Process: 260/2015-T

Date: December 21, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

In Process 260/2015-T, the CAAD arbitral tribunal addressed the subjective incidence of IUC (Imposto Único de Circulação - Single Circulation Tax) when vehicle registration does not reflect actual ownership or possession. A financial institution challenged IUC assessments totaling €648.75 for 2013, arguing it should not be considered the taxpayer for vehicles that had been sold to third parties or delivered to lessees under active financial leasing contracts, despite remaining registered as owner. The central legal issue concerned the interpretation of Article 3 of the IUC Code, which defines taxpayers as owners - those in whose name vehicles are registered - and equates financial lessees and purchasers with retention of title to owners. The Tax Authority contended that Article 3 establishes an express, intentional rule without creating a legal presumption. The applicant argued that the provision creates a rebuttable legal presumption under Article 73 of the General Tax Law, which permits proof to the contrary for all tax presumptions. The tribunal aligned with established CAAD jurisprudence recognizing Article 3 as containing a rebuttable presumption. When actual ownership or possession diverges from registration records due to sale or leasing arrangements, the registered owner can rebut the presumption by demonstrating the vehicle was transferred or delivered under leasing contracts. This interpretation protects taxpayers from liability when they lack effective ownership or possession, ensuring IUC burden falls on the actual economic owner or user. The decision has significant implications for financial institutions engaged in vehicle leasing and sellers awaiting registration transfers, establishing that registration alone does not definitively determine tax liability when contradicted by underlying contractual relationships.

Full Decision

Arbitral Decision

I. Statement of Facts

  1. A…, S.A., legal entity No. …, with registered office at …, …, Lot …, …, in Lisbon, requested the establishment of an arbitral tribunal in tax matters, raising a request for an arbitral decision against the assessment acts for Single Circulation Tax (IUC) relating to the period of 2013 and the motor vehicles which, in a table attached to the petition, it identifies by their respective registration numbers. As a consequence of the said annulment, it requests that the Tax Authority be condemned to reimburse the amount which it considers was unduly paid, in the total sum of € 648.75, plus corresponding indemnatory interest.

  2. As the grounds for the request, presented on 16 April 2015, the applicant alleges, in summary, that, although the vehicles in question were registered in its name on the date to which the tax facts refer that relate to the contested assessments, it does not assume, as to the same, the status of taxpayer of the tax obligation, because:

a) the vehicles to which the assessments relate had already been transferred to third parties by purchase and sale contracts; or

b) the vehicles were delivered to their respective lessees under financial leasing contracts in force, in which the applicant assumes the position of lessor.

  1. In response to what was requested, the Tax and Customs Authority (TCA) pronounced that the present request for an arbitral decision was unmeritorious, maintaining in the legal order the contested tax assessment acts and, accordingly, for the acquittal of the defendant entity, raising, however, a preliminary issue relating to the absence of supporting documents proving the timeliness of presentation of the present request for an arbitral decision.

  2. The request for the establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 20 April 2015.

  3. In accordance with the provisions of item a) of section 2 of article 6 and item b) of section 1 of article 11 of Decree-Law No. 10/2011 of 20 January, as amended by article 228 of Law No. 66-B/2012 of 31 December, the Deontological Council appointed the signatory as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of that appointment on 12 June 2015.

  4. Duly notified of that appointment, the parties did not express the will to challenge the appointment of the arbitrator, in accordance with the combined provisions of article 11, section 1, items a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  5. Thus, in accordance with the provisions of item c) of section 1 of article 11 of the RJAT, as amended by article 228 of Law No. 66-B/2012 of 31 December, the single arbitral tribunal was established on 10 July 2015.

  6. Duly established, the arbitral tribunal is materially competent, in view of the provisions of articles 2, section 1, item a) of the RJAT.

  7. The parties have legal personality and capacity and have standing (articles 4 and 10, section 2 of the RJAT, and article 1 of Ordinance No. 112-A/2011 of 22/03).

  8. By order of 4 November 2015, the 15th of the same month was designated for the holding of the meeting provided for in article 18 of the RJAT. The parties being duly notified, the respondent came to request waiver of the holding of said meeting. With the agreement of the applicant and in view of the knowledge that results from the procedural documents, deemed sufficient, the request for waiver was accepted, the parties being given the opportunity to present written submissions.

  9. No submissions were presented. However, the applicant sent, to be attached to the record, copies of the contested assessments, to which the respondent objects on the ground of untimeliness of that attachment.

II. Statement of Facts

  1. With relevance to the examination of the issues raised, the following factual elements are highlighted which, based on the documentary evidence attached to the record, are considered proved:

12.1. The applicant is a financial credit institution, subject to the supervision of the Bank of Portugal.

12.2. In the scope of its activity, it grants financing intended for the acquisition of motor vehicles, namely through the conclusion of financial leasing contracts.

12.3. The applicant was duly notified of ex officio assessment acts for IUC relating to the tax periods and vehicles identified in a table attached to the petition, which is hereby deemed fully reproduced, in the total amount of € 648.75, of which € 616.01 relates to tax and € 32.74 to compensatory interest.

12.4. The applicant made voluntary payment of the tax to which said ex officio assessments relate, as reported by the competent Finance Service.

  1. There are no facts relevant to the decision on the merits that have not been proved.

III. Joinder of Claims

  1. The present request for an arbitral decision relates to various assessments of IUC. However, taking into account the identity of the tax facts, the tribunal competent to decide, and the grounds of fact and law invoked, the tribunal considers that nothing prevents, in view of the provisions of articles 3 of the RJAT and 104 of the CPPT, the joinder of claims.

IV. Legal Issues

  1. In the request for an arbitral decision the applicant submits for examination by this tribunal the lawfulness of the IUC assessment acts relating to the period of 2013 and the vehicles which it identifies in a table attached to said request, invoking the circumstance that, on the date to which the tax facts that gave rise to them refer, the vehicles had already been transferred to third parties or were delivered to their respective lessees under financial leasing contracts in which it figures as lessor, and therefore it does not assume the status of taxpayer of the tax that was assessed to it.

  2. It is therefore at issue whether the applicant should or should not be considered a taxpayer of IUC as to the vehicles and period to which the tax relates, duly identified in the request, which had already been transferred to third parties or as to which leasing contracts were in force, even though the transfers or such contracts had not been registered at the Motor Vehicle Registration Office, in which it remained identified as owner, the lessor.

  3. Regarding this matter, article 3 of the IUC Code provides, in its sections 1 and 2, that:

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

  1. Equated to owners are financial lessees, purchasers with retention of title, as well as other holders of purchase option rights by virtue of a leasing contract"

  2. According to the respondent's understanding, said rule does not contain any legal presumption, considering that "the legislator established expressly and intentionally that should be considered as such (as owners or in the situations provided for in section 2, the persons there stated) the persons in the name of which the same (the vehicles) are registered..."

  3. For its part, the applicant argues that that rule establishes a legal presumption, rebuttable in general terms and, in particular, by virtue of the provisions of article 73 of the General Tax Law according to which tax presumptions always admit proof to the contrary.

  4. This matter has been the subject of numerous decisions within the arbitral tribunals functioning in CAAD, generally in the sense of the merits of the respective requests, on the ground that the rule in question contains a legal presumption that admits proof to the contrary [i].

  5. Adhering without reservation to the position referred to above, it is dispensed with, as unnecessary and tedious, the reproduction of the respective reasoning, because in the present case nothing new is advanced on that matter.

Preliminary Issue

  1. Having summarized the relevant factual elements as well as the positions which, in the matter of interpretation of applicable law, are maintained by the parties, it is necessary, first of all, to analyze and decide the preliminary issue raised by the respondent which relates to the fact that the applicant did not attach to the request copies of the contested assessments.

  2. From such circumstance, according to what the respondent alleges, it results that "by choosing not to attach the copies of all the assessments now contested, when not only could it but should have done so, the Applicant prevents the Tribunal from being able to verify the respective period of voluntary payment of the tax and the fulfillment, or not, of the period of the request for establishment of the Arbitral Tribunal."

  3. And, with such ground, the respondent comes to contest the timeliness of the present request for an arbitral decision.

  4. As a consequence of the respondent's response, in which said preliminary issue is raised, the applicant came to attach to the present case the documents in question. The respondent considers, however, that such documents should have been delivered together with the request for decision and that, without justification, namely subsequent occurrence, they cannot be subsequently presented (CPC, article 423).

  5. After making various considerations on the proper functioning of the Arbitral Tribunal, namely on the relevance of procedural formalism, the respondent concludes by requesting the Tribunal that "it determine the removal of the documents now attached to the case or at least that the other tribunal cannot consider proved the facts that appear therein".

  6. With regard to this issue, the Tribunal considers that, the contested assessments being duly identified by the applicant in the request it filed, appearing in a table attached to it the identification of each vehicle by indication of its respective registration number, the period to which the tax relates as well as the number of the corresponding collection document, the documents to which the respondent refers do not assume relevance for the decision.

  7. In fact, said documents constitute official documents, issued by the Tax Authority itself, appearing in its respective records, namely computerized ones, and cannot fail to be part of the respective administrative file, because the notification of the assessment constitutes, in legal terms, a condition of its effectiveness.

  8. Requested the sending of the mentioned file, the Tribunal obtained from the competent Service of the TCA the information that "all procedures were made automatically, reason why strictly speaking there are no physical administrative files." From the same information, it also appears that the applicant made payment of the tax and interest subject to contest in the present case. However, whether digitalized or not, the file in question was not sent.

  9. The supporting documents of the notification of the assessments and of the respective period of voluntary payment, by which the timeliness of the request could be ascertained, would be unnecessary if that file had been sent to the Tribunal, as required by article 17, section 2 of the RJAT and, by subsidiary application, section 3 of article 8 of the CPTA. It was not sent timely nor, subsequently, when expressly requested.

  10. It is also pointed out that, in accordance with section 6 (former section 5) of article 84 of the CPTA, the failure to send the administrative file not only does not prevent the continuation of the case but also determines that the facts alleged by the plaintiff are considered proved if that failure has made proof impossible or of considerable difficulty.

  11. Thus, considering the sole responsibility of the respondent for the failure to send the administrative file, combined with the circumstance that the documents in question are official documents issued by the TCA and that, for the reason stated, should appear in said file, and also having regard to the principles stated in articles 16, item c) and 29, section 2 of the RJAT, relating to the autonomy of the Arbitral Tribunal in the conduct of the case and to speed, simplification and procedural informality, the Tribunal decided to accept the documents presented by the applicant, by which it is verified that the present request was timely presented.

  12. From the foregoing it results, therefore, that the preliminary issue raised by the Respondent is to be considered inconsistent, and therefore, the Tribunal considers unmeritorious the request formulated by it.

On the Merits of the Request

  1. Concluding, in line with the guidance that has invariably been followed by arbitral jurisprudence, that the rule of subjective incidence of the IUC establishes a rebuttable presumption, it is necessary to analyze the documentation offered by the applicant in order to know whether the same constitutes, or not, sufficient proof for its rebuttal.

  2. As referred to above, in the matter of facts, there are two situations to which the present request refers: the taxation in IUC of vehicles which, on the date of due date of the tax, would already be property of third parties, transacted by purchase and sale contracts celebrated with the applicant or which, remaining in the property of the applicant, were delivered to their respective lessees under financial leasing contracts.

  3. With regard to the first situation referred to, copies of the invoices that would evidence the transaction are presented as evidence (Docs. 1 to 7) and, as for the second, copy of the financial leasing contracts (Docs. 8 and 9).

On the Rebuttal of the Presumption

  1. Tax presumptions may be rebutted through the specific contradictory procedure provided for in article 64 of the CPPT or, alternatively, by means of administrative review or challenging the tax acts that are based on them.

  2. In the present case, the applicant did not use that specific procedure, and therefore the present request for arbitral decision is an appropriate means to rebut the presumption of subjective incidence of the IUC that supports the tax assessments whose annulment is the subject of the request, because it is a matter that falls within the scope of material competence of this arbitral tribunal (articles 2 and 4 of the RJAT).

  3. Appearing the applicant in the Motor Vehicle Register as owner of the vehicles identified in the request in the taxation period to which the contested assessments relate and having the vehicles in question, on the date of due date of the tax, already passed to the ownership of third parties, by purchase and sale contracts, or, in other cases, being transferred to third parties under leasing contracts, it remains to evaluate the proof presented, in order to determine whether it is sufficient to rebut the presumption established in section 1 of article 3 of the same Code.

  4. For rebuttal of said presumption, derived from the entry in the motor vehicle register, the applicant offers copy of the sale invoices as well as the financial leasing contracts celebrated on a date prior to the occurrence of the tax fact and in force on the date of due date of the tax.

On the Rebuttal of the Presumption Based on Commercial Invoices

  1. Pronouncing itself on the documentary evidence presented, the Respondent alleges that the invoices attached to the record do not constitute suitable documents to effect the proof sought in order to show that the Applicant is not the owner of the vehicles in the tax periods to which the assessments in question relate.

  2. In that sense, the respondent argues that "Invoices are not able to prove the execution of a bilateral contract as is purchase and sale, because such documents do not reveal by themselves an indispensable and unequivocal declaration of intent (i.e. acceptance) on the part of the alleged purchasers."

  3. In addition to the aspect referred to above, the respondent points out that from the analysis of the second copies of the invoices attached by the applicant one can verify that they present in their description distinct mentions.

  4. In fact, the respondent observes, "in some invoices attached one can read in the description field the mention 'SALE NOT LEASED' for example vehicle with registration number …-…-…, 'RESIDUAL VALUE' for example vehicle with registration number …-…-…, 'RESCISSION' for example vehicle with registration number …-…-…".

  5. Faced with the discrepancies noted, the respondent argues that, being at issue "an alleged single type of contract (i.e. a contract of purchase and sale of a motor vehicle) it would be expected to ascertain the existence of a uniform description, which does not appear in the present case, since various invoices attached to the request for arbitral decision include different descriptions, and therefore necessarily one is led to conclude for the existence of various distinct realities."

  6. The Respondent therefore concludes that "showing themselves the invoices nonconforming as they do, then it is necessary to conclude that such documents can never benefit from the presumption of truth to which article 75 of the LGT refers."

  7. It is therefore at issue whether the invoices that evidence commercial transactions constitute evidence for rebuttal of the presumption contained in article 3 of the IUC Code and, if this is admitted, whether the copies of invoices presented by the Applicant constitute sufficient proof for the purpose.

  8. For that, it is necessary to bear in mind that, in the situation under analysis, one is dealing with contracts of purchase and sale which, relating to movable things and not being subject to any special formalities (Civil Code, article 219), operate the corresponding transfer of real rights (Civil Code, article 408, section 1).

  9. Being contracts which involve the transfer of ownership of movable property by means of payment of a price, such have, as essential effects, among others, that of delivery of the thing (Civil Code, articles 874 and 879).

  10. However, being at issue a contract of purchase and sale which has as object a motor vehicle, in which registration is mandatory, its due performance presupposes the issuance of the declaration of sale necessary for the entry in the register of the corresponding acquisition in favor of the purchaser, as has been understood by the jurisprudence of the superior courts.[ii] Such declaration, relevant for registration purposes, may constitute proof of the transaction, but does not constitute the sole or exclusive means of proof of the transaction.

  11. For registration purposes, neither is any special formalism required, it being sufficient the presentation to the competent entity of a petition subscribed by the purchaser and confirmed by the seller who, by means of a declaration of sale confirms that the ownership of the vehicle was acquired by the purchaser by a verbal contract of purchase and sale (see Motor Vehicle Registration Regulation, article 25, section 1, item a).[iii]

  12. Notwithstanding these being the rules arising from the provisions of civil law relating to the informality of the transfer of movable things and, where applicable, of their respective registration, it cannot fail to be borne in mind that, in the situation under analysis, we are dealing with commercial transactions effected by a business entity in the scope of the activity which constitutes its corporate object.

  13. In that scope, the selling company is bound to the fulfillment of specific accounting and tax rules, in which invoicing assumes special relevance.

  14. First of all, by virtue of tax rules, the transferring entity of goods is obliged to issue an invoice relating to each transfer of goods, whatever may be the status of the respective purchaser (VAT Code, article 29, section 1, item b).

  15. Also in accordance with the provisions of tax rules, the invoice must comply with a certain form, detailed and regulated in articles 36 of the VAT Code and 5 of Decree-Law No. 198/90 of 19 June.

  16. It is based on that document issued by the supplier of the goods that the purchaser, when it is an economic operator, will deduct the VAT to which it has entitlement (VAT Code, article 19, section 2) - except if the tax paid on the acquisition of the vehicle, by the characteristics of this, is not deductible - and account for the expense of the transaction (Corporate Income Tax Code, articles 23, section 6 and 123, section 2).

  17. For its part, it is also based on the invoicing issued that the supplier of the goods should account for the respective revenues, as flows from the provisions of item b) of section 2 of article 123 of the Corporate Income Tax Code.

  18. Provided that issued in legal form and constitute elements of support of the accounting entries in accounting organized in accordance with commercial and tax legislation, the data that appear therein are covered by the presumption of truthfulness to which article 75, section 1 of the LGT refers.

  19. Considered therefore the relevance attributed by the tax legislation to the invoices issued in legal terms by commercial companies in the scope of their business activity and the presumption of truthfulness of the operations evidenced by them, it cannot fail to be considered that the same can constitute, by themselves, sufficient proof of the transfers invoked by the Applicant.

  20. However, the issuance of invoices in legal form presupposes that they contain, among other relevant elements, the usual designation of the transmitted goods, as results from the tax law (See VAT Code, article 36, section 5).

  21. As rightly points out the Respondent, it is manifestly not that situation evidenced in the present case.

  22. In fact, analyzing the copies of the invoices presented as proof of the transfer, by purchase and sale, of various vehicles, it is verified that, as regards the mention of the object of the transaction, there are described operations as "Sale not leased", "residual value", "Rescission" (Docs. 1 to 7). Such description, not conveying the usual designation of the transmitted good required by the tax law, does not allow to conclude that they evidence a contract of purchase and sale of anything.

  23. The applicant also presents, for purposes of rebuttal of that presumption and as documentary support of a possible vehicle transaction, copy of a loan contract (Doc. 10). The Tribunal considers that such document could only prove the loan that it evidences, but not already the transaction of the motor vehicle to whose acquisition it appears to be intended.

  24. In these terms, aligning itself with the position of the respondent, it is considered that the elements presented by the applicant (Docs. 1 to 7 and 10) do not constitute sufficient proof of the facts alleged for purposes of rebuttal of the presumption in question, and therefore the tax assessment acts to which refer the collection documents identified in the following table must be maintained in the legal order:

[Table of registration numbers, collection documents, tax amounts, interest amounts, and totals - with redacted information]

On the Rebuttal of the Presumption Based on Leasing Contracts

  1. With regard to situations, duly identified in the table attached to the request for decision, the applicant grounds the challenge of the respective assessments on the circumstance that they relate to vehicles which, on the date of due date of the tax, were delivered to the lessees under leasing contracts then in force.

  2. Under these conditions, taking into account the provisions of article 3, section 2 of the IUC Code, which provides for the equating to owners of financial lessees, the applicant considers that it cannot be imputed to it, as to said vehicles, the status of taxpayer of the tax obligation.

  3. As proof of what was alleged, the applicant attaches to the request copy of financial leasing contracts relating to the vehicles with registration numbers …-…-… - beginning on 24.12.2011 and ending on 24.12.2015 - and …-…-… - beginning on 24.8.2008 and ending on 24.8.2014 (Docs. 8 and 9).

  4. With regard to this matter, the respondent understands that "if one were to follow the thesis upheld by the Applicant as to the fact that article 3 of the IUC Code establishes a rebuttable presumption, one would necessarily have to conclude that such presumption would only be removed by the timely fulfillment of the rule of article 19 of the same Code, which establishes for lessors the obligation to communicate to the Tax Authority the identification of the lessees"

  5. In addition to the position expressed as to the non-compliance with the duty of communication provided for in article 19 of the IUC Code, the Respondent understands that the said contracts, "in addition to being accompanied by documentation without any date, prove nothing, namely in the absence of payments of leasing rents, that effectively the vehicles were in the year 2013 in the situations referred to by the Applicant."

  6. However, it not being directly questioned the formal validity of the financial leasing contracts attached by the Applicant, nor being seen from the copies presented any irregularities or insufficiencies, it is considered documentarily proved that on the date of due date of the tax the vehicles to which they refer, although being property of the applicant, were by this one given in the regime of financial leasing to third parties.

  7. Considered the positions of the parties, as briefly stated above, and considered documentarily proved what was alleged by the applicant, it is verified that the issue to be decided centers on knowing whether the verification of the circumstance provided for in section 2 of article 3 of the IUC Code removes or not the rule of incidence established in section 1 of the same article, namely in the case of non-compliance with the provisions of article 19 of the IUC Code.

  8. This provision establishes that "For purposes of the provisions of article 3 of the present code, as well as in section 1 of article 3 of the law of its respective enactment, the entities that engage in financial leasing, operational leasing or long-term hire of vehicles are obliged to provide to the General Tax Directorate the data relating to the tax identification of the users of the leased vehicles."

  9. From the rule of section 2 of article 3 of the IUC Code, combined with the aforementioned article 19 of the same Code, there subsist no doubts that, with the vehicles in the regime of financial leasing, the taxpayer of this tax will be the lessee and not the respective owner, being thus removed the rule of subjective incidence of section 1 of that article, provided that said communication is made or, alternatively, sufficient proof is provided to rebut the presumption that it contains.

  10. It will not be, however, the respondent's understanding which, admitting by mere hypothesis that "if one were to follow the thesis upheld by the Applicant as to the fact that article 3 of the IUC Code establishes a rebuttable presumption, then it is necessary to conclude that the operation of that article (i.e. the rebuttal of the presumption) depends equally on the fulfillment of what is provided in article 19 of the IUC Code, as is gathered from its literal wording ('for purposes of article 3 of the present Code...')"

  11. As a consequence of that understanding, the respondent argues that "In the matter of financial leasing and for purposes of the rebuttal of article 3 of the IUC Code, it is necessary that the financial lessors (as the Applicant) comply with the obligation inherent in article 19 of that Code to exempt themselves from the obligation of payment of the tax."

  12. The respondent concluding that "the Applicant provided no proof as to the fulfillment of this obligation ... as moreover was incumbent on it, for which reason the sought rebuttal of article 3 at issue here must necessarily fail" and "...not having the Applicant complied with that obligation, it is necessary to conclude that that one is the taxpayer of the tax."

  13. Recognizing, although, that the financial lessors of motor vehicles are bound by the obligation to communicate to the Tax Authority the tax identification of the lessees, it is not possible to agree with the respondent's understanding in the sense that owners only exempt themselves from the tax obligation if they complied with said obligation.

  14. This matter has been the subject of various arbitral decisions, recalling for this purpose the Arbitral Decision of 14 July 2014 in Proc. 136/2014-T:

"In fact, the provisions of article 3, section 2 of the IUC Code are very clear as to the subjective incidence of the IUC during the validity of financial leasing contracts, subjecting the lessee to that obligation, when it equates it to the owner for this purpose.

Thus being, not assigning the law that obligation to the owner-lessor, there will be no occasion for any exemption on the part of this one with the communication provided for in the aforementioned article 19 of the IUC Code, for the simple reason of never having been subject to payment of the tax.

The subjective incidence of the IUC is established in all its elements in article 3 of the IUC Code, and it will be through the application of this normative provision that the taxpayer will be ascertained, not being relevant for purposes of the incidence of the tax the failure of fulfillment of the aforementioned ancillary obligation." [iv]

  1. It is therefore to this jurisprudential guidance to which, without reservation, adherence is given.

  2. Concluding thus that, in the situation under analysis, having been made documentary proof that on the date of due date of the tax there were in force financial leasing contracts relating to the vehicles with registration numbers …-…-… and …-…-…, and considered rebutted the presumption of ownership derived from the motor vehicle register embraced in section 1 of article 3 of the IUC Code, shall be proceeded to the annulment of the respective assessments, on the ground of illegality and error in the prerequisites, with the consequent reimbursement of the tax unduly paid.

On the Request for Indemnatory Interest

  1. Alongside the annulment of the assessments and consequent reimbursement of the amounts unduly paid, the applicant also requests that there be recognized to it the right to indemnatory interest, under article 43 of the LGT.

  2. The examination of the request is only situated as regards the assessments whose annulment is determined, in the terms stated above.

  3. This is a matter that has already been the subject of various arbitral decisions, standing out from the start the one that was handed down in proceeding No. 26/2013-T which, no reason being seen that justifies its alteration, will be closely followed in the present case.

  4. In fact, in the terms of the rule of section 1 of that article 43 of the LGT, indemnatory interest is due "when it is determined in administrative review or judicial challenge that there was error attributable to the services from which results payment of the tax debt in an amount greater than the legally owed." Beyond the means referred to in the rule that is transcribed, we understand that, as flows from section 5 of article 24 of the RJAT, the right to the aforementioned interest can be recognized in the arbitral proceedings and thus the request is examined.

  5. The right to indemnatory interest to which the norm of the LGT above referred presupposes that there has been paid tax for an amount greater than the legally owed and that such derives from error, of fact or of law, attributable to the services of the TCA.

  6. In the present case, even though it is recognized that the tax paid by the applicant is not due, relating to the IUC relating to the vehicles with registration numbers …-…-… and …-…-… and to the tax period of 2013, because it is not the taxpayer of the tax obligation, and it is determined, as a consequence, its respective reimbursement, it is not seen that, in its origin, is found the error attributable to the services, which determines such right in favor of the taxpayer.

  7. In fact, in promoting the ex officio assessment of the IUC considering the applicant as taxpayer of this tax, the TCA confined itself to complying with the rule of section 1 of article 3 of the IUC Code which, as referred to above, imputes such status to the persons in the name of which the vehicles are registered.

  8. On the other hand, also as was already concluded, said rule has the nature of a legal presumption, from which flows for the TCA the right to assess the tax and demand it from those persons, without the need to prove the facts that lead to it, as expressly provided by section 1 of article 350 of the Civil Code.

  9. In the situation at issue, covered by the incidence rule of section 2 of said article, which establishes the subjection to tax of the lessee in case of existence of a financial leasing contract, it would be incumbent on the applicant to communicate to the Tax Authority the identification of the respective lessees, as flows from article 19 of the IUC Code. Not complying with this obligation, the applicant, through its behavior, legitimized the assessment that was imputed to it, based on the presumption established in section 1 of article 3 of said Code.

  10. From the foregoing, it can be concluded for the non-existence of error attributable to the Tax Authority, for which reason the applicant does not have the right to indemnatory interest that it petitions for with reference to the amounts unduly paid relating to the assessments whose annulment is now decided.

V. DECISION

In these terms, and with the grounds stated, the Arbitral Tribunal decides:

a) To judge the preliminary issue raised by the Tax Authority unmeritorious.

b) To judge the request unmeritorious as regards the assessments relating to the vehicles identified in the table inserted in point 64 that precedes.

c) To judge the request for an arbitral decision meritorious as regards the illegality of the assessments relating to the vehicles with registration numbers …-…-… and …-…-…, to which relate the collection documents 2013 … and 2013…, determining their annulment and consequent reimbursement of the amounts unduly paid.

d) To judge the request unmeritorious as regards the recognition of the right to indemnatory interest in favor of the applicant.

Value of the Case: € 648.75

Costs: Under article 22, section 4 of the RJAT, and in the terms of Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 306.00, at the expense of the applicant and the Respondent (TCA), in the proportion of their respective success, being € 221.54 and € 84.46, respectively.

Lisbon, 21 December 2015

The Arbitrator, Álvaro Caneira

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle has been sold but remains registered in the seller's name?
When a vehicle has been sold but remains registered in the seller's name, the determination of the IUC taxpayer depends on whether the seller can rebut the legal presumption established by Article 3(1) of the IUC Code. While this provision presumes that the person in whose name the vehicle is registered is the owner and therefore the taxpayer, CAAD arbitral tribunals have consistently held this constitutes a rebuttable presumption under Article 73 of the General Tax Law. The seller can demonstrate through purchase and sale contracts and other evidence that ownership was effectively transferred to the buyer, thereby shifting IUC liability to the actual owner despite the registration not yet reflecting this transfer. The registered owner is not automatically liable when they can prove they no longer hold economic ownership or possession of the vehicle.
Can a financial leasing company (locador) be exempt from IUC liability on vehicles delivered to lessees under active leasing contracts?
Yes, a financial leasing company acting as lessor (locador financeiro) can be exempt from IUC liability on vehicles delivered to lessees under active financial leasing contracts. Although Article 3(1) of the IUC Code presumes the registered owner is the taxpayer, Article 3(2) specifically equates financial lessees to owners for IUC purposes. CAAD tribunals recognize that Article 3(1) creates a rebuttable presumption. When the lessor demonstrates that vehicles were delivered to lessees under valid financial leasing contracts, the IUC liability transfers to the lessee as the actual economic user and holder of the purchase option right. The lessor, despite remaining the registered owner, is not the proper taxpayer during the active leasing period, as the lessee assumes the position equivalent to owner under the statutory framework and holds effective possession and use rights.
What is the subjective incidence rule for Imposto Único de Circulação (IUC) under Portuguese tax law?
The subjective incidence rule for IUC under Portuguese tax law is governed by Article 3 of the IUC Code. Section 1 establishes that taxpayers are the owners of vehicles, defining owners as natural or legal persons in whose name vehicles are registered at the Motor Vehicle Registration Office. Section 2 equates to owners: financial lessees, purchasers with retention of title, and holders of purchase option rights under leasing contracts. While the provision creates a formal connection between registration and tax liability, CAAD arbitral jurisprudence consistently interprets this as a rebuttable legal presumption rather than an absolute rule. Under Article 73 of the General Tax Law, all tax presumptions admit proof to the contrary. Therefore, the subjective incidence depends primarily on registration, but the registered owner can demonstrate that actual ownership, possession, or economic control lies with another party who should properly bear the IUC obligation.
How does the CAAD arbitral tribunal handle disputes over IUC liquidation acts when vehicle registration does not reflect actual ownership?
The CAAD arbitral tribunal handles disputes over IUC liquidation acts when vehicle registration does not reflect actual ownership by applying the principle that Article 3 of the IUC Code creates a rebuttable legal presumption. The tribunal examines evidence presented by the registered owner to determine whether they have successfully rebutted the presumption of being the taxpayer. Acceptable evidence includes purchase and sale contracts demonstrating transfer of ownership, financial leasing agreements showing delivery to lessees, and documentation proving the registered owner no longer exercises economic control or possession. When the tribunal determines that actual ownership or the equivalent position diverges from registration records, it recognizes that the registered owner is not the proper taxpayer. This approach aligns with established CAAD jurisprudence prioritizing economic substance over registration formalities, ensuring IUC liability falls on those who actually own, possess, or derive economic benefit from vehicle use during the relevant tax period.
Is the taxpayer entitled to a refund and compensatory interest (juros indemnizatórios) when IUC is charged to the wrong taxable person?
Yes, the taxpayer is entitled to both a refund of the principal amount and compensatory interest (juros indemnizatórios) when IUC is charged to the wrong taxable person. When the arbitral tribunal determines that the registered owner successfully rebutted the presumption under Article 3 of the IUC Code and was not the proper taxpayer, the assessment acts are annulled as unlawful. The taxpayer who made voluntary payment of the incorrectly assessed tax has the right to reimbursement of the full amount paid. Additionally, compensatory interest is due pursuant to Article 43 of the General Tax Law, which provides for interest on amounts unduly paid to the Tax Authority. This interest compensates for the financial prejudice suffered by the taxpayer who was deprived of funds that were not legally due. The combined refund of principal and compensatory interest aims to restore the taxpayer to the economic position they would have occupied had the incorrect assessment not occurred.