, paragraphs 1 and 2 of the IUC Code and Article 6 of the same code, the claimant, in its capacity as owner, was the liable subject of the IUC [...] such that, in their entirety, the arguments that the Claimant makes are without merit." It concludes, finally, that "the present request for arbitral pronouncement should be judged without merit, maintaining in the legal order the tax assessment acts contested and absolving, accordingly, the respondent entity of the request."

2.4. The following facts are considered proven:

i) The claimant and company B proceeded, by deed, to the merger of the two companies by means of the incorporation of B into the company now claimant.

ii) By virtue of said merger, the assets of company B were transferred, in their entirety, to the claimant, company B being extinguished (as per entry No. 8 of the permanent certificate which appears in document No. 1 attached to the present petition and document No. 1 attached to the administrative file 1 appended).

iii) The claimant was notified, on 3/9/2013, of the dismissal of the following gracious complaints relating to IUC for the year 2008, compensatory interest and respective penalties (which were sent in the name of company B to the address of the claimant): … (document No. 2 appended to the petition and administrative file 20), in the amount of €930.00; … (document No. 3 appended to the petition and administrative file 19), in the amount of €1,053.80; … (document No. 4 appended to the petition and administrative file 24), in the amount of €1,696.00; … (document No. 5 appended to the petition and administrative file 25), in the amount of €1,905.00; … (document No. 6 appended to the petition and administrative file 26), in the amount of €1,801.00; … (document No. 7 appended to the petition and administrative file 27), in the amount of €435.00; … (document No. 8 appended to the petition and administrative file 28), in the amount of €1,906.60; … (document No. 9 appended to the petition and administrative file 29), in the amount of €1,444.50; … (document No. 10 appended to the petition and administrative file 30), in the amount of €1,000.00; … (document No. 11 appended to the petition and administrative file 31), in the amount of €2,100.00.

iv) The claimant was notified, on 9/9/2013, of the dismissal of the following gracious complaints relating to IUC for the year 2008, compensatory interest and respective penalties (which were sent in the name of company B… to the address of the claimant): … (document No. 12 appended to the present petition and administrative file 23), in the amount of €631.80; … (document No. 13 appended to the petition and administrative file 22), in the amount of €988.20; … (document No. 14 appended to the petition and administrative file 21), in the amount of €723.70.

v) The claimant was notified, on 3/10/2013, of the dismissal of the following gracious complaints relating to IUC for the year 2008, compensatory interest and respective penalties: … (document No. 15 appended to the present petition and administrative file 1), in the amount of €4,954.70; … (document No. 16 appended to the petition and administrative file 5), in the amount of €5,540.00; … (document No. 17 appended to the petition and administrative file 4), in the amount of €5,324.90; … (document No. 18 appended to the petition and administrative file 2), in the amount of €1,620.00 (herein notified as the incorporating company of company C, S.A.).

vi) Finally, the claimant was notified, on 4/10/2013, of the dismissal of the following gracious complaint, also relating to IUC for the year 2008, compensatory interest and respective penalties: … (document No. 19 appended to the present petition and administrative file 3), in the amount of €5,121.20.

vii) Prior to the year and month of taxation of the tax in question, the vehicles in question were subject to sale to third parties, not being, therefore, property of the claimant, as per exhaustive lists contained in the respective administrative files appended and above identified, and which, given their extension, are hereby reproduced. All sales mentioned in the said lists are supported by the respective sales invoices, duly identified.

2.5. There are no facts not proven that are relevant to the decision of the case.

III – Substantiation: Matters of Law

In the present case, there are three disputed legal questions: 1) to know whether, as the claimant concludes, there is, in the case under analysis here, "erroneous interpretation of the law, in particular of the provisions of Article 3, paragraph 1, of the IUC Code"; 2) to know whether, as the AT alleges, the claimant's interpretation "does not regard the systematic element, [and violates] the unity of the regime", and furthermore whether, as the AT also alleges, such interpretation "ignores the teleological element of interpretation of the law: the ratio of the regime established in the article in question and, as well, throughout the IUC Code"; 3) to know whether, in the present case, indemnificatory interest is owed to the claimant.

Let us see, then.

  1. and 2) The first two legal questions converge in the direction of the interpretation of Article 3 of the IUC Code, such that it is necessary: a) to know whether the rule of subjective incidence, contained in the said Article 3, establishes or not a presumption; b) to know whether, when considering that such rule establishes a presumption, such violates the "unity of the regime", or disregards the systematic element and the teleological element; c) to know – admitting that the presumption exists (and that the same is iuris tantum) – whether the rebuttal of the same was made.

a) Article 3, paragraphs 1 and 2, of the IUC Code, has the following wording, which is reproduced here:

"Article 3 – Subjective Incidence

1 - The liable subjects 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 - Financial lessees are equated to owners, as well as purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the lease contract".

The interpretation of the cited legal text is, naturally, indispensable for the resolution of the case under analysis. In that measure, it is necessary to resort to Article 11, paragraph 1, of the GTL, and, by reference of this, to Article 9 of the CC.

Now, pursuant to the said Article 9 of the CC, interpretation starts from the letter of the law and aims, through it, to reconstruct the "legislative intent". This means (regardless of the objectivism-subjectivism controversy) that literal analysis is the basis of the interpretative task and the systematic, historical or teleological elements are guides to the direction of said task.

The literal apprehension of the legal text in question does not generate – even if the separation of this from the ascertainment, even if minimal, of its respective meaning is highly debatable – the notion that the expression "considering as such" means something different from "presuming as such". In fact, we would hardly find authors who, in a task of pre-understanding of the said legal text, would instinctively reject the identity between the two expressions.

Confirming the indistinction (both literal and in meaning) of the words "considering" and "presuming" (presumption), see, for example, the following articles of the Civil Code: 314, 369, paragraph 2, 374, paragraph 1, 376, paragraph 2, and 1629. And, with particular interest, the case of the expression "shall be considered", contained in Article 21, paragraph 2, of the CITC. As noted by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, with respect to that article of the CITC: "beyond this rule showing that what is at stake in the taxation of capital gains is to ascertain the real value (that of the market), the limitation to the ascertainment of real value derived from the rules for determining the taxable value provided for in the CIS cannot fail to be considered as a presumption with regard to incidence, the rebuttal of which is permitted by Article 73 of the GTL" (General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

b) These are just a few examples that allow one to conclude that it is precisely for reasons related to the "unity of the legal system" (the systematic element) that one cannot affirm that only when the verb "presume" is used is one dealing with a presumption, given that the use of other terms or expressions (literally similar) can also serve as the basis for presumptions. And, among these, the expressions "is considered as" or "being considered as" assume, as has been seen, prominence.

If literal analysis is only the basis of the task, it is, naturally, imperative to evaluate the text in light of the other elements (or sub-elements of the so-called logical element). Indeed, the AT also alleges that the claimant's interpretation "ignores the teleological element of interpretation of the law: the ratio of the regime established in the article in question and, as well, throughout the IUC Code".

It is therefore justified to ascertain whether the interpretation that considers the existence of a presumption in Article 3 of the IUC Code conflicts with the teleological element, i.e., with the purposes (or with the sociological relevance) of what was intended with the rule in question. Now, such purposes are clearly identified at the beginning of the IUC Code: "The Unique Circulation Tax obeys the principle of equivalence, seeking to burden the taxpayers in the measure of the environmental and road cost which they cause, in implementation of a general rule of tax equality" (see Article 1 of the IUC Code).

What can be inferred from this Article 1? It can be inferred that the close connection of the IUC to the principle of equivalence (or principle of benefit) does not allow the exclusive association of the "taxpayers" mentioned there with the figure of the owners but rather with the figure of the users (or of the economic owners). As was aptly noted in Arbitral Decision No. 73/2013-T: "in truth, the ratio legis of the tax [IUC] rather points in the direction of those who use the vehicles being taxed, the 'economic owner' in the words of Diogo Leite de Campos, the actual owners or the financial lessees, as these are the ones that have the polluting potential causing the environmental costs to the community."

In fact, if the said ratio legis were otherwise, how could one understand, for example, the obligation (on the part of entities that proceed to lease vehicles) – and for the purposes of the provisions of Article 3 of the IUC Code and Article 3, paragraph 1, of Law No. 22-A/2007, of 29/6 – to supply the DGI with data relating to the tax identification of the users of the said vehicles (see Article 19)? Should where it reads "users", it be read instead, disregarding the systematic element, "owners with registration in their name"...?

c) From the foregoing it is concluded that limiting the liable subjects of this tax only to the owners of the vehicles in whose name the same are registered – ignoring the situations in which these no longer coincide with the real owners or the real users of the same – constitutes a restriction that, in light of the purposes of the IUC, finds no basis of sustenance. And, even if Article 6 of the IUC Code is invoked, as the AT does, to allege "that only legal situations subject to registration [...] generate the birth of the tax obligation", it is necessary to bear in mind that such registration generates only a rebuttable presumption, i.e., a presumption that can be set aside by means of proof to the contrary (proof that the registration no longer reflects, at the moment of the tax obligation, the material truth that would have given rise to it).

It would, moreover, be unjustified to impose a kind of irrebuttable presumption, since, without an apparent reason, one would be imposing a (admittedly debatable) formal truth to the detriment of what could really have been and had been proven; and, on the other hand, it would be distancing the AT from compliance with the inquisitorial duty established in Article 58 of the GTL, i.e., the duty to carry out the necessary steps for a correct determination of the factual reality on which its decision must be based (which means, in the present case, the determination of the actual and effective owner of the vehicle).

Furthermore, if the seller were not permitted to rebut the presumption contained in Article 3 of the IUC Code, one would be benefiting, without a plausible reason, the acquirers who, in possession of correctly completed and signed contract forms for acquisitions, and enjoying the advantages associated with their condition as owners, would attempt to exempt themselves, by way of "registration formalism", from the payment of tolls or penalties.

On this point, it is also worth noting that motor vehicle registration does not have constitutive effect, functioning, as stated before, as a rebuttable presumption that the holder of the registration is, in fact, the owner of the vehicle. In this sense, see, for example, the Judgment of the STJ of 19/2/2004, case 03B4639: "Registration does not have constitutive effect, since it is intended to give publicity to the registered act, functioning (only) as a mere rebuttable presumption ('iuris tantum' presumption) of the existence of the right (Articles 1, paragraph 1 and 7, of the CRP84 and 350, paragraph 2, of the Civil Code) as well as of the respective ownership, all in accordance with what is stated therein."

In the same sense, Arbitral Decision No. 14/2013-T referred, in this regard, in terms which are here endorsed: "the essential function of motor vehicle registration is to give publicity to the legal situation of vehicles, registration not having constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all in accordance with what is stated therein. The presumption that the registered right belongs to the person in whose name it is inscribed can be rebutted by proof to the contrary. Not fulfilling the AT the requirements of the notion of third party for the purposes of registration [circumstance that could prevent the full effectiveness of the contracts of purchase and sale celebrated], it cannot prevail itself of the absence of update of the registration of the property right to call into question the full effectiveness of the contract of purchase and sale and to demand of the seller (previous owner) the payment of the IUC owed by the buyer (new owner) as long as the presumption of the respective ownership is rebutted through sufficient proof of the sale."

Now, in the case under analysis here, it is verified that the rebuttal of the presumption (by way of "sufficient proof" of the alleged sales) was accomplished. Furthermore, it should be noted that the AT did not question the invoices presented by the claimant (nor does the Tribunal see reason to question them), the same being clearly demonstrative that this was not, at the date of the tax, the owner of the vehicles in question.

  1. A final note to consider, under Article 24, paragraph 5, of the LRTA, the request for payment of indemnificatory interest in favor of the claimant (Article 43 of the GTL and Article 61 of the CPPT).

In this regard, Arbitral Decision No. 26/2013-T recalled (which dealt with a situation very similar to the one now under consideration): "The right to indemnificatory interest to which the norm of the GTL mentioned above refers presupposes that tax has been paid for an amount superior to that owed and that such derives from an error, of fact or of law, attributable to the services of the AT. [...] even if it is recognized that the tax paid by the claimant is not owed, because it is not the liable subject of the tax obligation, determining, consequently, its respective reimbursement, it is not seen that, at its origin, there is an error attributable to the services, which determines such right [to indemnificatory interest] in favor of the taxpayer. In fact, in proceeding to the official assessment of the IUC considering the claimant as the liable subject of this tax, the AT merely complied with the norm of paragraph 1 of Article 3 of the IUC Code, which, as abundantly referred to above, attributes such quality to the persons in whose name the vehicles are registered."

In view of this justification, with which agreement is expressed, it is concluded, also in the present case, by the lack of merit of the aforementioned request for payment of indemnificatory interest.

IV – Decision

In view of the foregoing, the decision is as follows:

  • To judge the request for arbitral pronouncement as meritorious, with the consequent annulment, with all legal effects, of the assessment acts contested and the reimbursement of the amounts unduly paid;

  • To judge the request without merit with respect to the recognition of the right to indemnificatory interest in favor of the claimant.

The value of the case is fixed at €39,176.40 (thirty-nine thousand one hundred and seventy-six euros and forty cents), in accordance with Article 32 of the CAAP and Article 97-A of the CPPT, applicable by virtue of the provisions of Article 29, paragraph 1, subsections a) and b), of the LRTA, and Article 3, paragraph 2, of the Regulation of Costs in Tax Arbitration Processes (RCTAP).

Costs charged to the respondent, in the amount of €1,836.00 (one thousand eight hundred and thirty-six euros), in accordance with Table I of the RCTAP, given that the present request was judged as meritorious, and in compliance with the provisions of Articles 12, paragraph 2, and 22, paragraph 4, both of the LRTA, and the provisions of Article 4, paragraph 4, of the cited Regulation.

Notify.

Lisbon, 31 March 2014.

The Arbitrator

Miguel Patrício

Text prepared on computer, in accordance with the provisions of Article 138, paragraph 5, of the CCP, applicable by reference of Article 29, paragraph 1, subsection e), of the LRTA.

The preparation of the present decision is governed by the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Who is liable for IUC vehicle tax when the registered owner differs from the actual owner?
Under Article 3 of the Portuguese IUC Code, the person liable for IUC vehicle tax is the individual or entity in whose name the vehicle is registered, regardless of who the actual owner may be. The Tax Authority maintains that this creates a definitive rule, not merely a rebuttable presumption. When the registered owner differs from the actual owner, the registered owner remains liable for IUC unless and until the vehicle registration is officially transferred. However, taxpayers argue this provision should be interpreted as a rebuttable presumption (iuris tantum) that can be overcome with proof of actual ownership transfer through sales invoices or other documentation.
Can the legal presumption of vehicle ownership based on registration records be rebutted for IUC purposes?
This is the core dispute in Process 243/2013-T. The claimant argued that the legal presumption of vehicle ownership based on registration records can be rebutted for IUC purposes by presenting contrary evidence such as sales invoices proving transfer of ownership before the taxable event. However, the Tax Authority contends that Article 3, paragraph 1 of the IUC Code establishes an irrebuttable rule where the registered owner is 'considered' the liable party for tax purposes. The AT argues this interpretation maintains systematic unity of the legal-fiscal system and serves the teleological purpose of administrative efficiency, preventing disputes over actual ownership while ensuring tax collection certainty.
What is the subjective incidence rule under Article 3 of the Portuguese IUC Code?
Article 3 of the Portuguese IUC Code establishes the subjective incidence rule by defining who is liable for the tax. Paragraph 1 states that owners or, in situations provided in paragraph 2, certain specified persons, are 'considered' to be those in whose name the vehicles are registered. This rule creates a direct link between vehicle registration and tax liability. The provision aims to provide legal certainty and administrative efficiency by basing tax liability on an objective, verifiable criterion—the vehicle registration database—rather than requiring the tax authority to investigate actual economic ownership in each case.
How did the CAAD arbitral tribunal rule on the annulment of IUC tax assessments in Process 243/2013-T?
The decision text provided is incomplete and cuts off before the tribunal's ruling is stated. However, the case involved the claimant requesting annulment of IUC tax assessments totaling €39,176.40 for 2008, arguing they should not be liable for taxes on vehicles they no longer owned. The arbitral tribunal was established on December 30, 2013, heard arguments from both parties, and was scheduled to pronounce its decision on March 31, 2014. The tribunal needed to determine whether Article 3 of the IUC Code creates a rebuttable or irrebuttable presumption of ownership based on registration records.
What is the procedure for challenging IUC tax decisions through CAAD tax arbitration in Portugal?
The procedure for challenging IUC tax decisions through CAAD tax arbitration in Portugal follows these steps: (1) First, file a gracious complaint (reclamação graciosa) with the Tax Authority; (2) If the gracious complaint is dismissed, file a request for establishment of an arbitral tribunal within the legal deadline, pursuant to Article 10 of Decree-Law No. 10/2011 (LRTA); (3) Pay the required arbitration fees; (4) The arbitral tribunal is established and the Tax Authority is cited to submit its response within the legal timeframe; (5) The tribunal may request the administrative file from the AT; (6) A hearing may be scheduled under Article 18 of LRTA where parties present arguments; (7) The tribunal issues its arbitral decision within the established deadline. Taxpayers can request reimbursement of unduly paid amounts plus compensatory interest and penalties if successful.