Process: 244/2014-T

Date: November 2, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD Arbitration Case 244/2014-T addresses a critical dispute regarding IUC (Single Circulation Tax) subjective incidence in Portugal. The applicant, a financial leasing institution, challenged €3,786.57 in IUC assessments for tax periods 2009-2012, arguing it should not be liable as the registered owner when vehicles were under lease contracts or had been sold. The central legal question involves interpreting Article 3 of the IUC Code, which defines taxpayers as owners and considers as owners those in whose names vehicles are registered. The applicant contended this registration-based definition constitutes a rebuttable presumption under Article 73 of the General Tax Law, allowing proof that actual ownership transferred through lease or sale agreements. Additionally, the applicant argued that Article 3(2) of the IUC Code explicitly assigns tax liability to lessees in financial leasing situations. The Portuguese Tax Authority countered that the registration requirement is not a presumption but rather an intentional legislative policy choice designed to ensure legal certainty and administrative efficiency. The Tax Authority emphasized that Article 6(1) establishes ownership as attested by registration as the taxable event itself, making registration the definitive criterion for determining IUC liability. Furthermore, the Authority argued that failure to update vehicle registration is attributable to the taxpayer, not the State, and that invoices alone cannot prove vehicle sales as they are unilateral documents insufficient to demonstrate synallagmatic contracts. The Authority also noted that for leasing situations, lessors must comply with ancillary obligations under Article 19 of the IUC Code. This case represents a fundamental conflict between formal registration reality and actual economic ownership, with significant implications for financial institutions engaged in vehicle leasing and for establishing clear administrative procedures for IUC tax collection.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 244/2014 – T

Subject Matter: IUC – Subjective Incidence

I – Report

  1. On 10.3.2014, the Applicant "A, S.A.", legal entity no. ..., with registered office in ... filed a request with CAAD for the constitution of an arbitral tribunal, pursuant to article 10 of Decree-Law No. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to simply as LFATM), in which the Respondent is the Tax and Customs Authority, with a view to annulling the Official Assessments of the Single Circulation Tax ("IUC"), identified in Annex I, together with the initial petition, relating to the tax periods of 2009, 2010, 2011 and 2012, which total €3,786.57.

  2. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and notified to the Tax and Customs Authority.

Pursuant to the terms and for the purposes of the provisions in paragraph 1 of article 6 of the LFATM, by decision of the President of the Deontological Council, duly communicated to the parties within the legally applicable time limits, the undersigned was appointed as arbitrator, and communicated to the Deontological Council and to the Administrative Arbitration Centre the acceptance of the mandate within the regularly applicable time limit.

The Arbitral Tribunal was constituted on 16.5.2014.

  1. By order of 4.09.2014, the meeting provided for in article 18 of the LFATM was waived, following a request to that effect submitted by the Respondent, which received the agreement of the Applicant.

  2. The grounds presented by the Applicant in support of its claim are, very succinctly, as follows:

4.1. The Applicant does not agree with the imputations made by the Tax Authority regarding responsibility for payment of the assessments in question, inasmuch as, on the date of their exigibility, it was not a legal taxpayer, in some cases because the vehicle subject to the tax was covered by a lease contract, with the respective lessee being responsible in accordance with article 3, paragraph 2 of the IUC Code, and in other cases because that contract had ended or was still pending, the vehicle having been sold to the lessee or to a third party, these then being considered legal taxpayers of the tax;

4.2. The Applicant further adds that, with respect to the first situation referred to in the previous point, this was already known to the Respondent, since in the course of the right of hearing the latter had proceeded to identify fiscally the lessees/users of the leased vehicles, yet the Tax Authority proceeded with the official assessments against the Applicant.

4.3. As to the second situation, the Applicant considers that the provision in article 3 of the IUC Code establishes a true legal presumption, which may be rebutted in accordance with article 73 of the General Tax Law, exercised during the right of hearing;

4.4. The lack of registration does not affect the validity of the purchase and sale contracts but only their effectiveness, and even this only vis-à-vis third parties in good faith for purposes of registration, a qualification that the Tax Authority does not assume in the case at hand.

4.4. Not being the Applicant the owner of the motor vehicles in question, on the date of exigibility of the tax to which the official assessments contained in Annex I together with the initial petition relate, these should be considered illegal and consequently annulled.

  1. The Tax Authority – Administration, called upon to respond, contested the Applicant's claim, defending itself by opposition, also alleging, very succinctly, the following:

5.1. The tax legislator, in establishing in article 3, paragraph 1, of the IUC Code who are the taxpayers of the IUC, expressly and intentionally established that these are the owners, considering as such the persons in whose names they are registered, not being a matter of presumption but rather a clear option of legislative policy adopted by the legislator within its freedom of legislative configuration.

5.2. The tax provision is replete with provisions analogous to that established in the final part of paragraph 1 of article 3, in which the tax legislator, within its freedom of legislative configuration, expressly and intentionally, establishes what should be considered legally, for purposes of incidence.

5.3. The systematic element of interpretation of the law also demonstrates that the solution advocated by the Applicant is intolerable, establishing article 6, paragraph 1, of the IUC Code that "The taxable event of the tax is constituted by ownership of the vehicle, as attested by registration in the national territory".

5.4. Failure to update the registration, in accordance with article 42 of the Motor Vehicle Registry Regulations, shall be imputable in the legal sphere of the IUC taxpayer and not in that of the Portuguese State, as the active subject of this tax.

5.5. The interpretation proposed by the Applicant of article 3, paragraph 1 of the IUC Code is contrary to the Constitution of the Portuguese Republic in that it devalues the registration reality as against an "informal reality", violating the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

Even if this were not the case,

5.6. With the request for arbitral pronouncement, the Applicant attached copies of the invoices/sales receipts for each of the vehicles.

The invoices do not constitute suitable documents to prove the sale of the vehicles in question, since they are nothing more than a document unilaterally issued by the Applicant and are not suitable to prove a synallagmatic contract such as a purchase and sale.

5.7. In the matter of financial leasing and for purposes of article 3, paragraph 2, of the IUC Code it is necessary that the lessors comply with the ancillary obligation provided for in article 19 of the IUC Code, which did not happen in the present case, with the consequent responsibility of the Applicant for the arbitration costs, since such omission gave rise to the issuance of the assessments sub judice.

  1. By order of 4.9.2014, the submission of statements was dispensed with, in accordance with article 18, paragraph 2 of the LFATM, given the positions of the parties and the content of the pleadings, as these appeared to be unnecessary.

  2. The cumulation of claims relating to the tax acts of assessment subject to the present request for arbitral pronouncement is admissible in light of article 3, paragraph 1 of the LFATM, since the success of the claims depends on the assessment of the same circumstances of fact and the interpretation and application of the same rules of law.

  3. The tribunal is materially competent and is regularly constituted in accordance with the LFATM.

The parties have legal personality and capacity, are legitimate and are legally represented.

The process does not suffer from defects that would invalidize it.

II – Relevant Factual Matters

  1. The tribunal considers the following facts to be proven:

9.1. The Respondent made the Official Assessments of the Single Circulation Tax ("IUC"), identified in Annex I, together with the initial petition, relating to the tax periods of 2009, 2010, 2011 and 2012, which total €3,786.57, with the Applicant as the taxpayer;

9.2. The Applicant is a financial credit institution that engages, among others, in the conclusion of financial lease contracts and long-term rental, having motor vehicles as their object;

9.3. The motor vehicles listed in Annex I together with the initial petition with registrations ..., ..., ..., ..., ..., ... and ... were given under rental contracts by the Applicant to the lessees identified in the said annex;

9.4. The remaining motor vehicles listed in Annex I, with registrations ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ..., ... and ... were given under financial lease contracts to clients identified in the said annex;

9.5. With respect to the financial lease contracts, all lessees acquired, by purchase, on the date the financial lease contract ended, the motor vehicle on which it was based, by payment of the corresponding residual value, the vehicles having been sold on the date when the financial lease contract ended, with the exception of three vehicles, which were sold at a later time:

9.5.1. The vehicle with registration ... was sold on 18.01.2010, with the financial lease contract ending on 15.09.2009, the registration date of such vehicle being 28.08.2003;

9.5.2. The vehicle with registration ... was sold on 22.03.2011, with the financial lease contract ending on 05.01.2011, the registration date of such vehicle being 11.10.2005;

9.5.3. The vehicle with registration ... was sold on 25.11.2011, with the financial lease contract ending 25.05.2011, the registration dated 06.05.2005.

9.6. In the rental contracts contained in Annexes II.1 and II.2 the following clause appears: "Clause 15 – Taxes. All taxes, in particular circulation taxes and municipal taxes on vehicles, fees, licenses that are due by reason of the holding or use of the equipment, shall be the exclusive responsibility of the Lessee, who must immediately reimburse the Lessor whenever the latter proceeds with the respective payment."

9.7. On 26.09.2013 the Applicant was notified electronically to proceed with payment of the official assessments identified in Annex I together with the initial petition, with 10.03.2014 being indicated as the deadline for this, corresponding to the date of expiration of the first of the official assessments;

9.8. In August 2013, on a day not specifically determined, the Respondent notified the Applicant electronically of the right of prior hearing;

9.9. On 11.10.2013 the Applicant exercised the right of prior hearing before the Respondent;

9.10. In exercise of the right of hearing, the Applicant alleged that: "(…) the Taxpayer cannot agree with the subjective imputation of responsibility for payment of the IUC in the years in question, insofar as, on the date of its exigibility, it was not a legal taxpayer of the same, since i) the vehicle subject to the tax was covered by a lease contract, and thus the respective lessee was responsible ii) and/or because, on the termination of that contract or while it was still pending, the vehicle was sold to the lessee or to a third party, these then being considered legal taxpayers of the tax."

9.11. The Applicant, in exercise of prior hearing, also proceeded to identify fiscally the lessees/users of the leased vehicles.

9.12. By order of the Chief of Finance by delegation of the Finance Office of Oeiras 2 (Paço de Arcos), dated 31.10.2013, the Applicant's claim was not accepted, and it was determined that the procedure continue with a view to making the official assessments, having the Respondent for this purpose invoked that the vehicles on the date of the tax facts were registered with the Motor Vehicle Registry in the name of the Applicant.

9.13. The vehicles to which the assessments listed in Annex I together with the initial petition relate and with respect to which a financial lease contract was not concluded but a rental contract was concluded, were not the property of the Applicant on the dates of occurrence of the tax-generating events of the obligations in question in the present process, having been sold previously, with the exception of the vehicles with registration ..., ... and ..., with respect to the following assessments:

9.13.1. Assessment No. ..., of the year 2009, corresponding to vehicle ... (registration date: 13.8.2005), contract No. ... with a duration from 25.8.2005 to 25.9.2009, the sale having occurred on 25.9.2009;

9.13.2. Assessments No. ... and ..., of the years 2010 and 2011, respectively, corresponding to vehicle ... (registration date: 2.7.2008), contract No. ... with a duration from 15.7.2006 to 15.7.2014, the sale having occurred on 24.10.2011;

9.13.3. Assessment No. ..., of the year 2009, corresponding to vehicle ... (registration date: 5.12.2007), contract No. ... with a duration from 5.12.2007 to 5.11.2012, the sale having occurred on 26.11.2010;

9.14. On the dates of occurrence of the tax-generating events of the obligations in question in the present process, all the vehicles to which the assessments in question in the present process relate were registered with the Motor Vehicle Registry in the name of the Applicant.

  1. Facts not proven.

With interest for the decision of the case, it was not proven, with respect to the assessments identified in numbers 9.13.1, 9.13.2 and 9.13.3 that the vehicles to which they relate were sold by the Applicant on a date prior to the occurrence of the tax-generating event of their respective tax obligations, nor that, on the date of the tax facts in question, they had been subject to a financial lease contract or a lease contract by virtue of which the lessee was the holder of a right of purchase option.

  1. The Tribunal's conviction as to the decision of the factual matters was based on the documents contained in the process, as well as on the statements of the parties in the pleadings submitted, it being noted that the Respondent did not contest the Applicant's statements regarding the facts in numbers 9.1, 9.2 and 9.7.

As to the fact proven under number 9.3, the proof of the same results from the financial lease contracts and the rental contracts identified in Annex I and contained in Annex II.1 and Annex II.2 together with the initial petition and not contested by the Tax Authority.

With respect to the facts proven under numbers 9.4, 9.5, 9.6 and 9.13, it should first be noted that the Respondent did not contest the accuracy of copies of the invoices[1] attached with the request for arbitral pronouncement as Annex II.

The Tribunal's conviction regarding the facts in question results from the issuance of the respective invoices in conjunction with the other documents contained in the process and with the positions of the Respondent regarding the same.

Although such documents were issued unilaterally by the seller, according to the rules of experience, nothing points, on the contrary, to the non-coincidence of such invoices with the reality they represent.

On the other hand, the Respondent points to no concrete lack of correspondence between the invoices and the transactions represented in them, and it is further added that value added tax was levied on the same, with no allegation having been made that the same was not taken to the respective statements, or that the acquirers, recipients of the same, did not take them into consideration for legal-tax purposes.

On the other hand, having analyzed the list of assessments in Annex I together with the initial petition in conjunction with the copies of the sales invoices and respective contracts, some of financial lease, others of rental together as Annex II.1 and II.2 with the initial petition, the coherence of the invoices with the contracts is verified, from which results, according to what normally occurs, the reinforcement of the tribunal's conviction that the invoices correspond to sales, which they are intended to attest.

With respect further to fact number 9.13, it should be noted that Annex VI together with the initial petition proved relevant since it contained a descriptive list of the authorship of the Tax Authority, not contested by the Applicant, with information about the vehicles identified in Annex I together with the initial petition, in particular information about the date of registrations which was decisive for the proof of facts 9.13.1, 9.13.2 and 9.13.3.

The proof of the fact contained in number 9.8 results from article 22 of the initial petition of the Applicant and not contested by the Respondent.

The proof of the facts contained in numbers 9.9, 9.10 and 9.11 result from a copy of the exercise of the right of prior hearing exercised by the Applicant, together with the initial petition as Annex V and not contested by the Tax Authority.

The proof of the fact set forth in number 9.12 proceeds from notification of the decision of the Respondent following the exercise of the right of prior hearing by the Applicant and which the latter attached to the initial petition as Annex VI, and not contested by the Tax Authority.

Fact No. 9.14 results from agreement of the parties, expressed in the pleadings.

With respect to the facts not proven, the Tribunal's decision is based on the total absence of proof of the same.

III – Applicable Law

  1. Pursuant to article 3, paragraph 1 of the IUC Code, "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 names they are registered."

Paragraph 2 of the same provision provides that "Deemed equivalent to owners are financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract"

The legal problem to be decided relates to the question of whether the person in whose name the property of the vehicles whose official assessments are identified in Annex I together with the initial petition are registered may prove, despite such circumstance, that they were not the owner of the same on the date of the tax fact, in order to exclude the status of taxpayer of the tax.

  1. In order to respond to the problem in question, it appears pertinent to inquire whether article 3, paragraph 1, of the IUC Code establishes a presumption, a position sustained by the Applicant, or whether differently it is merely the configuration of the legal type of tax, within the scope of freedom of legislative configuration, as the Respondent contends.

The answer to this question may be decisive, given that, in accordance with article 73 of the General Tax Law "Presumptions established in provisions of tax incidence always admit proof to the contrary". Furthermore, as referred to in the Arbitral Decision delivered in case 286/2013-T, the "understanding of the Constitutional Court, affirmed in decision No. 348/97, of 29.4.1997 and reiterated in decision No. 311/2003, of 28.4.2003, as to the unconstitutionality of 'the establishment by the tax legislator of a presumption juris et de jure' since 'completely prohibits taxpayers from the possibility of contravening the presumed fact, subjecting them to taxation that may be based on taxable matter fixed against the principle of tax equality'."[2]

  1. In legal doctrine the distinction between fictions and presumptions has been analyzed from the perspective of tax law.

Thus, ANA PAULA DOURADO ("The Principle of Tax Legality: Typicality, Indeterminate Legal Concepts and Margin of Free Appreciation", Almedina Publisher, Theses collection, 2007) writes:

"With respect to fictions, as a technique used in tax laws, and its function, Karl Larenz tells us that 'legal fictions normally aim at the application of the rule given for a fact foreseen (F1) to another fact foreseen (F2)... the law "feigns" that F2 is a case of F1" (p. 603).

"Fiction is distinguished from simple presumption and absolute presumption in that it does not rest "on a probability that normally transforms itself into truth", since it "deforms ('a legal truth') consciously" (p. 604)

Also on this question, in terms convergent with ANA PAULA DOURADO, JOÃO SÉRGIO RIBEIRO, ("PRESUMPTIVE TAXATION OF INCOME, A Contribution to Re-evaluate Indirect Methods of Determining Taxable Matter, Almedina, Theses, 2010, pp. 48-49) considers that the criterion for distinguishing the two realities should be "eminently juridical" and that "In light of this criterion the essential difference between presumption and legal fiction resides in the fact that the former has as its starting point the truth of a fact, that is, a connection to the natural order of things, since from a known fact an unknown probable fact is inferred; whereas fiction, on the contrary, is born of a falsity or something unreal, disconnected from the natural order of things. That is, fiction creates a legal truth distinct from the real; presumption creates a causal relationship between two realities or natural facts. (…).

Despite both presumption and fiction being the result of legislative techniques through which consequences are drawn from legal facts taken as true, what truly distinguishes them is the circumstance that, in legal presumption, the presumed fact has a high degree of probability of existing, and in fiction, the presumed fact is very improbable."

CASALTA NABAIS also addressed this question ("The Fundamental Duty to Pay Taxes", Almedina, 2004, p. 500-501) writing that "(…) one must separate situations in which we face legal presumptions, in which from a known fact (real or even juridical) a naturally probable legal fact is inferred, in which case proof to the contrary must be admitted, to make them compatible with the principle of tax capacity, from situations in which we encounter the assumption of rules of common experience as rules of taxation, thus verifying the construction of legal norms (or legal types) with (eventual) recourse to legal fictions. In these, the principle of tax capacity suffers the natural impact of the principles of practicability and effective fight against tax evasion, having to content itself with a relative safety valve for those cases which, by reaching such rigors of iniquity, cannot fail to permit the departure from said rules of experience."

  1. In the case at hand, and in light of the authoritative doctrine cited, it appears clear that, in article 3, paragraph 1, of the IUC Code, we are faced with a presumption, inasmuch as it is (very) probable from the fact of a person having a vehicle registered in their name that they are in fact the owner thereof.

It is this same probability that underlies the presumption derived from registration enshrined in article 7 of the Land Registry Code, applicable by reference from article 29 of the Motor Vehicle Registry Regulations.

It is true that the law does not use the expression "being presumed as such, until proof to the contrary", which was contained in article 3, paragraph 1 of the Regulations of the Municipal Tax on Vehicles (approved by Decree-Law No. 143/78, of 12 June and repealed by Law No. 22-A/2007, of 29 June) ("the tax is due by the owners of the vehicles, being presumed as such, until proof to the contrary, the persons in whose names they are matriculated or registered". But this does not appear to be prohibitive of being materially faced with a presumption.

As was written in the already cited decision delivered in case No. 286/2013-T, "just as already noted in other arbitral decisions delivered at this CAAD on the same matter (see the decisions delivered in cases Nos. 14/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, in which it is possible to find examples of legislative provisions, distinct from those invoked above, in which similarly occurs the use of the expression 'considering' or 'is considered' with the meaning of presumption), not only can it not be said, in any way, that the assignment of a presumptive meaning to the expression 'considered' does not have 'a minimum of verbal correspondence, albeit imperfectly expressed' (paragraph 2 of article 9 of the Civil Code), but, more than that, one must even recognize for such a word a current and normal correspondence to such a presumptive sense.

For this reason, the fact that, differently from what occurred with the literal expression 'being presumed' which previously appeared in article 3 of the Regulations on Tax on Vehicles, the legislator passed to using in the IUC Code the formula 'considered' which appears in the current article 3 of that Code, does not assume decisive weight, since this expression has perfect semantic force to involve the establishment of a presumption."[3]

  1. The decision of the Supreme Administrative Court of 4-11-2009, delivered in case 0553/09, applying article 73 of the General Tax Law, in the context of income tax, goes even further considering that this rule "does not appear to be applicable only to provisions of tax incidence in the proper sense, but also to all provisions that establish fictions that influence the determination of taxable matter (whether directly, through fictitious values for taxable matter, or indirectly, by fixating fictitious the values of income relevant to its determination). This, it appears, is the scope of the adverb 'always' used in article 73 of the General Tax Law, which raises this rule to a basic principle of the entire tax legal system, a corollary of the principle of equality in the distribution of public charges, based on the principle of tax capacity".

It is true that the IUC is not, essentially, subordinated to the principle of tax capacity, but rather to the principle of equivalence. However, this does not appear to impose different solutions insofar as both principles are intrinsically linked to the general principle of tax equality, where they find their foundation.

In truth, "The principle of tax capacity represents the material criterion of equality appropriate to taxes"[4] whereas "The principle of equivalence represents the material criterion of equality appropriate to fees and contributions".[5]

  1. It should further be noted that, in addition to article 1 of the IUC Code providing that "The Single Circulation Tax follows the principle of equivalence, seeking to burden taxpayers in proportion to the environmental and road cost that they cause, in implementation of a general rule of tax equality", other provisions reinforce and implement the weight of this principle in the internal system of this tax.

First and foremost, article 3, paragraph 1, of the Law that approved the IUC Code (Law No. 22-A/2007, of 29 June), implementing this idea of equivalence, determines that: "The revenue generated by the IUC on vehicles of categories A, E, F and G is attributable to the municipality of residence of the taxpayer or equivalent thereto, as well as 70 % of the component relating to engine displacement relating to vehicles of category B, unless such revenue is attributable to vehicles subject to long-term rental or operational lease, in which case it must be allocated to the municipality of residence of the respective user."

And, for purposes of effective implementation of this legislative intent, article 19 of the IUC Code provides that: "For purposes of the provision in article 3 of this Code, as well as in paragraph 1 of article 3 of the law of respective approval, entities that proceed with financial leasing, operational leasing or long-term rental of vehicles are obliged to furnish to the Directorate-General of Taxes the data relating to the fiscal identification of users of the leased vehicles."

On the other hand, paragraph 2 of article 3 of the same Code further implements this principle of equivalence by providing that "Deemed equivalent to owners are financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract"

  1. Thus it is quite clear the decisive importance given by the Law to the principle of equivalence, both from the side of the causer of the environmental and road cost, and from the side of the Municipality which tendentially bears such costs and which, for that reason, is the beneficiary of the tax revenue.

As Sérgio Vasques notes: "The structure of the new Single Circulation Tax is clearly commutative as well, which since 2007 burdens automobiles based on CO2 emission levels, openly appealing to the principle of equivalence and to a relationship of exchange with taxpayers"[6]

Should it not be possible for the person registered as owner in the motor vehicle register to exclude their status as taxpayer, by proving that they were not the owner on the date of the tax fact, this idea of equivalence could be decisively called into question, taxing the person who did not cause the environmental and road cost and not allocating the revenue to the Municipality which tendentially bore those costs.

  1. The Respondent contends that the interpretation proposed by the Applicant of article 3, paragraph 1 of the IUC Code is contrary to the Constitution of the Portuguese Republic in that it devalues the registration reality as against an "informal reality",[7] violating the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

It is not apparent, with all due respect, how the position that sustains that we are, in article 3, paragraph 1, of the IUC Code, before a rebuttable presumption, could call into question the principles of trust and legal certainty, since the same impose duties and restrictions on legal-public action[8].

The same may be said, in substance, of the principle of proportionality.[9]

Indeed, with respect to this principle, we would even say that the question that might be raised would be whether such principle would not be violated by the interpretation advocated by the Respondent insofar as, if it were admitted that the citizen could be prevented, for purposes of taxation, from proving that despite registration he is not the actual owner of the vehicle, this would be equivalent to suffering the consequence of the omission of an act (motor vehicle registration) in respect of which the interested party in terms of legal certainty, from the legal-civil perspective is another person (the buyer).

In fact, even if it is admitted that such solution is apt to achieve the public purpose in view, it does not result in clear the absence of alternative measures equally apt.

On the other hand, from the point of view of balance or proportionality in the strict sense, it is understood that a rule with the interpretation sustained by the Respondent would have excessive costs from the point of view of the rights and interests of individuals (in this case of the former owners of the vehicles) vis-à-vis the benefits sought to be achieved with the public interest, with this fundamental requirement of the principle of proportionality not being met.

In reality, the benefit achieved, from the perspective of tax management, with the rebuttable presumption is already significant, and cases of failure to register by buyers are certainly situations of certainly little relevance in the universe of vehicle transactions, given the natural motivation of buyers to effect registration, since this is in their own interest.

Note also that the rebuttable presumption already represents some sacrifice for the legitimate interests of the seller, in that in order to exempt oneself from a taxation offensive to the principle of equivalence, he bears the burden of rebutting the same.

However, weighing in particular the requirements of practicability of tax management, it is considered that the same is apt, necessary and reasonable from the point of view of the principle of proportionality, which would not be the case with an absolute presumption, explicit or implicit, that would not even permit the citizen to make proof contrary to the presumption.

  1. The Respondent further invoked that the rule in question, in the interpretation sustained by the Applicant, would violate the principle of efficiency of the tax system.

It appears that the Respondent has in mind the idea of efficiency in tax law, related to administrative efficiency[10]. It must be observed, however, that the relevance of a principle in the solution of a specific case should not operate in isolation but in joint consideration with the other principles and in the sequel of what was said above regarding the principles of equality, equivalence and proportionality, the idea of efficiency is not sufficient to postpone the possibility of the taxpayer rebutting the presumption resulting from motor vehicle registration. Furthermore, efficiency and practicability are sufficiently safeguarded by the existence of a rebuttable presumption, in the terms referred to above.

  1. Thus it is concluded that article 3, paragraph 1, of the IUC Code, establishes a rebuttable presumption with the interested party, in order to rebut it, bearing the burden of proving that, despite registration, they were not the actual owner, having in the meantime sold it.

In this sense were the decisions delivered in arbitral cases numbers 26/2013-T, 27/2013-T, 14/2013-T, 170/2013-T, 256/2013-T, 286/2013-T and 289/2013-T, whose understanding is thus supported.

Thus, with respect to the taxes relating to vehicles which were proven to have been sold by the Applicant before the tax fact, the request for arbitral pronouncement cannot fail to succeed, the same occurring with respect to assessments relating to vehicles subject to financial lease contracts, during the pendency of such contracts, in accordance with the provision in article 3, paragraph 2, of the IUC Code (as results from the facts contained in numbers 9.4 and 9.5 of the evidence no tax fact occurred between the termination of the financial lease contracts and the date of sale thereof).

As results from the evidence, proof of sales prior to the tax facts was made, with the exception of what relates to the vehicles with registration ..., ... and ..., with respect to the following assessments:

a) Assessment No. ..., of the year 2009, corresponding to vehicle ... (registration date: 13.8.2005), contract No. ... with a duration from 25.8.2005 to 25.9.2009, the sale having occurred on 25.9.2009;

b) Assessments No. ... and ..., of the years 2010 and 2011, respectively, corresponding to vehicle ... (registration date: 2.7.2008), contract No. ... with a duration from 15.7.2006 to 15.7.2014, the sale having occurred on 24.10.2011;

c) Assessment No. ..., of the year 2009, corresponding to vehicle ... (registration date: 5.12.2007), contract No. ... with a duration from 5.12.2007 to 5.11.2012, the sale having occurred on 26.11.2010;

Although there were rental contracts with respect to these vehicles, the contracts in question do not fall within paragraph 2 of article 3 of the IUC Code, since from the content thereof no purchase option rights emerge, a circumstance provided for in the norm in question for purposes of its application, whereby in such cases the taxpayer is not the lessee but rather the owner of the vehicle, in accordance with paragraph 1 of this article.

IV – Decision

Thus, the arbitral tribunal decides:

To partially uphold the opposition in the following terms:

a) To dismiss the claim with respect to assessment No. ..., relating to the vehicle with ... (in the amount of €131.58), to assessments No. ... and ... relating to the vehicle with registration ... (in the amount of €98.05 each) and to assessment No. ... relating to the vehicle with registration ... (in the amount of €213.07).

b) To uphold the opposition with respect to all other assessments, declaring their annulment.

Value of the case: €3,786.57 (three thousand seven hundred and eighty-six euros and fifty-seven cents) in accordance with the provision in article 315, paragraph 2, of the Code of Civil Procedure and article 97-A, paragraph 1, subparagraph a), of the Code of Administrative Court Procedure and article 3, paragraph 2, of the Regulations of Costs in Arbitration Proceedings.

Costs by the Respondent and by the Applicant in the proportion of eighty-five point seventy-two percent and fourteen point twenty-eight percent, respectively, in accordance with paragraph 4 of article 22 of the LFATM.

Lisbon, 2 October 2014

The Arbitrator

(Marcolino Pisão Pedreiro)

Document prepared by computer, in accordance with paragraph 5 of article 131 of the Code of Civil Procedure, applicable by reference from subparagraph e) of paragraph 1 of article 29 of Decree-Law No. 10/2011, of 20/01.

The drafting of this decision follows the former spelling conventions.

[1] For purposes of article 368 of the Civil Code.

[2] Available at the website "https://caad.org.pt"

[3] Furthermore, as sustained by Diogo Leite de Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in the annotation to article 73, paragraph 3 of the General Tax Law ("GTL") "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 incidence provisions, in particular regarding objective incidence, when certain values of movable or immovable property are considered to constitute taxable matter, in situations in which it is not impracticable to ascertain the real value" (See "General Tax Law Commented and Annotated", Encontros da Escrita, 4th Edition, 2012, page 651).

[4] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, page 251.

[5] Sérgio Vasques, Manual of Tax Law, Almedina, 2011, page 260.

As this author further notes on page 227 of the same work "Until the end of the 20th century, special taxes on alcohol, tobacco, petroleum products or automobiles had no other objective than revenue collection, showing the typical unilateral features of any tax.

From the 1980s and 1990s onwards (…), however, these tax figures came to be instrumentalized to compensation for the costs that the consumption of these brings to public health and the environment, with the result that special consumption taxes have come to gain a nature that is commutative typical of contributions"

[6] Manual of Tax Law, Almedina, 2011, page 229.

[7] It should be noted, however, that the principle of freedom of form or consensuality applies in Portuguese law (article 219 of the Civil Code). Unless the law requires it, the validity of a legal declaration does not depend on the observance of any special form. The "informal reality" to which the Applicant refers is in fact the material reality that results from the norms of civil law.

[8] Jorge Bacelar Gouveia notes that the principle of legal certainty requires "the publicity of acts of public power, as well as the clarity and determinability of sources of law" and that the principle of protection of trust requires "that the existing regulatory framework does not change in a way as to frustrate the expectations generated in citizens regarding its continuity, with the prohibition of intolerable retroactivity of laws, as well as the need for its alteration in conformity with expectations that are constitutionally protected" (Manual of Constitutional Law, Almedina, 4th Ed., Vol. II, page 821)

[9] According to the same author the configuration of this principle "rests on an internal material limitation to legal-public action of a discretionary character, containing the excessive effects that may present themselves in the edition of public power measures of an ablatory nature for their respective recipients" (op. cit. pages 839-840)

[10] And not, manifestly, the principle of efficiency of tax law since, as written by Jónatas E.M. Machado and Paulo Nogueira da Costa "From the principle of Efficiency it follows that the tax system should not have distortionary effects and should not interfere with the functioning of markets, except when, due to the existence of market failures, they do not function efficiently." (Course in Tax Law, Coimbra Editora, 2009, page 28.)

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle is under a leasing or rental contract?
Under Article 3(2) of the IUC Code, when a vehicle is subject to a financial leasing contract, the lessee (user) is designated as the taxable person for IUC purposes, not the lessor who holds legal ownership. However, the Tax Authority's position in this case indicates that lessors must comply with ancillary notification obligations under Article 19 of the IUC Code to effectively transfer tax liability to lessees. If these administrative requirements are not fulfilled, the registered owner (lessor) may remain liable for IUC assessments despite the existence of a leasing contract. This creates a dual requirement: both the substantive leasing relationship and proper administrative compliance are necessary to shift tax liability from the registered owner to the lessee.
Can the registered owner challenge IUC tax assessments if the vehicle was sold but the registration was not updated?
The registered owner faces significant challenges when contesting IUC assessments after selling a vehicle without updating registration. The Tax Authority's position is that Article 3(1) of the IUC Code establishes a definitive criterion—not a rebuttable presumption—that considers as owners those in whose names vehicles are registered. This interpretation is reinforced by Article 6(1), which defines the taxable event as ownership attested by registration. According to the Tax Authority, failure to update registration is imputable to the taxpayer, and mere invoices or sales receipts are insufficient proof of ownership transfer, as they are unilateral documents that cannot adequately demonstrate synallagmatic contracts like purchase and sale agreements. The Authority argues this approach is constitutionally mandated to ensure legal certainty, administrative efficiency, and protection of the principle of trust in public registrations.
Is the presumption of tax liability under Article 3 of the IUC Code rebuttable under Portuguese tax law?
The rebuttability of the tax liability presumption under Article 3 of the IUC Code is the core dispute in this case. The applicant argues that the provision establishes a legal presumption that can be rebutted pursuant to Article 73 of the General Tax Law, allowing taxpayers to prove during the right of hearing that they are not the actual owners despite being registered as such. Conversely, the Portuguese Tax Authority maintains that Article 3(1) does not create a presumption but rather constitutes an intentional legislative policy choice that defines taxpayers as registered owners for purposes of legal certainty and administrative efficiency. The Tax Authority contends that devaluing registration reality in favor of informal reality would violate constitutional principles including trust, legal certainty, efficiency of the tax system, and proportionality. The Authority's systematic interpretation emphasizes that Article 6(1) establishes registration-attested ownership as the taxable event itself, suggesting the legislature intended registration to be the definitive criterion rather than a rebuttable presumption.
What is the role of vehicle registration in determining IUC subjective incidence?
Vehicle registration plays a determinative role in establishing IUC subjective incidence under Portuguese tax law. Article 3(1) of the IUC Code expressly provides that IUC taxpayers are vehicle owners, specifically defining owners as persons in whose names vehicles are registered. This is complemented by Article 6(1), which establishes that the taxable event consists of vehicle ownership as attested by registration in national territory. The Tax Authority interprets these provisions as creating a registration-based system where the formal registration reality prevails over actual economic ownership or contractual arrangements. This approach serves multiple policy objectives: ensuring legal certainty by providing a clear, objective criterion for determining tax liability; facilitating administrative efficiency by allowing the Tax Authority to rely on official registration records rather than investigating complex private contractual relationships; and protecting third-party reliance on public registration information. Consequently, taxpayers bear the responsibility and risk of ensuring vehicle registrations are promptly updated to reflect ownership changes, as failure to do so results in continued IUC liability for the registered owner regardless of actual ownership transfer through sale or lease agreements.
How does CAAD arbitration handle disputes over IUC official tax assessments issued by the Portuguese Tax Authority?
CAAD (Administrative Arbitration Centre) arbitration provides an alternative dispute resolution mechanism for taxpayers contesting IUC official assessments issued by the Portuguese Tax Authority. Under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011), taxpayers can request constitution of an arbitral tribunal to challenge tax assessments, as demonstrated in Case 244/2014-T where a financial institution contested €3,786.57 in IUC assessments. The arbitration process involves: (1) filing a request with CAAD identifying the contested assessments; (2) appointment of an arbitrator by the President of the Deontological Council; (3) constitution of the arbitral tribunal; (4) submission of claims and responses by the parties; and (5) potentially a hearing, though this may be waived if parties agree. The tribunal examines both factual circumstances and legal interpretation, including constitutional arguments. In IUC disputes, CAAD arbitration frequently addresses complex issues such as the interpretation of Article 3's definition of taxpayers as registered owners, the allocation of liability in leasing situations under Article 3(2), the evidentiary requirements for proving ownership transfer, and the balance between formal registration requirements and actual economic ownership. This mechanism offers taxpayers a specialized, potentially faster alternative to traditional judicial proceedings for resolving tax assessment disputes.