Process: 250/2016-T

Date: November 9, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

In Process 250/2016-T, the CAAD arbitral tribunal addressed whether a company could be held liable for IUC (Imposto Único de Circulação) on a vehicle it sold 18 years prior. The claimant company challenged an IUC assessment of €497.00 plus €4.63 compensatory interest for 2015, concerning a vehicle sold in 1997 to another company, which subsequently resold it in 1998. Despite providing documentary evidence of the sale and prior CAAD recognition in Case 216/2014-T that the company was no longer the owner, the Tax Authority issued the assessment based on the vehicle registry. The central legal issue concerned whether Article 3(1) of the IUC Code establishes a rebuttable presumption of ownership based on registry data. The claimant argued the presumption in Article 3(1) CIUC—which deems registered owners as taxpayers—is rebuttable under Article 73 of the General Tax Law (LGT), and that the Tax Authority failed to pursue the actual owner despite having knowledge of the vehicle's sale history. The tribunal examined the legal value of vehicle registry for IUC purposes and whether material ownership or registry ownership determines tax liability when they diverge. This case highlights the tension between administrative efficiency through registry-based taxation and substantive tax justice based on actual ownership, with significant implications for taxpayers wrongly assessed due to registry delays.

Full Decision

ARBITRAL DECISION

I. - REPORT

A - PARTIES

The company A..., SA, legal entity no. ..., with registered address at ... Street no. ..., ...-..., ..., Matosinhos, hereinafter referred to as the "Claimant", filed a request for the constitution of an arbitral tribunal, under the terms of paragraph a) of section 1 of article 2 and articles 10 et seq. of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "LFATM"), with a view to the appreciation of the following claim against the Tax and Customs Authority (which succeeded, among others, the General Tax Directorate), hereinafter referred to as the "Respondent" or "TA".

B - REQUEST

1 - The request for the constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 3 May 2016 and notified to the TA on 13 May 2016.

2 - The Claimant did not proceed with the appointment of an arbitrator, wherefore, under the terms of section 1 of article 6 of the LFATM, the undersigned was designated, on 29-06-2016, by the Deontological Council of the Administrative Arbitration Centre as arbitrator of a Singular Arbitral Tribunal, having accepted in the manner legally provided.

3 - The Parties were, on 29-06-2016, duly notified of this designation, having manifested no desire to refuse it, under the combined terms of paragraphs a) and b) of section 1 of article 11 and of articles 6 and 7 of the Deontological Code.

4 - In these circumstances, in accordance with the terms of paragraph c) of section 1 of article 11 of Decree-Law no. 10/2011, of 20 January, in the wording introduced by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was regularly constituted on 28-07-2016.

5 - The Arbitral Tribunal, under the terms of article 16, paragraph c) of the LFATM (Decree-Law no. 10/2011, of 20 January), and having regard to the content of the order issued on 25 October 2016, considered dispensed the holding of the meeting provided for in article 18 of the said legal instrument.

6 - The present Claimant requests that this Arbitral Tribunal:

a) - Declare the annulment of the assessment relating to the Single Motor Vehicle Tax (hereinafter referred to as "SMVT"), referenced in the Collection Notice contained in the case file, relating to the year 2015, concerning the vehicle with registration number ...-...-..., identified in the court records;

b) - Condemn the Tax and Customs Authority to reimburse the amount of € 501.63, which it indicates as the value of the claim, relating to € 497.00, as SMVT and € 4.63 relating to compensatory interest;

c) - Condemn the Tax and Customs Authority to payment of indemnificatory interest for payment of amounts wrongfully assessed and paid.

C - CAUSE OF ACTION

7 - The Claimant, in the substantiation of its request for arbitral pronouncement, affirms, in summary, the following:

8 - That it was notified of the assessment of SMVT and Compensatory Interest issued under no. 2015..., relating to SMVT and Compensatory Interest, concerning the year 2015, relating to the motor vehicle with registration number ...-...-..., whose ownership was attributed to it.

9 - That to avoid the institution of future tax enforcement proceedings, it proceeded to payment of the assessed amount relating to the SMVT and Compensatory Interest in the total amount of €501.63.

10 - That since 31-07-1997 it is not the owner of the motor vehicle at issue in the case, as on that date it proceeded to the sale of the said vehicle to the company B..., SA.

11 - That the said company sold, in its turn, on 17-02-1998, the vehicle in question to the company C..., Ltd., Legal Entity with no. ... .

12 - That it has not been the owner of the motor vehicle with registration number ...-...-... for more than eighteen (18) years, having taken steps with the IMT, IP for the seizure of the documents of that vehicle.

13 - That, in the framework of the exercise of its right of prior hearing, in relation to the assessment identified in the case, it made known to the TA all the facts and documentary elements intended to demonstrate that it was not the owner of the vehicle in question at the date of the said assessment.

14 - That the TA had knowledge for more than thirteen (13) years of all the facts and documentary elements intended to demonstrate that the last owner of the vehicle in question was the company C..., Ltd.

15 - That the vehicle registry does not reflect the true ownership of the vehicle, and the Claimant cannot be confronted with a tax act affecting property that does not belong to it.

16 - That the TA presumed the ownership of the vehicle in question in the legal sphere of the Claimant as the criterion of incidence of the SMVT, but that the presumptions contained in the rules of incidence are always rebuttable.

17 - That the expression "considering them as such" contained in section 1 of article 3 of the CIUC, constitutes a legal presumption which, in view of the terms of article 73 of the LGT, is rebuttable, in that it determines that the presumptions enshrined in the rules of tax incidence always admit proof to the contrary.

18 - That the TA although having all the documentary elements that allowed it to know the last known owner of the vehicle in question, refrained from instituting proceedings with that same owner, not observing the principle of inquisitorial investigation, so as to achieve material truth.

19 - That, having previously resorted to the Tax Arbitral Tribunal to examine the legality of the SMVT, relating to the same vehicle and relating to the years 2009, 2010, 2011 and 2012, the said Tribunal recognized in the decision issued in Case no. 216/2014 - T that the Claimant was no longer the owner of the vehicle in question, considering the presumption contained in the registry to have been rebutted.

D - RESPONSE OF THE RESPONDENT

20 - The Respondent, having been notified on 01-08-2016, in accordance with the terms of section 1 of article 17 of the LFATM (Decree-Law no. 10/2011, of 20 January), to present its defence, decided not to do so, presenting no response to the arguments adduced by the Claimant in its request for arbitral pronouncement, wherefore the case proceeds with its processing in accordance with the established in section 1 of article 19 of the said LFATM, taking into account the provisions of sections 6 and 7 of article 110 of the TPCP.

E - QUESTIONS TO BE DECIDED

21 - It is accordingly necessary to appreciate and decide.

22 - In view of the above, the main questions to be decided are whether:

a) The rule of subjective incidence contained in article 3, section 1 of the CIUC establishes or does not establish a presumption.

b) What is the legal value of the vehicle registry in the economy of the CIUC, particularly for purposes of the subjective incidence of this tax.

c) If, at the date of the occurrence of the taxable event, the vehicle has already been previously alienated, although the right of ownership thereof continues to be registered in the name of its previous owner, for purposes of the provisions of article 3, section 1 of the CIUC, the taxpayer of the SMVT is the previous owner or the new owner.

F - PROCEDURAL PRESUPPOSITIONS

23 - The Arbitral Tribunal is regularly constituted and is materially competent, under the terms of paragraph a) of section 1 of article 2 of Decree-Law no. 10/2011, of 20 January.

24 - The Parties enjoy legal personality and capacity, are legitimate and are legally represented (cf. article 4 and section 2 of article 10 of Decree-Law no. 10/2011 and article 1 of Ordinance no. 112/2011, of 22 March).

25 - The case does not suffer from vices that invalidate it.

26 - Having regard to the documentary evidence in the case file, it is now necessary to present the factual matters relevant to the understanding of the decision, as established in the terms mentioned below.

II - GROUNDS

G - GROUNDS OF FACT

27 - In matters of fact relevant, this tribunal establishes as established the following facts:

28 - The Claimant was notified of the assessment of SMVT and Compensatory Interest issued under no. 2015..., relating to the year 2015, concerning the motor vehicle with registration number ...-...-..., whose ownership was attributed to it.

29 - The Claimant, to avoid the institution of future tax enforcement proceedings, proceeded to payment of the assessed amount relating to the SMVT and Compensatory Interest, in the total amount of €501.63.

30 - The Claimant, since 31-07-1997, is not the owner of the motor vehicle at issue in the case, having on that date proceeded to the sale of the said vehicle to the company B..., SA.

31 - The company B..., SA sold, on 17-02-1998, the vehicle in question to the company C..., Ltd., Legal Entity with no. ... .

32 - The Claimant has not been the owner of the motor vehicle with registration number ...-...-... for more than eighteen (18) years, having taken steps with the IMT, IP for the seizure of the documents of that vehicle.

33 - The Claimant, in the framework of the exercise of its right of prior hearing, in relation to the assessment identified in the case, made known to the Respondent all the facts and documents intended to demonstrate that it was not the owner of the vehicle in question at the date of the said assessment.

34 - The Respondent had knowledge, for more than thirteen (13) years, of all the information intended to demonstrate that the last owner of the vehicle in question was the company C..., Ltd.

35 - The TA although having all the elements that allowed it to know the last known owner of the vehicle in question, refrained from instituting proceedings with that same owner.

36 - The Tax Arbitral Tribunal recognized, in the decision issued in Case no. 216/2014-T, that the Claimant was no longer the owner of the vehicle with registration number ...-...-..., for purposes of the SMVT assessed, relating to the years 2009, 2010, 2011 and 2012, considering the presumption contained in the registry to have been rebutted.

GROUNDS OF THE FACTS PROVEN

37 - The facts established as proven are based on the documents mentioned, as to each of them, insofar as their correspondence with reality was not contested.

FACTS NOT PROVEN

38 - There are no facts established as not proven, given that all the facts considered relevant to the appreciation of the claim have been proven.

H - GROUNDS OF LAW

39 - The factual matter is established, being now necessary to proceed with its legal subsumption and determine the Law applicable to the underlying facts, in accordance with the questions to be decided enumerated in section 22.

40 - The essential and decisive question in the present case is translated into knowing whether the rule of subjective incidence contained in section 1 of article 3 of the CIUC establishes or does not establish a rebuttable presumption.

41 - On the said question, the Claimant understands that the expression "considering them as such", contained in section 1 of article 3 of the CIUC, constitutes a legal presumption which, in view of the terms of article 73 of the LGT, is rebuttable, in that it determines that the presumptions enshrined in the rules of tax incidence always admit proof to the contrary. The Respondent, for its part, as follows from what is referred to in section 20, understood it not to pronounce on the matter.

I - INTERPRETATION OF THE RULE OF SUBJECTIVE INCIDENCE CONTAINED IN SECTION 1 OF ARTICLE 3 OF THE CIUC

42 - On this question, that is, whether the rule of subjective incidence contained in section 1 of article 3 of the CIUC, consecrates a presumption, it should be noted that the settled jurisprudence at CAAD points in the direction that the said rule consecrates a legal presumption. Indeed, from the earliest Decisions, issued on this matter, in the year 2013, among which may be notably referred to those issued in the framework of Cases nos. 14/2013-T, 26/2013-T and 27/2013-T, to the most recent of which may be indicated the Decision issued in Case no. 69/2015-T, passing through numerous Decisions issued in the year 2014, of which are mentioned, by way of mere example, the Decisions issued in Cases nos. 34/2014-T, 120/2014-T and 456/2014-T, all point to the understanding that section 1 of article 3 of the CIUC consecrates a rebuttable legal presumption.

For this purpose, should also be considered the understanding stated in the Judgment of the Central Administrative Court South, issued on 19-03-2015, Case 08300/14, available at: www.dgsi.pt, when therein it is expressly stated that article 3, section 1 of the CIUC "[…] consecrates a legal presumption that the holder of the vehicle registry is its owner, and that such presumption is rebuttable by force of article 73 of the LGT".

This is an understanding which is entirely endorsed and which is given, without further, as valid and applicable in the present case, not considering, accordingly, necessary other arguments, given the abundant grounds set forth in the mentioned Decisions and in the said Judgment.

J - OF THE ACQUISITION OF OWNERSHIP OF THE VEHICLE AND OF THE VALUE OF THE REGISTRY

43 - First, it should be added, given what hereinafter, expressly, will be said about the value of the registry, that the acquirers of vehicles become owners of the same vehicles by means of the celebration of the corresponding contracts of sale and purchase, with registry or without it.

44 - There are three articles of the Civil Code that it is important to take into account, regarding the acquisition of ownership of a motor vehicle. They are, firstly, article 874, which establishes the notion of a contract of sale and purchase, as being "[…] the contract by which the ownership of a thing, or another right, is transferred, by means of a price"; article 879, in whose paragraph a) it is provided, as essential effects of the contract of sale and purchase, "the transfer of the ownership of the thing or the ownership of the right" and article 408, which has as its heading contracts with real effect, and establishes in its section 1, that "the constitution or transfer of real rights over a determined thing takes place by mere effect of the contract, save for exceptions provided by law". (emphasis added)

We are, indeed, in the domain of contracts with real effect, which means that their celebration causes the transfer of real rights, in this case, motor vehicles, determined by mere effect of the contract, as expressly follows from the norm previously mentioned.

45 - Regarding the said contracts with real effect, it is appropriate to note the teachings of Pires de Lima and Antunes Varela, when, in annotations to article 408 of the CC, tell us that "From these contracts called real (quoad effectum), because they have as their immediate effect the constitution, modification or extinction of a real right (and not merely the obligations tending to that result) are distinguished the so-called real contracts (quoad constitutionem), which require the delivery of the thing as an element of their formation (cf. arts. 1129, 1142 and 1185) ".

We are, thus, faced with contracts in which the ownership of the thing sold is transferred, without further, from the seller to the buyer, having, as its cause, the contract itself.

46 - Also from jurisprudence, namely from the Judgment of the STJ no. 03B4369 of 19/02/2004, available at: www.dgsi.pt, it is drawn that, in view of the terms of article 408, section 1 of the C. Civil, "the constitution or transfer of real rights over a determined thing takes place by mere effect of the contract, save for exceptions provided by law". It is the case of the contract of sale and purchase of motor vehicle (articles 874° and 879 para. a) of the C. Civil), which does not depend on any special formality, being valid even when celebrated in verbal form - conf. Judgment of the STJ of 3-3-98, in CJSTJ, 1998, year VI, Tome I, p. 117". (emphasis added)

47 - Having the contract of sale and purchase, in view of what has been said, a real nature, with the mentioned consequences, it is necessary to consider, also, the legal value of the vehicle registry object of that contract, insofar as the transaction of the said good is subject to public registry.

48 - It establishes, indeed, section 1 of article 1 of Decree-Law no. 54/75, of 12 February, relating to the registry of motor vehicles, that "The registry of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and their respective trailers, with a view to the security of legal commerce". (emphasis added)

49 - Being clear, in view of the said norm, what is the purpose of the registry, there is not, however, clarity, within the scope of the said Decree-Law, about the legal value of that registry, it being necessary to consider article 29 of the mentioned legal instrument, relating to the registry of motor vehicle ownership, when therein it is provided that "There shall be applicable, with the necessary adaptations, to the registry of motor vehicles the provisions relating to the registry of real property, […]". (emphasis added)

50 - In this framework, so that we may achieve the sought-after knowledge about the legal value of the registry of motor vehicle ownership, it is important to take into account what is established in the Property Registry Code, approved by Decree-Law no. 224/84, of 06 July, when it provides in its article 7 that "the definitive registry constitutes a presumption that the right exists and belongs to the registered holder in the precise terms in which the registry defines it". (emphasis added)

51 - The combination of the provisions in the articles previously mentioned, particularly the established in section 1 of article 1 of Decree-Law no. 54/75, of 12 February and in article 7 of the Property Registry Code, allows to consider, on one hand, that the fundamental function of the registry is to give publicity to the legal situation of the vehicles, allowing, on the other hand, to presume that the right exists and that such right belongs to the registered holder in whose name the same is registered, in the precise terms in which it is defined in the registry.

52 - Thus, the definitive registry constitutes nothing more than the presumption that the right exists and belongs to the registered holder, in the exact terms of the registry, but a rebuttable presumption, admitting, for that reason, rebutting evidence, as follows from the law and jurisprudence has been pointing out, being able, for this purpose, to see, among others, the Judgments of the STJ nos. 03B4369 and 07B4528, respectively, of 19/02/2004 and 29/01/2008, available at: www.dgsi.pt.

53 - The function legally reserved for the registry is, thus, on one hand, that of publicizing the legal situation of the goods, in this case, of the vehicles and, on the other hand, to allow us to presume that there exists a right over those vehicles and that it belongs to the registered holder, which means that the registry does not have a constitutive nature of the right of ownership, but only declarative, hence the registry does not constitute a condition of validity of the transfer of the vehicle from the seller to the buyer.

54 - Thus, if the buyers of the vehicles, as the "new" owners thereof, do not promote, from the outset, the adequate registry of their right, it is presumed, for purposes of section 1 of article 3 of the CIUC and the provisions of article 7 of the Property Registry Code, that the vehicles continue to be the property of the person who sold them and who in the registry remains their owner, being that person the taxpayer of the tax, in the certainty, however, that such presumptions are rebuttable, whether by force of the established in section 2 of article 350 of the CC, or in the light of the terms of article 73 of the LGT. Hence, from the moment these presumptions are set aside, by means of proof of the said sales, the TA cannot persist in considering as taxpayer of the SMVT the seller of the vehicle, who, in the registry, continues to appear as its owner.

L - OF THE MEANS OF PROOF PRESENTED

55 - Since the written form is not legally required for the contract of sale and purchase of motor vehicles, the proof of the corresponding sale may be made by any means, namely by means of documentation.

56 - As a means of proof that it proceeded to the sale of the used vehicle with registration number ...-...-..., identified in the present case, on a date prior to the date of exigibility of the tax, the Claimant attached copies of declarations of sale of the said vehicle to the company B... SA and from this to company C..., Ltd.

57 - On the other hand, it attached either a copy of the request addressed, on 17-01-2012, to the IMTT - Regional Directorate of Mobility and Transport of the North requesting the seizure of the documents of the vehicle in reference, or a copy of the Arbitral Decision issued in Case no. 216/2014-T, which, regarding the assessment of the SMVT relating to the years 2009, 2010, 2011 and 2012, concerning the vehicle in question, recognized that the Claimant was no longer, then, the owner of that vehicle, considering the presumption established in section 1 of article 3 of the CIUC to have been rebutted.

Let us see,

58 - Among the said documents it is to be noted, particularly, the Declaration, identified in the court records as DOC. 3, in which the last of the buyers of the vehicle, with registration number ...-...-..., that is, the company C..., Ltd, assumes, on 29-02-1998, the date of the purchase of the vehicle in question, all responsibility, including of a fiscal nature, associated with the purchase in question.

59 - Should also be considered the request addressed, on 17-01-2012, to the IMTT - Regional Directorate of Mobility and Transport of the North requesting the seizure of the documents relating to the vehicle with registration number ...-...-..., in that it evidences that the same was not, at the date, the property of the Claimant.

60 - Note that nothing allows to consider that the elements recorded in the said documents are inconsistent with what, in reality, occurred, documents which, moreover, enjoy the presumption of truthfulness provided in section 1 of article 75 of the LGT, everything indicating that they reflect and prove the facts mentioned therein, that is, that the vehicle in question was not, at the time of exigibility of the SMVT at issue in the present case, relating to the year 2015, the property of the Claimant.

61 - In the case of the present proceedings, it is important to take into account that the Claimant, having been notified for prior hearing, exercised that right, having in that framework, made available to the Tax Administration all the documented information, which supported the request for arbitral pronouncement underlying the present case, whether, namely, that relating to the sales to which the vehicle was subject, or the identification of its last buyer, or that relating to the Arbitral Decision issued in Case no. 216/2014-T, in which, regarding the assessment of the SMVT relating to the years 2009, 2010, 2011 and 2012, concerning the vehicle at issue in the present case, the annulment of the acts of assessment of SMVT relating to those years was determined, and the condemnation of the TA to proceed with the reimbursement of the tax wrongfully paid.

62 - As already referred to, namely in decisions relating to cases in which we accepted the task of being arbitrator, the provisions of section 1 of article 3 of the CIUC consecrate a legal presumption which, in view of the terms of article 73 of the LGT, shall necessarily be rebuttable, which means that the taxpayers of the tax are, presumptively, the persons in whose names the vehicles are registered, that is, the said taxpayers are, in principle, the persons in whose names such vehicles are registered. They will, thus, be those persons, identified in such conditions, to whom, from the outset and in principle, the TA, before the assessment is implemented, must address itself.

63 - This would be a procedure which, only in principle, will thus have to be, given that within the framework of the prior hearing, of mandatory character, in view of the terms of paragraph a) of section 1 of article 60 of the LGT, the tax relationship may be reconfigured, validating the taxpayer initially identified, or redirecting the procedure towards the one that is, after all, the true and effective taxpayer of the tax in question.

64 - The right that the taxpayer has to be heard, which is materialized by means of the prior hearing, must correspond to and be translated into the opportunity granted to private parties to have useful participation in the procedure.

65 - The prior hearing, which, naturally, must occur at a moment immediately prior to the assessment procedure, corresponds to the place and proper moment for, with certainty and security, identifying the real taxpayer of the SMVT.

66 - The said assessment procedure, as is pointed out by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in Lei Geral Tributária, Anotada e Comentada, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, annotation no. 5 to article 36, serves solely to render certain the tax obligation and, consequently, exigible. In this sense, the said authors add, in annotation no. 6 to the same article, that "The assessment, like any tax act, being an act defining the position of the tax administration towards private parties, does not constitute the obligation. It makes it certain and exigible […]".

67 - The prior hearing is, moreover, the proper place, to seek the material truth of the essential elements to the assessment of the tax, among which will be the knowledge of the true taxpayers of the tax, while first elements of the tax legal relationship. For this purpose, it is fitting to refer to what the aforementioned authors tell us, ibidem, in annotation no. 5 to article 55, when therein they refer that, in the domain of the tax procedure, the tax administration, particularly in light of the principles of justice and impartiality, should be guided by "[…] criteria of exemption in the investigation of factual situations, carrying out all the steps that appear necessary to investigate the material truth, regardless of whether the facts to be investigated are contrary to the patrimonial interests that the tax administration is responsible for defending". (emphasis added)

68 - It is also fitting to recall the principle of inquisitorial investigation, which fixed in article 58 of the LGT, provides in the sense that "The tax administration must, in the procedure, carry out all the necessary steps to satisfy the public interest and to discover the material truth, not being subordinate to the initiative of the author of the request". (emphasis added)

69 - For this purpose, should, again, be referred to the teachings of Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in Lei Geral Tributária, Anotada e Comentada, 4th Edition 2012, Encontro de Escrita, Lda, Lisbon, p. 488/489, when, in annotations to the cited article 58, they refer that it is the responsibility of the administration to play a dynamic role in the collection of elements with relevance to the decision, adding that the "[…] lack of steps deemed necessary for the construction of the factual basis of the decision will affect this not only in the case where they are mandatory (violation of the principle of equality), but also if the materiality of the facts considered is not proven or if there are missing, in that basis, facts relevant, alleged by the interested party, by insufficiency of evidence that the Administration should have collected […]".

The principle of inquisitorial investigation, the said authors add, ibidem, "[…] has to do with the powers (-duties) of the Administration to proceed with the investigations necessary for the knowledge of the facts essential or determining for the decision […]".

70 - This was not the understanding adopted by the Respondent in the case of the present proceedings, given that, despite the information made available to it, whether, relative to the sales to which the vehicle was subject, or the identification of its last buyer, or relative to the Arbitral Decision issued in Case no. 216/2014-T, in which, relative to the assessment of the SMVT relating to the years 2009, 2010, 2011 and 2012, the annulment of the acts of assessment of SMVT, relating to those years, was decided, the TA did not show a procedure in line with the principle of material truth, which, had it been, in the present case, given due consideration, would have led to the identification of a taxpayer of the SMVT different from the Claimant.

71 - The documents presented by the Claimant, as means intended to provide proof that the vehicle in question was not at the date of exigibility of the SMVT the property of the Claimant, enjoying the aforementioned presumption of truthfulness, appear with sufficient suitability, in order to demonstrate the transactions to which the vehicle was subject, constituting, in our view, an appropriate and capable means of proof of rebutting the presumption established in section 1 of article 3 of the CIUC.

72 - In view of what has been referred to above, and taking into account, both the presumption established in section 1 of article 3 of the CIUC, and the transfer of ownership of the vehicle in question, by mere effect of its sale, prior to the date of exigibility of the tax, and the legal value of the vehicle registry in the economy of the CIUC, the tax act under scrutiny cannot merit our agreement, whether because there was not taken into account an adequate interpretation and application of the legal rules of subjective incidence, which constitutes an error as to the legal presuppositions, or because the said act is based on a factual matter, clearly divergent from the actual reality, which constitutes an error as to the factual presuppositions.

73 - In these circumstances, taking into account, on one hand, that the presumption enshrined in article 3, section 1 of the CIUC has been rebutted and that, on the other, the vehicle in question in the present case was sold on a date prior to that of exigibility of the tax, one cannot fail to consider that, at the time of exigibility of the tax, in view of the terms of section 3 of article 6, combined with section 2 of article 4, both of the CIUC, the Claimant was not taxpayer of the tax in question.

74 - The TA, when it understands that the taxpayer of the SMVT is, definitively, the person in whose name the motor vehicle in question is registered, without considering that article 3, section 1 of the CIUC constitutes a presumption, nor taking into account the probative elements presented to it, is proceeding with the illegal assessment of the SMVT, based on the incorrect interpretation and application of the rules of subjective incidence of the Single Motor Vehicle Tax, contained in the said article 3 of the CIUC, whether at the level of the rule, or of the provision, which constitutes the practice of a tax act deficient in legality due to error as to the factual and legal presuppositions, which determines its annulment, by violation of law.

M - REIMBURSEMENT OF THE AMOUNT PAID AND INDEMNIFICATORY INTEREST

75 - Under the terms of paragraph b) of section 1 of article 24 of the LFATM, and in accordance with what is established therein, the arbitral decision on the merits of the claim that no appeal or challenge applies binds the tax administration from the end of the period provided for appeal or challenge, the administration must - in the exact terms of the substantiation of the arbitral decision in favor of the taxpayer and until the end of the period provided for the performance of judgments by tax courts - "Restore the situation that would exist if the tax act subject of the arbitral decision had not been practiced, adopting the acts and operations necessary for the effect." (emphasis added)

76 - These are legal commands that are in total harmony with the terms of article 100 of the LGT, applicable to the case by force of the terms of paragraph a) of section 1 of article 29 of the LFATM, in which it is established that "The tax administration is obliged, in case of substantiation in whole or in part of complaints or administrative appeals, or of judicial process in favor of the taxpayer, to the immediate and complete restitution of the situation that would exist if the illegality had not been committed, comprising the payment of indemnificatory interest, in the terms and conditions provided by law." (emphasis added)

77 - The case contained in the present proceedings, raises the manifest application of the mentioned norms, given that as a result of the illegality of the act of assessment, referenced in this case, there shall, by force of these norms, be a need for reimbursement of the amounts paid, as title of tax and compensatory interest, which in the case of the present proceedings is materialized in the amount of € 501.63, as a way to achieve the restitution of the situation that would exist if the illegality had not been committed.

78 - As to indemnificatory interest, it appears manifest that, in view of the established in article 61 of the TPCP and the requirements of the right to indemnificatory interest having been met, that is, verified the existence of error attributable to the services from which results payment of the tax debt in an amount higher than legally due, as provided in section 1 of article 43 of the LGT, the Claimant has the right to indemnificatory interest at the legal rate, calculated on the amount of € 501.63, which shall be counted, from the date of payment of the tax and the corresponding compensatory interest, until the full reimbursement of that same amount.

N - ARBITRATION COSTS

79 - Regarding the arbitration costs, more specifically on the responsibility for its payment, it is only necessary to note that, in view of the established in section 2 of the said article 527 of the CPC, causes "[…] the costs of the process to the party losing, in the proportion in which it is" being, thus, what will apply in the case of the present proceedings.

CONCLUSION

80 - In the circumstantial framework that has been referred to, the TA, when practicing the act of assessment at issue in the present case, founded on the idea that article 3, section 1 of the CIUC does not consecrate a rebuttable presumption, makes incorrect interpretation and application of this norm, committing an error as to the legal presuppositions, which constitutes violation of law.

81 - On the other hand, because the TA, at the date of the occurrence of the tax event, considered the Claimant owner of the vehicle referenced in the present case, considering it, as such, taxpayer of the tax, when such ownership, regarding the vehicle in question, was no longer inscribed in its legal sphere, basing itself, thus, on a factual matter divergent from the actual reality, commits an error as to the factual presuppositions, and therefore of violation of law.

III - DECISION

82 - Therefore, having regard to all the foregoing, this Arbitral Tribunal decides:

  • To judge substantiated, as proven, on the grounds of violation of law, the request for arbitral pronouncement insofar as it concerns the annulment of the act of assessment of SMVT and compensatory interest to which the Claimant's request refers, relating to the year 2015, as identified in the court records, concerning the vehicle identified in the case;

  • To annul, accordingly, both the act of assessment of SMVT, and the act of assessment of compensatory interest associated therewith, relating to the year 2015, concerning the vehicle, as identified in the court records.

  • To condemn the TA to pay the costs of the present proceedings.

VALUE OF THE CASE

In accordance with the terms of articles 306, section 2 of the CPC (ex-315, section 2) and 97-A, section 1 of the TPCP and in article 3, section 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at € 501.63.

COSTS

In accordance with the terms of article 12, section 2, in fine, in article 22, section 4, both of the LFATM, and in article 4 of the Regulation of Costs in Tax Arbitration Proceedings and Table I, which is attached thereto, the amount of the total costs is set at € 306.00.

Let it be notified.

Lisbon, 9 November 2016

The Arbitrator

António Correia Valent

(The text of the present decision was prepared by computer, in the terms of article 131, section 5 of the Code of Civil Procedure (ex-138, section 5), applicable by reference of article 29, section 1 paragraph e) of Decree-Law no. 10/2011, of 20 January (LFATM), being governed in its drafting by the orthography prior to the 1990 Orthographic Agreement.)

Frequently Asked Questions

Automatically Created

What is the IUC (Imposto Único de Circulação) and who is liable to pay it in Portugal?
The IUC (Imposto Único de Circulação) is Portugal's Single Motor Vehicle Tax, an annual tax levied on vehicle ownership. Under Article 3(1) of the IUC Code (CIUC), the registered owner of a vehicle is presumed to be the taxpayer liable for IUC. However, this is a rebuttable legal presumption under Article 73 of the General Tax Law (LGT), meaning taxpayers can provide contrary evidence demonstrating they are no longer the actual owner, such as sale contracts or transfer documentation.
Can a company challenge an IUC tax assessment through arbitration at CAAD?
Yes, companies and individuals can challenge IUC tax assessments through arbitration at CAAD (Centro de Arbitragem Administrativa) under Article 2(1)(a) of Decree-Law 10/2011, which established the Legal Framework for Arbitration in Tax Matters (RJAT). The process involves filing a request for constitution of an arbitral tribunal, appointment of arbitrator(s), a response period for the Tax Authority, and issuance of a binding arbitral decision. This provides an alternative to judicial courts for resolving tax disputes.
What are the grounds for annulling an IUC liquidation when vehicle ownership is disputed?
An IUC liquidation can be annulled when vehicle ownership is disputed on several grounds: (1) the taxpayer provides documentary evidence rebutting the registry-based presumption of ownership, such as sale contracts demonstrating transfer prior to the assessment period; (2) the Tax Authority fails to investigate material truth despite having knowledge of ownership changes; (3) previous arbitral or judicial decisions have already established the taxpayer is not the owner; and (4) the assessment violates the principle that tax liability must correspond to actual taxable capacity and material ownership, not merely formal registry entries.
How does the CAAD arbitral tribunal process work for IUC tax disputes under Decree-Law 10/2011?
The CAAD arbitral tribunal process for IUC disputes under Decree-Law 10/2011 follows these steps: (1) the taxpayer files a request for arbitration with CAAD; (2) the President accepts the request and notifies the Tax Authority; (3) an arbitrator is appointed (either by agreement or by CAAD's Deontological Council); (4) parties are notified and may refuse the arbitrator; (5) once constituted, the tribunal may dispense with hearings if appropriate; (6) the Tax Authority has an opportunity to file a response; (7) the tribunal examines procedural requirements, establishes facts, and issues a binding decision on the legality of the assessment.
Is a taxpayer entitled to reimbursement and indemnity interest after an unlawful IUC assessment?
Yes, when an IUC assessment is annulled as unlawful, the taxpayer is entitled to full reimbursement of amounts paid, including both the principal IUC tax and any compensatory interest charged. Additionally, under Portuguese tax law, the taxpayer is entitled to indemnity interest (juros indemnizatórios) on the amounts wrongfully paid, calculated from the date of payment until reimbursement. This compensates taxpayers for the financial loss from having funds wrongfully retained by the State, ensuring complete restitution when tax assessments are found to be illegal.