Process: 259/2017-T

Date: October 31, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD Process 259/2017-T addresses the subjective incidence of Portugal's Single Circulation Tax (IUC) when a vehicle importer sells cars to dealerships before licence plate registration. The claimant, an exclusive vehicle importer, challenged 180 IUC assessments for fiscal years 2013-2014 totaling €21,263.49. The central legal issue concerned whether the registered owner is liable for IUC when vehicles were contractually sold before registration allocation. The claimant argued that Article 3 of the IUC Code establishes a rebuttable presumption of ownership, and since they sold vehicles to dealers before registration (evidenced by invoices with chassis numbers), they were not the actual owners when the tax became due. The Tax Authority countered that Article 3 creates a legal fiction, not a rebuttable presumption, making the registered owner the taxpayer regardless of actual ownership. The AT argued the invoices failed to prove ownership transfer, lacked payment evidence, and merely demonstrated ISV pass-through charges. Additionally, the AT raised a procedural exception claiming 48 assessments were time-barred under Article 70(1) CPPT, as the administrative appeal was filed beyond the 120-day period from the voluntary payment deadline. The claimant contested this, arguing the applicable deadline was two years under Article 131 CPPT for self-assessments. This case highlights the critical distinction between declarative versus constitutive effects of vehicle registration, the interpretation of tax liability provisions in the IUC Code, and procedural requirements for challenging tax assessments through administrative appeals and tax arbitration under the RJAT (Decree-Law 10/2011).

Full Decision

ARBITRAL DECISION

REPORT:

A... – BRANCH IN PORTUGAL, a company with registered office in ..., ..., ..., holder of the sole registration and collective person identification number ..., hereinafter referred to as the Claimant, submitted a request for the establishment of an arbitral tribunal in tax matters and a request for arbitral decision, pursuant to the provisions of paragraph a) of paragraph 1 of Article 2 and paragraph a) of paragraph 1 of Article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter abbreviated as RJAT), petitioning for a declaration of illegality of the decision rejecting the administrative appeal presented and consequent declaration of illegality of 180 assessments of Single Circulation Tax (IUC) relating to the fiscal years 2013 and 2014 and respective compensatory interest, in the total amount of €21,263.49, as well as condemnation of the Respondent to the restitution of the indicated amount, plus indemnificatory interest.

To support its request, it alleges, in summary:

  • The Claimant is the exclusive importer of all motor vehicles of the brand "B..." for the national market;

  • In the scope of its activity, the Claimant imports automobiles of the said brand and proceeds to their sale to concessionaries;

  • Although the Claimant must request from the competent services the allocation of registrations for the imported vehicles, and consequently the initial property registration is made in the name of the Claimant, the truth is that, even before the allocation of registrations, the vehicles have already been sold to the concessionaries;

  • For that reason, an invoice is issued regarding the sale value of the vehicles to the concessionaries with only the identification of the vehicle frame number;

  • After the allocation of registrations, an invoice is issued to the concessionaries, already with the identification of the registration, corresponding to the ISV/IA borne by the Claimant;

  • The Claimant is not a taxpayer of single circulation tax, since on the date when the tax became due it was not the owner of the respective vehicles, having already sold them;

  • The registration of the vehicle property has a merely declarative effect, not a constitutive one;

  • Paragraph 1 of Article 3 of the CIUC, in the wording in force at the date of the facts, provides for a rebuttable presumption of ownership;

  • Thus, the taxpayer of the IUC is the owner, even if not registered in the vehicle registry, provided that sufficient proof is made to rebut the legal presumption arising from the registration;

  • The Claimant paid the tax in question in the present proceedings, as well as the corresponding compensatory interest;

  • The Claimant filed an administrative appeal against the assessments in question in the present proceedings, which was rejected.

The Claimant attached 15 documents and listed two witnesses.

In the request for arbitral decision, the Claimant chose not to appoint an arbitrator, whereby, pursuant to the provisions of Article 6, paragraph 1 of the RJAT, the undersigned was appointed by the Deontological Council of the Administrative Arbitration Center, the appointment being accepted in accordance with the legally provided terms.

The arbitral tribunal was constituted on 27 June 2017.

Notified in accordance with and for the purposes of the provisions of Article 17 of the RJAT, the Respondent presented its response, presenting defense by exception and by challenge.

By way of exception, it invoked, in summary:

  • The administrative appeal filed against the 48 assessments marked in the "untimely" field of the table at pages 30 and 31 of the PA was filed after the expiration of the 120-day period provided for in Article 70, paragraph 1 of the CPPT, and is thus untimely;

  • With respect to these assessments, the Claimant should have filed a challenge within 90 days counted from the date of the end of the voluntary payment period for the IUC, a period that, at the date of filing the challenge, had already expired;

  • Untimeliness constitutes a peremptory exception, which results in the dismissal of the Respondent from the claim.

By way of challenge, it alleges in summary as follows:

  • The legislator expressly and intentionally established that the taxpayers of the IUC are the owners of the vehicles, being considered as such the persons in whose name the vehicles are registered;

  • On the date of the occurrence of the tax event, the vehicles were registered in the name of the Claimant, whereby it was the owner of the vehicles on which the assessed liabilities in dispute were levied;

  • Article 3 of the CIUC does not establish any presumption of ownership, but a true legal fiction;

  • The invoices attached by the Claimant do not constitute any purchase and sale contract nor are they capable of proving the conclusion of a purchase and sale contract;

  • The invoices attached by the Claimant do not demonstrate the transfer of ownership of the motor vehicle;

  • It is not demonstrated in the proceedings the payment of the invoices attached by the Claimant nor the date on which such payment occurred;

  • The only invoices attached by the Claimant with identification of the registration number of the vehicles relate to the passing on of the ISV to the concessionaries, and are therefore not capable of proving the sale of such vehicles;

  • The failure to fulfill the obligation to update the registrations places on the Claimant the responsibility for the arbitration costs.

It concludes, petitioning for the upholding of the exception invoked and, consequently, for the dismissal of the request for arbitral decision.

The Respondent attached a copy of the administrative proceedings and did not list any witnesses.

The Claimant responded to the exception invoked by the Respondent, arguing for its dismissal.

Given the position assumed by the parties and the absence of necessity for additional production of evidence, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with, as well as the presentation of arguments.

CONSIDERATION OF THE EXCEPTION RAISED:

The AT invokes, with respect to the 48 assessments marked in the "untimely" field of the table at pages 30 and 31 of the PA, that the time limit for the Claimant to file a challenge has expired.

This is because, according to the Respondent, since these are IUC assessments and not self-assessments, the time limit for filing the corresponding administrative appeal is 120 days counted from the date of the end of the voluntary payment period for the tax, in accordance with and for the purposes of the provisions of Article 70, paragraph 1 of the CPPT.

Given the voluntary payment period for each of these assessments – October and November 2013 and December 2014 – and the date of presentation of the administrative appeal – 22/07/2016 – it is manifest, according to the Respondent, the untimeliness of the appeal filed and, consequently, of the subsequent challenge.

In turn, the Claimant invokes that the time limit for the filing of the administrative appeal is the time limit provided for in Article 131 of the CPPT – two years after the presentation of the declaration –, given the fact that in this case these are self-assessments and not assessments, whereby no untimeliness exists.

This must be examined.

The examination of this question involves the determination of the nature of the IUC assessments in question, specifically, whether these are assessments made by the Respondent or self-assessments carried out by the Claimant.

Let us proceed, then, to the determination of the typology of the assessment.

Under the heading "assessment," paragraphs 1 and 2 of Article 16 of the CIUC, in the version in force until 31/12/2013, provided:

"1 - The competence for the assessment of the tax is of the General Directorate of Taxation.
2 - The assessment of the tax is made by the taxpayer itself through the Internet, under the conditions of registration and access to electronic declarations, being mandatory for legal persons."

Following the amendment introduced by Law no. 83-C/2013, of 31/12, paragraph 1 of the same article now reads:

"1 - The competence for the assessment of the tax is of the Tax and Customs Authority, and for all legal purposes, the tax act shall be deemed performed at the tax service of the residence or registered office of the taxpayer."

Although the wording is different, the truth is that no relevant amendments were introduced, in the part that matters for the present proceedings, in paragraph 1 of the cited Article 16, the competence for assessment of the tax remaining with the Tax and Customs Authority.

Attending to the criterion of the competent body to carry out the assessment, it would appear to result from paragraph 1 of Article 16 that we are dealing with an administrative assessment.

However, such understanding should be tempered by reading paragraph 2 of the same article, which determines that it is incumbent upon the taxpayer to make the assessment.

Thus, knowing that self-assessment is spoken of when the assessment of the tax is carried out by the taxpayer, based on the taxable matter entered in the respective declarations, the question arises: does the assessment of the IUC assume the typology of self-assessment?

To answer this question, it is important to pay attention to the content of Articles 17 and 18 of the CIUC, from which it results, without any margin for doubt, that the rule is that the assessment of the tax is carried out by the taxpayer itself, being carried out by the Tax Authority only in the cases provided for in Article 18, a situation in which, by virtue of the omissive conduct of the taxpayer, the Tax Authority proceeds to the official assessment of the tax, notifying the taxpayer to proceed with its payment.

This means that, as a general rule, the IUC assumes the nature of a self-assessment.

In this sense, see, among others, ANTÓNIO BRIGAS AFONSO and MANUEL TEIXEIRA FERNANDES, Tax on Vehicles and Single Circulation Tax, Annotated and Commented Codes, Coimbra Editora, p. 218 et seq.)

In the case at hand, it was the Claimant that carried out the assessment of the tax, although the Tax Authority did, so to speak, contribute to such assessment, through the sending to the Claimant of the notification for prior hearing to the official assessment of IUC.

But the truth is that such official assessment was never carried out, due to the fact that the Claimant, notified for purposes of prior hearing, proceeded to the assessment of the IUC.

Thus, there is no doubt that we are, in this case, dealing with a true self-assessment of IUC, carried out by the taxpayer.

Being a self-assessment, it is subject to review within the period of two years, counted from the assessment made, provided for in Article 131 of the CPPT.

Given this, upon examining the assessments challenged, it is verified that none were issued before 22 July 2014, the date relevant for the purpose of verifying the timeliness of the administrative appeal, filed on 22/07/2016.

It is thus verified that the administrative appeal was filed within the two-year period counted from the date of issue of the assessments challenged, and is therefore timely.

The exception invoked by the Respondent is thus dismissed.

PRELIMINARY RULING:

The Arbitral Tribunal was regularly constituted and is substantively competent.

There are no nullities that invalidate the proceedings.

The parties have legal personality and capacity and are legitimate, with no defects in representation.

There are no other nullities, exceptions or preliminary issues that prevent the examination of the merits and which must be examined ex officio.

QUESTIONS TO BE DECIDED:

Given the positions assumed by the Parties, set forth in the arguments expounded, it is necessary:

  • To determine who is the taxpayer of IUC when, on the date of the occurrence of the tax event, the motor vehicle has already been sold;

  • To determine what the legal value of vehicle registration is with respect to IUC, particularly for purposes of the subjective incidence of the tax;

  • To determine whether the failure to update vehicle registration allows for the persons in whose name the vehicles are registered to be considered as taxpayers of IUC; and

  • To determine whether the invoices attached by the Claimant are or are not capable of proving the alleged transfers.

FACTS OF THE CASE:

Facts Established

With relevance for the decision to be rendered in the present proceedings, the following facts were established as proven:

  • The Claimant is the exclusive importer of all motor vehicles of the brand "B..." for the national market;

  • In the scope of its activity, the Claimant imports automobiles of the said brand and proceeds to their sale to concessionaries;

  • For purposes of the sale of imported vehicles, the Claimant requests the allocation of the respective registrations, and consequently, the initial property registration is made in the name of the Claimant;

  • The Claimant issues to the concessionaries an invoice regarding the sale value of the vehicles to the concessionaries with only the identification of the vehicle frame number;

  • After the allocation of registrations, an invoice is issued to the concessionaries already with the identification of the registration, with the value corresponding to the ISV/IA;

  • None of the vehicles in the assessments challenged belong to categories F) or G) referred to in Article 4 of the CIUC;

  • Of the 180 assessments challenged, 174 relate to vehicles with respect to which, on the date of the occurrence of the tax event, an invoice for sale to a third party had been issued by the Claimant;

  • The Claimant filed an administrative appeal of the IUC assessments and compensatory interest now challenged;

  • By official communication dated 19/12/2016, the Claimant was notified of the decision to reject the administrative appeal presented;

  • The request for the establishment of the arbitral tribunal in tax matters and request for arbitral decision was presented on 09/04/2017;

  • The Claimant paid the tax and compensatory interest that are now under discussion.

Facts Not Established

With interest in the proceedings, no other fact was established.

Justification of the Facts

The conviction regarding the facts established was formed on the basis of the documentary evidence attached by the Claimant, indicated with respect to each of the points, and whose correspondence to reality was not questioned, as well as the matter alleged and not disputed.

ON THE LAW:

The facts established, it is now necessary, by reference to them, to determine the applicable law.

The first of the questions to be analyzed concerns the interpretation of the norm contained in paragraph 1 of Article 3 of the CIUC, in the wording in force at the date of the facts, and, more specifically, in knowing whether it contains or not a legal presumption.

In this regard, the Claimant invokes that, with respect to the IUC assessments in dispute, the prerequisites for subjective incidence provided for in Article 3 of the CIUC are not fulfilled, and is therefore not a taxpayer of IUC.

To this end, it alleges, in summary, that Article 3 of the CIUC, in the wording in force at the date of the facts, establishes an implicit presumption of ownership of vehicles in favor of those in whose name the same are registered, a presumption that, by virtue of the application of the general rule provided for in Article 73 of the General Tax Law, is rebuttable by proof to the contrary.

In turn, the Respondent argues that Article 3 of the CIUC does not establish any implicit presumption, but a true legal fiction, and therefore irrebuttable by proof to the contrary.

Given the position of the parties, let us examine what should be, in accordance with the rules of legal hermeneutics enshrined, the interpretation of Article 3, paragraph 1 of the CIUC.

Paragraph 1 of Article 3 of the CIUC, in the wording in force at the date of the facts, provided:

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

From the simple reading of paragraph one of the indicated provision, it is verified, without great difficulty, that the cornerstone is in the expression "considered as" used by the legislator.

Given the terminology used, should it be understood that the legislator intended to establish an implicit presumption or a true legal fiction?

To address this question, it is important, first and foremost, to bring to bear some legal concepts and statutory definitions.

Thus, pursuant to the provisions of Article 349 of the Civil Code, presumptions are the inferences that the law or the judge draws from a known fact to establish an unknown fact.

With respect to legal presumptions, paragraph 2 of Article 350 of the same Code prescribes that these may be rebutted by proof to the contrary, except in cases where the law prohibits it.

As regards, specifically, presumptions of tax incidence, Article 73 of the General Tax Law establishes that these always admit proof to the contrary.

In addition to presumptions, the legislator also resorts to the so-called "legal fictions," which are expressed "in a legal process that considers a situation or a fact as different from reality in order to attribute legal consequences to it"[1].

According to the thesis advanced by the Respondent, the fact that Article 3, paragraph 1 of the CIUC provides that those "are considered" as owners, rather than those "are presumed" to be owners, reveals that the legislator, within its freedom of legislative shaping, expressly intended to determine that the persons in whose name the vehicles are registered are considered, without the admissibility of any proof to the contrary, to be the owners thereof.

Also according to the Respondent, if the legislator intended to create a presumption and not a legal fiction, it would have written, as it does in various other statutes, that they are presumed to be owners and not that they are considered to be owners.

From the outset, we can state that this tribunal does not endorse the understanding defended by the Respondent.

This is because, from the analysis of the historical and teleological elements, in addition, naturally, to the literal element of legislative interpretation, we will inevitably reach the conclusion that the legislator did not intend to establish any legal fiction, but only and solely a presumption, rebuttable by proof to the contrary in accordance with and for the purposes of the provisions of Article 73 of the General Tax Law.

Let us see:

As to the historical element, it is important to note that the current IUC had its genesis in the creation, through Decree-Law 599/72, of 30 December, of a tax on vehicles.

This tax on vehicles, which remained in force until the creation of the current IUC, expressly provided that the tax is due by the owners of the vehicles, being presumed as such the persons in whose name the same are registered or enrolled – see Article 3 of the Regulation of the Tax on Vehicles, attached to the said Decree-Law 599/72, of 30 December.

Upon the approval of the new CIUC, the legislator substituted the expression "being presumed as such" with the expression "being considered as such," but this cannot be defended as signifying a true substitution of a presumption (rebuttable) for a legal fiction (irrebuttable).

This is because, as teaches JORGE LOPES DE SOUSA[2], in the matter of tax incidence, presumptions can be revealed by the expression "it is presumed" or by similar expression. By way of example, the author notes that in Article 40, paragraph 1 of the CIRS the expression "it is presumed" is used, whereas in Article 46, paragraph 2 of the same Code the expression "is considered" is used, with no difference between one and the other expression, both meaning, after all, the same thing: a legal presumption.

The same occurred with the CIUC in which, although the expression "it is presumed" was altered in relation to the original wording to the expression "is considered," no substantive change occurred, the different expressions having exactly the same meaning.

We arrive at the same conclusion through the analysis of the teleological element.

In fact, it is important to keep in mind the statement of reasons of the Bill of Law no. 118/X of 07/03/2007, underlying Law no. 22-A/2007, of 29 June.

Upon examination of this statement of reasons, it is verified that what was intended was to undertake a "comprehensive and coherent reform of taxes relating to the acquisition and ownership of motor vehicles" which results from the "imperative need to bring clarity and coherence to this area of the tax system and the need, even more imperative, to subordinate it to the principles and concerns of an environmental and energy nature that nowadays mark the discussion of motor vehicle taxation."

Continuing, the said statement of reasons explains that "the two new taxes which are now created, the tax on vehicles and the single circulation tax, constitute much more than the technical continuation of the figures created in the 70s and 80s that preceded them, aimed predominantly at generating revenue, indifferent to the social cost resulting from motor vehicle circulation. They constitute something different, figures of the century in which we live, with which it is certainly intended to generate public revenue, but to generate it to the extent of the cost that each individual causes to the community."

Which led, furthermore, to the enshrinement of the principle of equivalence, inscribed in Article 1 of the CIUC, "thus making it clear that the tax, in its entirety, is subordinated to the idea that taxpayers should be burdened in proportion to the cost they cause to the environment and the road network, this being the reason for being of this tax figure. It is this principle that dictates the burdening of vehicles based on their respective ownership and until the moment of scrapping."

The IUC, as a true environmental tax, has, therefore, as its taxpayer the polluter, being nothing more, after all, than the embodiment of the polluter-pays principle.

From this it is verified that the structuring principle of the reform of motor vehicle taxation is precisely the incidence of taxation on the true user of the vehicle, and this principle is not consistent with the "blind" reading of the letter of the law, which could lead, after all, to taxing someone who is not the owner and, thereby, someone who is not the subject causing the "environmental and road cost" caused by the vehicle, to which Article 1 of the CIUC alludes.

From all of the foregoing, it results that the literal, historical and teleological elements of interpretation of the law necessarily lead to the conclusion that the expression "considered as" has exactly the same meaning as the expression "presumed as," and should, therefore, be understood that Article 3, paragraph 1 of the CIUC, in the version in force at the date of the facts, enshrines a true presumption of ownership and not any fiction, and is therefore such presumption rebuttable.

Indeed, it was precisely because Article 3, paragraph 1 of the CIUC, in the previously applicable wording, enshrined a rebuttable presumption, that the legislator, choosing this time to enshrine a true legal fiction and not a presumption, amended the wording of Article 3, paragraph 1 of the CIUC, through Decree-Law no. 41/2016, of 1 August, of ownership, which thus came to have the following wording:

"The taxpayers of the tax are the natural or legal persons, of public or private law, in whose name the property of the vehicles is registered."

In the wording in force at the date of the facts, however, the taxpayer of the tax is, in principle, the owner, since the law presumes that it is he who makes use of the property. But if it is proven that, in fact, it is not the owner who makes use of the vehicle, but a third party, then the latter will, necessarily, be the taxpayer of the tax.

This is, unless we are mistaken, the interpretation that is in line, on the one hand, with the principle set forth in Article 11, paragraph 3 of the General Tax Law, according to which, in cases of doubt about the interpretation of tax norms "the economic substance of the tax facts" should be considered and, on the other hand, with the principle of equality in the distribution of public charges, which requires that the taxation of the generality of taxpayers, whenever possible, be based on the economic reality underlying the tax facts[3].

Indeed, any other interpretation would violate, at the outset, the already-mentioned principle of equivalence enshrined in Article 1 of the CIUC, pursuant to which it is established that the IUC seeks to "burden the taxpayers in proportion to the environmental and road cost that they cause, in fulfillment of a general rule of tax equality."

Established as it is the legal nature of the norm contained in paragraph 1 of Article 3 of the CIUC, in the wording in force at the date of the facts, it is now necessary to clarify the question of the subjective incidence of the tax when the vehicle, on the date of the tax event, has already been sold.

Upon conclusion of the purchase and sale contract, the purchaser shall be vested, ex contractu, in the position of owner, consequently becoming applicable to him paragraph 1 of Article 3 of the CIUC; i.e., the new owner comes to hold, for purposes of IUC, the position of taxpayer of the tax.

And such a solution is required from the moment of the perfection of the purchase and sale contract not only because the CIUC determines it – by stating that "the taxpayers of the tax are the owners" – but also due to the fact that among us prevails the principle of consensuality, which entails that the transfer of ownership occurs by mere effect of the contract; as results in the first instance from paragraph 1 of Article 408 of the Civil Code.

And what has just been said is relevant to support our position regarding the legal value of vehicle registration. Recall, however, that according to the general rule seen above, the transfer of the right occurs ex contractu, without the need for any material act or publicity[4].

As is peacefully accepted by legal doctrine and jurisprudence, faced with the silence of Decree-Law no. 54/75, of 12 February, as to the question of the legal value of vehicle registration, it becomes necessary to resort to the discipline of real property registration; an operation moreover authorized by Article 29 of that Decree-Law.

Now, attending to the Code of Real Property Registration – approved by Decree-Law no. 125/13, of 30 August –, particularly its Article 7, and combining this norm with Article 1 of Decree-Law no. 54/75, it is quickly inferred that the primary function of (vehicle) registration is to give publicity to the legal situation of motor vehicles.

It can therefore be stated that registration is not constitutive in nature, but merely declarative, permitting only the presumption of the existence of the right and its title. Note: presumption and not fiction, and can thus be rebutted by proof to the contrary.

And this is so precisely because, pursuant to the provisions of Article 408 of the Civil Code, and except for the exceptions provided by law, the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, with its validity not depending on any subsequent act, e.g., registration.

Therefore, since the law does not provide for any exception for the purchase and sale contract of a motor vehicle, the real effect normally produces its effects, the purchaser becoming its owner, independently of registration.

Now, if independently of registration the purchaser becomes the owner, the registered holder ceases to be so at the same time, although he appears in the registration as such.

In this case, and notwithstanding the failure to register, the alleged transfers carried out may be enforceable against the Respondent, given the fact that it cannot be considered a third party for registration purposes, pursuant to and for the purposes of the provisions of paragraph 1 of Article 5 of the Code of Real Property Registration.

Now, although on the date of the tax assessments the Claimant still appears in the registration as the owner of the vehicles, the truth is that it alleges that it is not, on the date of the tax event, the owner thereof, having already sold them.

Thus, and since the presumption resulting from the registration is, as we have seen, rebuttable, let us examine whether the proof provided by the Claimant is capable of achieving such a goal.

With a view to proving that the vehicles in question in the present proceedings were sold on a date prior to the occurrence of the tax event, the Claimant attaches two sets of documents: one, relating to invoices issued solely with the identification of the vehicle frame number; another, relating to invoices issued with the identification of the registration number and the vehicle frame number.

As for the invoices attached by the Claimant, the Respondent alleged that these are not capable of proving the conclusion of a purchase and sale contract, "since such documents do not by themselves reveal an essential and unequivocal declaration of intent (that is, the acceptance) on the part of the alleged purchasers."

Further alleging that, as results from the invoices attached, "the seller reserves for itself the ownership of the goods contained in this invoice until full payment of the respective price," whereby, since the payment of the respective price is not demonstrated, the invoices attached cannot be capable of demonstrating the transfer of ownership of the motor vehicle.

Given this, from the combined analysis of this set of invoices, it can be verified that, with respect to 174 vehicles, two invoices were issued, one with the identification of the vehicle frame number and another, later, with the identification of the registration number and the vehicle frame number, which allows for verification of which vehicle the invoices issued first relate to.

It is true that, as the Respondent alleges, the invoices attached "do not by themselves reveal an essential and unequivocal declaration of intent (that is, the acceptance) on the part of the alleged purchasers." But, as has already been set forth, the law not providing for any specific form for the conclusion of a purchase and sale contract of a motor vehicle, and the Respondent not having disputed the invoices attached, limiting itself to attempting to exclude their probative force, it is necessarily required to accept as proof of the purchase and sale contract the invoice issued in accordance with legal terms, as is the case with the invoices in question in the present proceedings.

On the other hand, the fact that the invoices record that "the seller reserves for itself the ownership of the goods contained in this invoice until full payment of the respective price" is, for this purpose, irrelevant, since, as results from the provisions of paragraph 2 of Article 3 of the CIUC, in the wording in force at the date of the facts, "financial lessees, purchasers with retention of title, as well as other holders of options to purchase rights by virtue of the lease contract, are equated with owners."

Whereby, even if the purchase price were not paid by the purchaser, in which case ownership would not be transferred, remaining in the legal sphere of the Claimant, the purchaser with retention of title would still be the taxpayer of the tax.

Thus, it must inevitably be considered that all 174 vehicles with respect to which two invoices were issued, one with only the identification of the frame number and another with the identification of the registration and frame number, were sold by the Claimant on the dates of issue of the invoices of which only the identification of the vehicle frame number is entered.

Excepted are the vehicles with registrations ..., ..., ..., ..., ..., and ..., with respect to which no invoices with the identification of the registrations were attached, and it is thus not possible for this tribunal to judge proven that the said vehicles were sold.

Given this, as results from point 6 of the established facts, none of the vehicles in the assessments challenged belong to categories F) or G) referred to in Article 4 of the CIUC, whereby the tax event occurs on the date of the respective registration or on each of its anniversaries.

Furthermore, pursuant to the provisions of Article 6, paragraph 3 of the CIUC, the tax is deemed due on the first day of the tax period referred to in Article 4, paragraph 2 of the CIUC.

Whereby it is verified that, on the first day of the tax period referred to in Article 4, paragraph 2 of the CIUC (date of registration or of each of its anniversaries), the Claimant had sold 123 of the 180 vehicles in question in the present proceedings, although the said sales have not been reflected in the respective registration.

Note that, with respect to the remaining 51 vehicles, although they were sold by the Claimant, they were not sold on a date prior to the date of tax due diligence, whereby with respect to these the Claimant is the taxpayer of the tax.

Thus, given the fact that, as already stated, the presumption resulting from the registration is rebuttable by proof to the contrary, proof that is considered effected with the presentation of the invoices for the sale of the vehicles, it is verified that, with respect to the vehicles with the following registrations, in a total of 123, the Claimant is not the owner thereof on the date of the tax event, and is therefore not the taxpayer of the IUC assessed:

[List of vehicle registrations marked with "..."]

Note that, although it is true that the Claimant sold 174 of the 180 vehicles whose assessments are in question in the present proceedings, only with respect to 123 assessments is it verified that the respective vehicles had been sold on a date prior to that of the tax event. Indeed, with respect to all other vehicles, excepted, it is reiterated, the vehicles with respect to which no invoice with identification of the registration number was attached, the invoice for the sale of the vehicle was issued on the day of the tax event, whereby with respect to these vehicles, the Claimant is the taxpayer of the IUC.

Thus, it is clear that there is no legal basis for 123 of the 180 assessments challenged, imposing itself, therefore, its annulment, with the inherent annulment of the decision rejecting the administrative appeal presented.

Finally, the Claimant also petitions condemnation of the Respondent in the payment of indemnificatory interest.

With respect to indemnificatory interest, Article 43, paragraph 1 of the LGT prescribes that "indemnificatory interest is due when it is determined, in administrative appeal or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount exceeding that legally due."

In the case now under examination, the error affecting the assessments challenged and whose illegality has been declared is attributable to the AT, whereby there is no doubt that the Claimant has the right to the receipt of indemnificatory interest.

It remains, however, to determine, from which date the same shall be due.

This is because, although it is true that the error is attributable to the AT, it is no less true that, in light of the failure to update vehicle registration by the Claimant, the AT could only become aware of that error and remedy it when duly alerted by the Claimant.

And such alert by the Claimant arose with the administrative appeal, in which it attached documentary proof capable of excluding the presumption of ownership of the vehicles whose assessments are now challenged.

Now, given the principle of inquisitoriness contained in Articles 58 of the General Tax Law and 69 e) of the Code of Tax Procedure and Process, it was incumbent upon the AT to examine the documents attached by the Claimant, which, as it turned out, proved to be essential to the settlement of the dispute.

Whereby it could and should have the AT altered its decision and corrected the error upon the examination of the administrative appeal presented by the Claimant, an examination that took place on 19/12/2016.

Having failed to do so, it should be condemned in the payment of indemnificatory interest from 19/12/2016, a date on which, it is reiterated, it could and should have remedied the error.

OPERATIVE PART

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

  • To judge unmeritorious, as not proven, the claim for declaration of illegality of the decision rejecting the administrative appeal presented with respect to vehicles with registrations ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ...; ... and ..., and, consequently, to judge unmeritorious the claim for annulment of the IUC and compensatory interest assessment acts relating to the same vehicles;

  • To judge unmeritorious the claim for restitution of the amount of €5,431.50, relating to the tax and compensatory interest paid relating to the vehicles referred to in the preceding point;

  • To judge meritorious, as proven, the claim for declaration of illegality of the decision rejecting the administrative appeal presented with respect to the remaining IUC and compensatory interest assessment acts referred to in the claim of the Claimant, with the consequent annulment of such IUC and compensatory interest assessment acts;

  • To judge meritorious the claim for restitution of the amount of €15,831.99, paid by the Claimant, plus indemnificatory interest at the legal rate, counted from 19/12/2016 until full payment to the Claimant of the sums assessed;

  • To condemn the Claimant and Respondent in the costs of the proceedings, in proportion to their respective failure (25.54% for the Claimant and 74.46% for the Respondent).

The process value is set at €21,263.49, pursuant to paragraph a) of paragraph 1 of Article 97-A of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is set at €1,224.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, as well as paragraph 2 of Article 12 and paragraph 4 of Article 22, both of the RJAT, and paragraph 4 of Article 4 of the said Regulation, to be paid by the Claimant and Respondent, in proportion to their respective failure (25.54% for the Claimant and 74.46% for the Respondent).

Register and notify.

Lisbon, 31 October 2017.

The Arbitrator,

Alberto Amorim Pereira

Document prepared by computer, pursuant to paragraph 5 of Article 131 of the CPC, applicable by reference of paragraph e) of paragraph 1 of Article 29 of Decree-Law no. 10/2011, of 20/01.

[1] FRANCISCO RODRIGUES PARDAL, "The Use of Presumptions in Tax Law," in Science and Tax Technique, no. 325-327, page 20.

[2] In "Code of Tax Procedure and Process Annotated and Commented," Volume I, 6th Edition, Áreas Editora, Lisbon, 2011, p. 589.

[3] JORGE LOPES DE SOUSA, op. cit, pp. 590 et seq.

[4] See HEINRICH EWALD HÖRSTER, in "The General Part of the Portuguese Civil Code," 2nd Reprint of the 1992 Edition, Almedina, p. 467

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when the registered owner has already sold the vehicle before the tax becomes due?
Under Article 3 of the IUC Code, the taxable person is the vehicle owner, defined as the person in whose name the vehicle is registered. This case examined whether this provision creates a rebuttable presumption or an absolute legal fiction. The claimant argued that when vehicles are sold before registration allocation, the actual owner (purchaser) should be liable, not the registered owner. However, the Tax Authority maintained that registration determines liability regardless of underlying contractual arrangements, meaning the importer remained liable despite pre-registration sales to dealerships.
Can the legal presumption of vehicle ownership based on the automobile registry be rebutted for IUC purposes under Article 3 of the IUC Code?
The central legal dispute in this case concerned whether Article 3 of the IUC Code establishes a rebuttable presumption or an irrebuttable legal fiction. The claimant contended that the provision creates a rebuttable presumption, allowing taxpayers to prove actual ownership differs from registered ownership through sufficient evidence such as sale contracts and invoices. The Tax Authority argued Article 3 constitutes a legal fiction that absolutely equates the registered owner with the taxpayer, precluding rebuttal regardless of evidence showing prior sale or transfer of actual ownership.
Is a vehicle importer liable for IUC on cars sold to dealers before licence plate registration?
A vehicle importer faces IUC liability when registered as the vehicle owner at the tax due date, even if vehicles were sold to dealers before registration. In this case, the importer argued that pre-registration sales (evidenced by invoices with chassis numbers) transferred ownership before the tax event occurred. However, the Tax Authority maintained that registration formalities determine liability, and the importer's failure to promptly update vehicle registrations to reflect dealer ownership resulted in continued tax liability. The case turned on whether invoices and sale documentation could rebut the registered ownership status.
What is the legal distinction between constitutive and declarative effect of vehicle registration in Portuguese tax law?
Portuguese tax law distinguishes between constitutive effect (where registration creates the legal right) and declarative effect (where registration merely evidences a pre-existing right). The claimant argued vehicle registration has declarative effect, meaning ownership transfers upon sale contract conclusion, not registration. Therefore, invoices showing pre-registration sales proved they were not owners when IUC became due. The Tax Authority implicitly supported a constitutive approach for tax purposes, where registration formality determines the taxable person regardless of underlying ownership transfers, establishing a legal fiction linking registration to tax liability.
How can a taxpayer challenge IUC assessments through gracious complaint and tax arbitration under Decree-Law 10/2011?
Taxpayers can challenge IUC assessments by filing an administrative appeal (reclamação graciosa) within 120 days from the voluntary payment period end under Article 70(1) CPPT for assessments, or within two years under Article 131 CPPT for self-assessments. Following administrative appeal rejection, taxpayers may request tax arbitration under Decree-Law 10/2011 (RJAT) by submitting a request to CAAD within 90 days of the administrative decision. This case involved both procedural issues regarding timeliness of the administrative appeal for 48 assessments and substantive challenges to IUC liability based on vehicle ownership interpretation.