Process: 264/2013-T

Date: May 14, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitral case (264/2013-T) concerns the challenge to Motor Vehicle Tax (IUC) assessments and compensatory interest for the year 2008, totaling €160.66. The claimant company contested three IUC assessments issued in November 2012 for vehicles it claimed to have sold in 2004. The company filed a reclamação graciosa on May 8, 2013, which was rejected by the 2nd Finance Service of Porto on October 29, 2013. Rather than pursuing hierarchical appeal or judicial review, the company opted for tax arbitration under the LRAT regime. The central legal issue involves the conflict between formal registration records and material truth regarding vehicle ownership. The Tax Authority (AT) based its assessments solely on IMTT and Motor Vehicle Registration Office databases showing the company as registered owner in 2008, despite documentary evidence of sales in 2004. The claimant argued this violated the principle of material truth under Article 58 of the General Tax Law, which requires the AT to investigate the true facts. The company contended the assessments violated the contributory capacity principle (Article 4(1) of the General Tax Law) by taxing ownership of assets it no longer possessed. The case raises important questions about rebuttable presumptions in tax law, specifically whether the ownership presumption in Article 3(1) of the IUC Code can be overcome with proof of sale, and whether the AT can rely exclusively on registration databases when contradictory evidence exists. The claimant sought annulment of the assessments, refund of amounts paid, indemnity interest, and litigation costs.

Full Decision

CAAD: Tax Arbitration

Case No. 264/2013 – T

Subject: IUC – illegality of assessment acts; compensatory interest; reimbursement; indemnity interest.

Arbitral Decision

I. Report

  1. On 25-11-2013, company A, S.A., NIPC ... filed a request for constitution of a single arbitral tribunal, in accordance with the combined provisions of Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as LRAT), with a view to the illegality of the assessment acts for Motor Vehicle Tax (IUC) and compensatory interest, relating to the year 2008, in the total amount payable of 160.66 euros, the recognition of the right to reimbursement of the tax unduly paid, plus indemnity interest, calculated on the aforementioned amount, until the complete and full reimbursement thereof and compensation for litigation costs;

  2. In accordance with paragraph 1 of Article 6 of the LRAT, the Deontological Council of the Arbitration Centre appointed the undersigned arbitrator, notifying the parties.

  3. The tribunal is duly constituted to consider and decide the subject matter of the case.

  4. The allegations supporting the request for arbitral decision by the Claimant are, in summary, as follows:

4.1. On 08.05.2013, the Claimant submitted to the 2nd Finance Service of Porto a gracious complaint against the Motor Vehicle Tax (IUC) and compensatory interest assessments, relating to the year 2008, in the total amount payable of 160.66 euros.

4.2. The aforementioned procedure, to which the number ... was assigned, was expressly rejected by order of the Chief of the 2nd Finance Service of Porto, notified to the claimant by official letter No. ..., of 29.10.2013.

4.3. With the aforementioned notification, the claimant was also notified that, from the aforementioned order, it could appeal hierarchically within 30 days, or file judicial review in accordance with Articles 76 and 102 of the Tax Procedure Code (CPPT), within 15 days, but the claimant instead chose to submit the matter to the present Arbitral Tribunal in accordance with the LRAT.

4.4 The Claimant was notified of the following Motor Vehicle Tax (IUC) and Compensatory Interest (CI) assessments relating to the year 2008:

Document No. ..., of 28.11.2012, relating to the vehicle with registration plate ..., in the amount payable of 53.97 euros - being 46.00 euros relating to IUC and 7.97 euros relating to compensatory interest;

Document No. ..., of 27.11.2012, relating to the vehicle with registration plate ..., in the amount payable of 53.19 euros - being 46.00 euros relating to IUC and 7.19 euros relating to compensatory interest; and

Document No. ..., of 27.11.2012, relating to the vehicle with registration plate ..., in the amount payable of 53.50 euros - being 46.00 euros relating to IUC and 7.50 euros relating to compensatory interest.

4.5. The claimant made full payment of the aforementioned assessments in question - paid the assessment with document No. ... on 03.01.2013 and paid the assessments with document No. ... and document No. ... on 08.05.2013.

4.6. By official letter of 02.10.2012, the claimant was notified to exercise its right to prior hearing, due to the alleged failure to pay the motor vehicle tax relating to the year 2008, relating to the aforementioned vehicles.

4.7. On 22.10.2012, the claimant exercised its right to prior hearing, where it alleged, in summary, that it was not liable for any tax, since in the year in question, 2008, it was no longer the owner of the aforementioned vehicles.

4.8. The Claimant notified the Tax Authority that the vehicles with registration plates ... and ... were sold on 02.09.2004, to B, NIF ... .

4.9. and informed, likewise, that the vehicle with registration plate ..., was sold on 19.05.2004, to C, NIF ... .

4.10. By official letter No. ..., of 25.10.2012, the Claimant was notified of the decision of final rejection in the following terms:

"As long as the registration plate is not cancelled in the IMTT database: the competent service for its cancellation - or the property altered in the Motor Vehicle Registration Office, the vehicle will continue in the name of the respective owner, being the same responsible for payment of the corresponding IUC."

4.11. Not agreeing with the aforementioned decision, the Claimant submitted, on 08.05.2013, the appropriate gracious complaint, to which the Finance Directorate of Porto assigned the number... .

4.12. Subsequently, the Claimant was notified of the draft rejection of the gracious complaint, through official letter No. ..., of 01.10.2013, which states the following:

"The database of the Tax Administration - AT - is constituted by elements provided by the Institute of Records and Notaries - IRN (Motor Vehicle Registration Office) - and by the Institute of Mobility and Land Transport - IMTT.

It is on the basis of this database that the AT proceeds to assess the IUC."

4.13. The Claimant exercised the right to prior hearing, having reiterated that it was not the owner of the aforementioned vehicles, again providing documentary proof of this fact - the respective sales declarations,

4.14. which would attest that, in the year 2008, the aforementioned vehicles were no longer the property of the Claimant since, at least, the year 2004.

4.15. The Claimant has even taken action with the Institute of Mobility and Land Transport, I.P. (IMTT) to obtain the vehicle documents - a fact that is known to the AT.

4.16. Despite this, the AT merely referred to its own databases, to conclude that the claimant was the owner of the vehicle in 2008, thus rejecting the gracious complaint.

4.17. In fact, the AT stated in the draft rejection: "having verified the notations at the Motor Vehicle Registration Office, it was concluded, similarly to what had already happened in the analysis carried out by the AT in the context of the exercise of the right to hearing exercised by the claimant, that all vehicles are registered in the name of the same. (...) It thus follows from the law that, although the appellant alienated the vehicles on a date prior, was on the date of maturity of the IUC, the passive subject and as such responsible for payment of the corresponding IUC."

4.18. The Claimant considers that the AT is carrying out taxation only on the basis of "formal truth", despite the law imposing on it, in the procedure, the official performance of all necessary steps to discover the material truth (art. 58 of the General Tax Law).

4.19. According to the Claimant, the AT considers that it is the passive subject of the IUC of the year 2008, only because the vehicles were registered in its name, even though the Claimant does not meet the criterion of subjective scope - that is, that it was not the owner of them.

4.20. The AT would therefore be aware of the material assumptions of taxation - namely that the Claimant is not the addressee of the applicable taxation rule, because it is not its contributory capacity, revealed by the ownership of an asset, that is intended to be affected by means of the tax in question.

4.21. Therefore, the tax act that it is intended to annul would tax the ownership of another's property, thus violating Article 4, paragraph 1 of the General Tax Law, which establishes that taxes are based on contributory capacity revealed by ownership of certain goods - likewise violating the inherent principle of contributory capacity.

4.22. The taxation would thus result from the presumption of ownership of a property in the legal sphere of the Claimant, as a criterion for the scope of IUC, by mere reference to a "database", completely disregarding the documentary proof provided.

4.23. It happens that in tax law, irrebuttable presumptions are not admissible at the level of tax scope, and therefore the presumption of art. 3, No. 1 of the IUC Code should be considered a rebuttable presumption, in accordance with the general rules and, in particular, by virtue of the provision of art. 73 of the General Tax Law,

4.24. and also that the means of proof presented have in their favour the presumption of truthfulness conferred on them by art. 74, No. 1 of the General Tax Law and are suitable for rebutting the presumption on which the IUC assessments are based.

4.25. The Claimant thus considers itself to have demonstrated to the AT that it was no longer the owner of the vehicles in question, which would exclude it from the subjective scope of IUC in relation to them, being consequently illegal the assessment of the tax.

4.26. The Claimant likewise considers that, since it is not, and never has been, in default of any tax, the assessment of compensatory interest in question does not comply with Article 35 of the General Tax Law, in particular as regards the verification of the requirements for its assessment.

4.27. The Claimant, within the legal time limit, made full payment of the tax in the amount of 160.66 euros, therefore, in addition to the reimbursement of that amount, claiming also the payment of the respective indemnity interest.

4.28. In fact, there is a clear error of the Tax Authority Services in the assessment of the tax in question or, at least, an error of the Tax Authority Services in the rejection of the gracious complaint - conferring on the claimant the right to indemnity interest.

  1. For its part, the Respondent Tax Authority and Customs Authority filed a reply, in which it defended itself in the following terms:

5.1 Contrary to what was claimed by the Claimant in its request for arbitral decision, there was no violation either of the principle of participation, by failure to hold a prior hearing, or of the principle of inquisitorial investigation, since the AT did not ignore the documents presented at the prior hearing, nor did it refrain from carrying out additional steps to discover the material truth, having disagreed with reason from the arguments brought to the case by the passive subject, and therefore justifiably disregarded the documents presented.

5.2. The AT considers that, whether from a literal interpretation, or from a systemic and also teleological interpretation, it follows that the tax legislator, in establishing in Article 3, No. 1 of the IUC Code who are the passive subjects of the IUC, expressly and intentionally established that these are the owners (or in the situations provided for in No. 2, the persons mentioned there), being considered as such the persons in the name of which they are registered.

5.3. It being not manifestly possible to argue that this is a presumption, as the Claimant contends, but rather that this is a clear choice of legislative policy adopted by the legislator, whose intention, within its freedom of legislative shaping, was that, for the purposes of IUC, those who appear in the register as owners of the vehicles should be considered owners.

5.4. In addition to the provision of Article 3, No. 1 of the IUC Code, this understanding also results from other rules enshrined in the aforementioned Code, such as Article 6, Nos. 1, 2 and 3 and Article 3, No. 2.

5.5. This is, moreover, the understanding already adopted by the case law of our administrative and tax courts, since, in the context of Case No. 210/13.0BEPNF, the Administrative and Tax Court of Penafiel accepted the position advocated by the AT, in the terms above explained, having decided on the lack of merit of the appeal filed by the passive subject, with the following reasoning:

"The taxable event of the IUC is determined by art. 6, No. 1, of the IUC Code, being constituted by the ownership of the vehicle, as attested by the registration plate or registration in national territory. That is, as long as the vehicle has a registration plate or is registered in national territory (art. 2 of the IUC Code - objective scope), IUC is due by the owner of the vehicle, being considered as such the natural or legal person, of public or private law, in the name of which it is registered, who is the passive subject of the tax (art. 3, No. 1, of the IUC Code - subjective scope). The ownership and actual possession of the vehicle is irrelevant for the verification of the subjective and objective scope and the taxable event of the tax. It appears from the appeal that the appellant admits that in 2008 the vehicle was registered in its name, despite not being its owner since 15.12.2006. But, regardless of whether the registration of the right of property in the motor vehicle register is mandatory (art. 5, Nos. 1, a), and 2, of Decree-Law No. (DL) 54/75, of 12 February) and that the appellant sold the vehicle on 15/12/2006, in the case of IUC, the question is not about the inference of the presumption of the right of property derived from the motor vehicle register, nor the rebuttal of the presumption of registration of the right of property in the motor vehicle register. What is at issue is the determination of the taxable event of the tax and the determination of its subjective scope, which are fixed by the right of property of the vehicle 'as attested by the registration plate or registration in national territory', that is, regardless of the presumptions derived from the motor vehicle register and their inference and/or rebuttal. In accordance with arts. 1 to 6 of the IUC Code, in particular art. 3, No. 1, of the IUC Code, all elements of subjective and objective scope - taxable event and exigibility of the tax - are verified for the assessment of IUC of the aforementioned vehicle in 2008 in the name of the appellant, regardless of the transfers of the right of property of the vehicle and there is no exemption. The sale of the vehicle on 15/2/2006 is irrelevant. For the assessment of IUC of 2008 and the determination of the responsible party for its payment, the only relevant facts are the maintenance of the registration plate and motor vehicle registration in national territory and the registration of the right of property in the Motor Vehicle Registration Office regardless of its actual alienation. The seller has the duty, at the moment of alienation, to take care to proceed with the registration of the sale for the new acquirer, being the only way of ensuring that the registration is carried out for the new acquirer. In the case at hand, in 2008 there was no cancellation of the registration plate and until then the vehicle was registered in Portugal and its ownership was registered in the name of the appellant. Therefore, it is in the appellant that the taxable event of the tax and the elements of objective and subjective scope of the IUC are verified (arts. 2, 3 and 6, No. 1 of the IUC Code). The lack of registration in the name of the new acquirer means that the subjective scope of the IUC (art. 33, No. 1 of the IUC Code) only remains with the holder of the right of property registered in the Motor Vehicle Registration Office and is responsible for the assessment and payment of the IUC, regardless of its actual alienation. Therefore, the assessment of IUC relating to 2008 in the name of the appellant does not suffer from any illegality and the failure to pay the respective tax within the legal period is also its responsibility, constituting the failure to pay within the legal period (art. 179, No. 2, of the IUC Code) an administrative infraction provided for and punished by art. 114, No. 2, of the General Rules of Tax Infraction Code".

5.10. By virtue of this case law, the Respondent considers that the submission of the sales invoices of the vehicles to which the IUC assessments in question pertain does not allow the rebuttal of the legal presumption provided for in Article 3, No. 1 of the IUC Code, since those only prove that the entity in the name of which the vehicles are registered was no longer the owner thereof at the date when the tax should have been assessed, which would not mean that it was not therefore a passive subject of IUC.

5.11. Indeed, the tax legislator, in establishing in Article 3, No. 1 who are the passive subjects of IUC, expressly and intentionally established that these are the owners (or in the situations provided for in No. 2, the persons mentioned there), being considered as such the persons in the name of which they are registered.

5.12. The AT emphasizes that the legislator did not use the expression "are presumed", as it could have done, which demonstrates that it did not establish a presumption resulting from the registration, but rather a rule of scope.

5.13. Indeed, the tax regulations are full of provisions analogous to that enshrined in the final part of No. 1 of Article 3, in which the tax legislator, within its freedom of legislative shaping, expressly and intentionally, enshrines what should be considered legally, for purposes of scope, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence of location, among many others.

5.14. In these terms, it is imperative to conclude that, in the case of the present arbitral proceedings, the legislator expressly and intentionally established that those [as owners or in the situations provided for in No. 2, the persons mentioned there] are to be considered the persons in the name of which they [the vehicles] are registered, since it is this interpretation that preserves the unity of the legal-tax system.

5.15. To understand that the legislator enshrined here a presumption would unequivocally be to carry out an interpretation against the law.

5.16. Also the systematic element of interpretation of the law demonstrates that the solution advocated by the Claimant is intolerable, not finding the understanding advocated by it any support in law.

5.17. This results not only from the aforementioned No. 1 of Article 3 of the IUC Code, but also from other rules enshrined in the aforementioned Code.

5.18. In these terms, and in the same sense, Article 6 of the IUC Code, under the heading "Taxable Event and Exigibility", in its No. 1, establishes that: "The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration plate or registration in national territory."

5.19. From the combination of the scope of subjective scope of IUC and the constitutive fact of the corresponding tax obligation, it follows unequivocally that only the legal situations object of registration (without prejudice, the permanence of a vehicle in national territory for a period exceeding 183 days, provided for in No. 2 of Article 6) give rise to the birth of the tax obligation.

5.20. For its part, No. 3 of the same article provides that "the tax is considered exigible on the first day of the taxable period referred to in No. 2 of Article 4".

5.21. That is, the moment from which the tax obligation is constituted has a direct relationship with the issuance of the registration certificate, which must contain the facts subject to registration. (Compare with the provision of No. 2 of Article 4 and No. 3 of Article 6, both of the IUC Code, in No. 1 of Article 10 of Decree-Law No. 54/75, of 12 February and in Article 42 of the Motor Vehicle Registration Rules.)

5.22. In the same sense, the legislative solution adopted by the tax legislator in No. 2 of Article 3 of the IUC Code operates, by making the equivalences enshrined there coincide with the situations in which the motor vehicle register obligates to the respective registration.

5.23. Even if it is admitted that, from the point of view of the rules of civil law and property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effect, in accordance with what is established in the IUC Code (which in the case at hand constitutes special law, which, in accordance with the general rules of law derogates the general rule), the tax legislator intentionally and expressly wanted that those considered as owners, lessees, acquirers with reservation of ownership or holders of the right of purchase option in long-term rental, the persons in the name of which [the vehicles] are registered.

5.25. Indeed, it is the very ratio of the regime enshrined in the IUC Code that constitutes clear proof that what the tax legislator intended was to create a Unique Motor Vehicle Tax based on taxation of the owner of the vehicle as shown in the motor vehicle register (on this point, note that, from the outset, the cases exhaustively typified in Article 3 of the IUC Code, both in its No. 1, as in No. 2, correspond exactly to the cases of mandatory motor vehicle registration, in accordance with the Motor Vehicle Registration Code (CRA)).

5.26. Indeed, the IUC Code carried out a reform of the taxation regime of vehicles in Portugal, substantially altering the regime of automobile taxation, with the passive subjects of the tax becoming the owners shown in the property register, regardless of the circulation of the vehicles on the public road. That is, the Unique Motor Vehicle Tax became due by the persons who appear in the register as owners of the vehicles.

5.27 From all the above it is clear that the tax acts in question do not suffer from any defect of violation of law, in that in light of the provision of Article 3, Nos. 1 and 2 of the IUC Code and Article 6 of the same code, it was the Claimant, in the capacity of owner, the passive subject of the IUC, as attested by the Information relating to the history of ownership of the vehicles in question, contained in the Motor Vehicle Registration Office.

5.28. In light of Articles 43 of the General Tax Law and 61 of the Tax Procedure Code, the right to indemnity interest depends on the verification of the following assumptions: the tax being paid, the respective assessment having been annulled, in whole or in part, in gracious or judicial proceedings, determination, in gracious or judicial proceedings, that the annulment is based on error attributable to the services.

5.29. From all the above it is clear that the tax acts in question are valid and legal, because in conformity with the legal regime in force at the date of the tax facts, therefore, in casu, no error attributable to the services occurred.

5.30. Thus, the legal requirements that confer the right to the claimed indemnity interest are not met.

5.31. Moreover, even if it is understood, which is not conceded, that the tax is not due from the Claimant because the latter is not the passive subject of the tax obligation, still and as was decided by the Arbitral Tribunal constituted in the context of Case No. 26/2013T, as well as in the context of Case 170/2013T, it must be considered that there is no error attributable to the services that determines such a right in favour of the taxpayer.

5.32. As for compensation for costs resulting from the litigation, the arbitration process costs are established in the Rules of Costs in Tax Arbitration Proceedings.

  1. On 10-03-2014, an arbitral tribunal meeting was held, in accordance with Art. 18 of the LRAT, where the Representative of the Respondent was given the floor to pronounce on procedural matters and the need to schedule a new meeting for the conduct of oral arguments.

6.1 In the exercise of the floor, the Representative of the Respondent declared waiving oral arguments.

6.2 The Tribunal, in compliance with the provision of art. 18, No. 2 of the LRAT, set 15-04-2014 as the deadline for rendering the arbitral decision.

6.3 The Tribunal determined that the minutes be notified to the Claimant, being warned thereby that until the date of rendering the arbitral decision, it must proceed to payment of the subsequent arbitration fee, in accordance with No. 3 of Article 4 of the Rules of Costs in Tax Arbitration Proceedings, and communicate the same payment to the CAAD.

II - Procedural Requirements

  1. The necessary requirements for the issuance of an arbitral decision are met. Indeed:

7.1. The single Arbitral Tribunal is duly constituted. It is materially competent, in accordance with art. 2, No. 1, a) of the LRAT.

7.2. The parties have legal personality and capacity, are legitimate and are legally represented (cf. arts. 4 and 10, No. 2, of the LRAT and art. 1 of Administrative Regulation 112/2011, of 22 March.

7.3. Given that the requirements imposed by the provision of No. 1 of art. 3 of the LRAT are met, the combination of requests for annulment of the tax acts which are the subject matter thereof is permitted in the present case.

7.4. The case does not suffer from defects that would invalidate it.

III. Proved Facts

  1. Taking into account the statements of the parties, the tax administrative proceedings and the documentary evidence submitted to the record, the material facts relevant to the decision are set as follows:

8.1. The Claimant sold on 02.09.2004 the vehicles with registration plates ... and ... to B, NIF ..., having also sold on 19.05.2004 the vehicle with registration plate ..., to C, NIF ....

8.2. The Claimant was subject to the following Motor Vehicle Tax (IUC) and Compensatory Interest (CI) assessments relating to the year 2008:

Document No. ..., of 28.11.2012, relating to the vehicle with registration plate ..., in the amount payable of 53.97 euros - being 46.00 euros relating to IUC and 7.97 euros relating to compensatory interest;

Document No. ..., of 27.11.2012, relating to the vehicle with registration plate ..., in the amount payable of 53.19 euros - being 46.00 euros relating to IUC and 7.19 euros relating to compensatory interest; and

Document No. ..., of 27.11.2012, relating to the vehicle with registration plate ..., in the amount payable of 53.50 euros - being 46.00 euros relating to IUC and 7.50 euros relating to compensatory interest.

8.3. The Claimant made full payment of the aforementioned assessments in question - paid the assessment with document No. ... on 03.01.2013 and paid the assessments with document No. ... and document No. ... on 08.05.2013.

8.4. By official letter of 02.10.2012, the Claimant was notified to exercise its right to prior hearing, due to the alleged failure to pay the motor vehicle tax relating to the year 2008, relating to the aforementioned vehicles.

8.5. The Claimant notified the Tax Authority that the vehicles with registration plates ... and ... were sold on 02.09.2004, to B, NIF ....

8.6. and informed, likewise, that the vehicle with registration plate ..., was sold on 19.05.2004, to C, NIF ....

8.7. The Claimant took action with the Institute of Mobility and Land Transport, I.P. (IMTT) to obtain the vehicle documents.

8.8. By official letter No. ..., of 25.10.2012, the Claimant was notified of the decision of final taxation in IUC in the following terms:

"As long as the registration plate is not cancelled in the IMTT database: the competent service for its cancellation - or the property altered in the Motor Vehicle Registration Office, the vehicle will continue in the name of the respective owner, being the same responsible for payment of the corresponding IUC."

8.9. On 08.05.2013, the Claimant submitted to the 2nd Finance Service of Porto a gracious complaint against the Motor Vehicle Tax (IUC) and compensatory interest assessments, relating to the year 2008, in the total amount payable of 160.66 euros.

8.10. The aforementioned procedure, to which the number ... was assigned, was expressly rejected by order of the Chief of the 2nd Finance Service of Porto, notified to the Claimant by official letter No. 9629/3182-40, of 29.10.2013.

8.11. There are no unproved facts with relevance to the decision of the case.

IV. Of the Law

  1. It is necessary, therefore, to consider and decide:

  2. Given the positions assumed by the parties, the following issues are to be considered within the scope of the present case:

a) On the possible illegality of the assessment acts for Motor Vehicle Tax (IUC) and compensatory interest, relating to the year 2008, in the total amount payable of 160.66 euros and the recognition of the right to reimbursement of the tax

b) On the right to indemnity interest.

  1. Let us analyze these questions:

A) On the possible illegality of the IUC and compensatory interest assessment acts.

  1. It follows from the material facts proved that the Claimant was not the owner of the vehicles at the date of the assessment of the tax, having alienated them several years before.

  2. Article 6, No. 1 of the IUC Code establishes that "the taxable event of the tax is constituted by ownership of the vehicle".

  3. In accordance with Article 3, No. 1 of the IUC Code, those are considered owners "the persons in the name of which the same [vehicles] are registered", there being a clear divergence between the parties as to whether this rule should be considered as a presumption, or as a rule of scope, which established only the subjective scope of IUC based on motor vehicle registration.

  4. Although it is conceded that the letter of the law may indeed point in the direction indicated by the AT, the truth is that, in accordance with art. 9 of the Code, interpretation cannot be limited to the letter of the law, the interpreter having to reconstruct the legislative intent, taking into account the unity of the legal system, and being equally obliged to presume that the legislator enshrined the most reasonable solutions.

  5. Now, it follows expressly from art. 1 of the IUC Code that "the unique motor vehicle tax follows the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road costs that they cause, in realization of a general rule of tax equality".

  6. Now, it is clear that this objective pursued by the legislator would be totally put in question if the scope of IUC were carried out solely on the basis of motor vehicle registration, since in that case taxation would be established in relation to passive subjects who cause no environmental cost, being the same taxed fiscally by virtue of taxation assumptions that materially occur in another's sphere, which is totally contrary to the principle of equivalence mentioned in art. 1 of the IUC Code.

  7. It must therefore be concluded that the subjective scope of IUC results from ownership of the vehicle, which determines the possibility of it being used on the public road, reason why the scope ceases to apply to the owner and passes to the acquirer with reservation of ownership and the financial lessee or the holders of the right to purchase option in the lease contract (art. 3, No. 2, of the IUC Code), since it is these who use the vehicle and cause the environmental costs that the legislator intended to burden.

  8. In this framework, it is clear that the mere existence of a property registration is not sufficient to establish the subjective scope of IUC, the reference to registration being merely a presumption in order to facilitate the knowledge of the universe of passive subjects by the AT.

  9. Now, Article 73 of the General Tax Law provides that "the presumptions enshrined in the rules of tax scope always admit proof to the contrary", and therefore the AT should have admitted the rebuttal of the presumption.

  10. As stated in another decision of this Arbitration Centre, in Case No. 14/2013-T: "Addressing again the question of whether No. 1 of Article 3 of the IUC Code enshrines or not a presumption, in light of all the above, we cannot but pronounce ourselves in the affirmative for the reasons that precede (...). Thus, if the buyer, new owner of the vehicle, does not provide for the registration of his right of property, it is presumed that this right continues to be that of the seller and may, however, this presumption be rebutted by proof to the contrary, that is, proof by any means of the respective sale (Cf. arts. 1 of DL No. 54/75, 7 of the CRP and 350, No. 2, of the CC). In these terms, we are of the opinion that the AT cannot take advantage of the absence of updating the registration of the right of property, to require payment of the tax from the former owner in the name of which the vehicle is registered if, by any means, sufficient proof of the respective sale is presented to it".

  11. The same was also decided by this Arbitration Centre in Case 26/2013-T: "In the sense of the legal concept of presumption and in respect of the constitutional principles of equality and contributory capacity that the legislator attributes full effectiveness to the presumption derived from motor vehicle registration by accepting it, as such, in the definition of the subjective scope of this tax established in No. 1 of art. 3 of the IUC Code. Thus, one cannot but understand that the expression 'shall be considered as', contained in the aforementioned rule, configures a legal presumption, and that it is rebuttable, in general terms, and in particular, by virtue of the provision of art. 73 of the General Tax Law which determines that the presumptions enshrined in the rules of tax scope always admit proof to the contrary."

  12. This Arbitration Centre further emphasized, in Case No. 27/2013-T, that "the AT when it understands that the passive subjects of the IUC are, ultimately, the persons in the name of whom the motor vehicles are registered, without considering the probative elements that, both in the context of the prior hearing, and at a later moment, were presented to it, intended to identify the effective and true owners of the vehicles, is proceeding to the illegal assessment of the IUC based on the erroneous interpretation and application of the rules of subjective scope of the Unique Motor Vehicle Tax, contained in art. 3 of the IUC Code, whether at the level of provision or of enactment, which configures the practice of a tax act lacking legality due to error concerning the material and legal assumptions which determines the annulment of the corresponding tax acts".

  13. We can therefore understand that the IUC assessment acts and respective compensatory interest are illegal and that the value of the payment made will have to be reimbursed to the Claimant.

B) On the right to indemnity interest.

  1. The Claimant also requested payment of indemnity interest, under Article 43 of the General Tax Law.

  2. It follows from paragraph 1 of that article that "when it is determined, in gracious complaint or judicial review, that there was error attributable to the services from which results payment of the tax debt in an amount higher than legally due".

  3. We can further understand that, as follows from No. 5 of art. 24 of the LRAT, the right to indemnity interest can be recognized in arbitration proceedings.

  4. The Respondent AT considers, invoking the case law of this Arbitration Centre in Cases No. 26/2013T and 170/2013T, that there is no error attributable to the services that determines such a right in favour of the taxpayer, since the AT has to be based on the motor vehicle register database.

  5. We consider, however, in conformity with what was decided by this Arbitration Centre in Case 27/2013T, that, having the Claimant at the prior hearing advised that it was no longer the owner of the vehicles in question, there is manifestly an error attributable to the services when the AT purported to establish taxation based solely on the register.

  6. Taking into account what is established in Article 61 of the Tax Procedure Code and having verified the existence of error attributable to the services of the Tax Administration, from which resulted payment of the tax debt in an amount higher than legally due (see art. 43/1 of the General Tax Law), we can understand that the Claimant has the right to indemnity interest at the legal rate, calculated on the amount of 160.66 euros, which will be counted from 09-05-2013, until the full reimbursement of that same amount.

V – Decision

In view of the foregoing, this Arbitral Tribunal decides:

— To rule on the merits the request for declaration of illegality of the assessment acts for Motor Vehicle Tax (IUC) and compensatory interest, relating to the year 2008, in the total amount payable of 160.66 euros, consequently annulling the corresponding tax acts;

— To rule on the merits the request for condemnation of the Tax Administration to the reimbursement of the amount unduly paid, in the amount of 160.66 euros, plus indemnity interest at the legal rate, counted from 09-05-2013, until the full reimbursement of the aforementioned amount, condemning the Tax Authority and Customs Authority to make such payments.

The value assigned to the case is fixed at 160.66 euros (value indicated and not contested), and the value of the arbitration process costs at 306 euros in accordance with Table I of the Rules of Costs in Tax Arbitration Proceedings.

Costs to be borne by the respondent entity.

Lisbon, 14 May 2014.

The Arbitrator

(Prof. Doctor Luís Menezes Leitão)

Frequently Asked Questions

Automatically Created

What grounds can be used to challenge the legality of IUC (Imposto Único de Circulação) tax assessments in Portugal?
Grounds to challenge IUC assessments include: (1) violation of the contributory capacity principle when the taxpayer is not the actual vehicle owner despite registration records; (2) breach of the material truth principle under Article 58 of the General Tax Law when the Tax Authority ignores documentary evidence of vehicle sales; (3) improper application of irrebuttable presumptions regarding ownership under Article 3(1) of the IUC Code when the taxpayer provides proof of alienation; (4) procedural irregularities in the assessment process; (5) incorrect calculation of tax or compensatory interest; and (6) assessments based exclusively on registration databases (IMTT/Conservatória) without investigating contradictory evidence provided by the taxpayer.
Are taxpayers entitled to indemnity interest when IUC tax assessments are declared illegal by a CAAD arbitral tribunal?
Yes, taxpayers are entitled to indemnity interest (juros indemnizatórios) when IUC assessments are declared illegal by CAAD arbitral tribunals. When a tax assessment is annulled and amounts were unduly paid, Article 43 of the General Tax Law establishes the right to reimbursement with indemnity interest calculated from the payment date until complete refund. This compensates taxpayers for the financial loss caused by having funds improperly retained by the Tax Authority. The interest rate and calculation method are established by law, and the arbitral tribunal has jurisdiction to order both the principal refund and indemnity interest as part of the relief granted when ruling in favor of the claimant.
How does the CAAD arbitration process work for disputing IUC vehicle tax liquidations and compensatory interest?
The CAAD arbitration process for IUC disputes follows these steps: (1) After rejection of a reclamação graciosa, the taxpayer has the option to file for tax arbitration instead of hierarchical appeal or judicial review; (2) A request for constitution of an arbitral tribunal is filed under Articles 2 and 10 of Decree-Law 10/2011 (LRAT); (3) The CAAD Deontological Council appoints an arbitrator who constitutes the tribunal; (4) The claimant submits allegations supporting the challenge to IUC assessments and compensatory interest; (5) The Tax Authority responds; (6) The tribunal examines the legality of the assessments, evaluates evidence, and applies relevant legal principles; (7) An arbitral decision is issued determining whether assessments are legal or should be annulled; (8) If successful, the tribunal orders refunds, indemnity interest, and litigation costs.
Can a taxpayer request a refund of unduly paid IUC tax and compensatory interest through tax arbitration in Portugal?
Yes, taxpayers can request refund of unduly paid IUC tax and compensatory interest through CAAD tax arbitration. The arbitration request must specify: (1) the illegality of the assessment acts being challenged; (2) the amounts paid (principal tax and compensatory interest); (3) recognition of the right to reimbursement; (4) indemnity interest calculated from payment until complete refund; and (5) litigation costs. The arbitral tribunal has jurisdiction under the LRAT to order the Tax Authority to refund amounts collected through illegal assessments, plus indemnity interest to compensate for improper retention of funds. This provides an alternative dispute resolution mechanism that is often faster than traditional judicial review for obtaining refunds of improperly assessed vehicle taxes.
What is the procedural path from a rejected reclamação graciosa to CAAD tax arbitration for IUC disputes?
The procedural path from rejected reclamação graciosa to CAAD arbitration involves: (1) Filing a reclamação graciosa with the competent Finance Service challenging the IUC assessment; (2) If rejected, receiving notification of the decision with information about available remedies; (3) Within the notification, being informed of three options: hierarchical appeal (30 days), judicial review under Articles 76 and 102 CPPT (15 days), or tax arbitration; (4) Instead of administrative or judicial routes, choosing to file a request for arbitral tribunal constitution with CAAD under the LRAT regime; (5) Submitting the arbitration request specifying the rejected assessment acts, amounts, legal grounds, and relief sought; (6) Following the arbitration procedure until final decision. This path offers taxpayers flexibility in choosing their preferred dispute resolution forum after exhausting the initial administrative complaint stage.