Process: 265/2015-T

Date: November 30, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral decision addresses whether a company that sold a vehicle in 2004 can be held liable for IUC (Single Motor Vehicle Tax) in 2013 when the buyer failed to update the vehicle registration. The central legal question concerns Article 3(1) of the IUC Code, which states that taxable persons are vehicle owners, 'being considered as such' those in whose names vehicles are registered. The Claimant argues this creates a rebuttable presumption (juris tantum) that can be overcome by proving actual transfer of ownership through a valid sale contract, citing Civil Code provisions that ownership transfers by mere contract effect. The Tax Authority counters that Article 3(1) does not contain a presumption but rather establishes a definitive criterion linking tax liability to registration records, essential for legal certainty and tax system efficiency. The Authority also challenges the evidentiary value of the invoices presented, arguing they fail to meet legal requirements and do not prove a valid sale. The case highlights the tension between civil law principles of property transfer (consensual contracts transferring ownership) and administrative tax law requirements (registration-based taxation). The outcome determines whether taxpayers can escape IUC liability by proving de facto ownership transfer despite registration remaining unchanged, or whether the tax system strictly follows official registration records regardless of underlying commercial reality.

Full Decision

ARBITRAL DECISION

Claimant: A…, SA.

Respondent: AT - Tax and Customs Authority

I – REPORT

Request

A…, SA, a legal entity and taxpayer no. …, with registered address at Rua …, Lote …, …, …, Figueira da Foz, hereinafter referred to as the Claimant, filed, on 20-04-2015, pursuant to the provisions of paragraph a) of Article 2(1) and Article 10 of Decree-Law no. 10/2011, of 20 January, which approves the Legal Regime of Arbitration in Tax Matters (RJAT), a request for arbitral decision, in which the AT - Tax and Customs Authority is the Respondent, with a view to:

  • Annulment of the tax assessment for the Single Motor Vehicle Tax;

  • Condemnation of the Respondent to refund the tax improperly paid, increased by default interest and compensatory interest;

To support its request, the Claimant alleges, in summary:

  • The Claimant was notified for payment of the Single Motor Vehicle Tax (hereinafter IUC) for the vehicle with registration number …-…-…, relating to the year 2013.

  • This vehicle, however, was sold by the Claimant in 2004 to the company B… – …, with Tax Identification Number …;

  • Consequently, the Claimant was no longer the owner of the vehicle at the date of the taxable event, which means that the fundamental condition of the subjective scope of the tax is not met;

  • It was the responsibility of the acquiring entity to proceed with the registration of the transfer of ownership;

  • Thus, the improper assessment occurred for reasons beyond the Claimant's control and cannot burden the Claimant;

  • Article 3(1) of the Single Motor Vehicle Tax Code (hereinafter CIUC) provides:

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

  • Thus, the Tax Authority may only impute the status of taxable person for IUC to the actual owners of the vehicle;

  • When the legislator adds, in Article 3(1) of the CIUC, "being considered as such the natural or legal persons, of public or private law, in whose names the same are registered," the legislator merely intends to introduce an enunciative element of who holds ownership;

  • Article 1(1) of Decree-Law no. 54/75, of 12 February, which regulates the registration of motor vehicle property, provides that "the registration of vehicles has essentially the purpose of giving publicity to the legal situation of the vehicles (…) with a view to the security of legal commerce."

  • To this extent, it must be concluded that the registration has merely enunciative effects, in order to publicize the legal situation of the vehicles;

  • The duty to register falls upon the acquirer of the vehicle property and without their cooperation the seller can never proceed with registration in the name of the new owner;

  • Pursuant to Article 874 of the Civil Code, the contract of sale is "the contract by which ownership of a thing, or another right, is transferred, in exchange for a price."

  • Thus, the essential effects of the contract of sale are: a) the transfer of ownership of the thing or the holding of the right; b) the obligation to deliver the thing; c) the obligation to pay the price;

  • Furthermore, Article 408(1) of the Civil Code also states that "the constitution of real rights over a determined thing is effected by mere effect of the contract";

  • The contract of sale is merely consensual (Article 219 of the CC), while the obligation to register is declarative or functional;

  • Therefore, the contract of sale which is proven to have been executed between the Claimant and B… – … effected the transfer of ownership of the vehicle, at a moment prior to the taxable event;

  • The transfer of ownership of a motor vehicle, even without registration, deprives the transferor of its enjoyment and disposal, transferring it to the acquirer;

  • By ceasing to have the use/possession of the vehicle, the Claimant does not cause any environmental or road cost, which is the basis of the IUC;

  • The presumption of Article 7 of the Land Registry Code, applicable to motor vehicle registration, is a rebuttable presumption (juris tantum);

  • By proving the transfer of ownership of the motor vehicle, the Claimant rebutted the presumption arising from the registration;

Response

In its Response, the Respondent AT – Tax and Customs Authority alleges, in summary:

  • Article 3(1) of the CIUC does not contain a presumption. The tax legislator, in establishing in Article 3(1) who are the taxable persons for IUC, expressly and intentionally established that these are the owners (or in the situations provided for in (2), the persons stated therein), being considered as such the persons in whose names the same are registered;

  • On the other hand, a presumption of ownership arises from motor vehicle registration, so the rebuttal of the presumption of ownership must be directed at the motor vehicle registration itself;

  • The consideration of the systematic element of interpretation, in the case of IUC its articulation with motor vehicle registration – which is seen in particular in Article 6 of the CIUC: "the taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration number or registry in national territory" - also requires that it be considered that the subjective scope of the tax cannot be determined without connection to motor vehicle registration;

  • The configuration of the IUC reveals that the legislator intended to create a tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle registry;

  • The interpretation that the Claimant makes of Article 3, to the effect that it contains a rebuttable presumption, violates the principle of trust and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

Regarding matters of fact, the Respondent alleges:

  • The invoices that the Claimant attaches as evidence of the contract of sale do not meet the legal requirements required for their issuance (Article 36/5 of the Value Added Tax Code), so such documents can never benefit from the presumption of truth to which Article 75 of the General Tax Law (hereinafter LGT) refers;

  • These invoices are not able to prove the execution of a synallagmatic contract such as a contract of sale, as such documents do not reveal by themselves an essential and unequivocal declaration of will (i.e., acceptance) by the purported acquirers;

  • And therefore, the Claimant failed to prove the alleged transfer of the vehicle in question.

Meeting provided for in Article 18 of the RJAT and arguments

With the agreement of the parties, the Tribunal decided to waive the holding of the meeting provided for in Article 18 of the RJAT as well as the phase of final arguments.

II. Preliminary Matters

The Single Arbitrator Tribunal was duly constituted on 21-05-2015, with the Arbitrator appointed by the Deontological Council of CAAD, with the respective legal and regulatory formalities complied with (Articles 11(1), subparagraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code of CAAD), and is competent ratione materiae, in accordance with Article 2 of the RJAT.

The parties have legal personality and capacity and are duly represented.

No procedural irregularities were identified.

III. Issues to be Decided

The following are the issues to be decided in this arbitral proceeding:

  1. Whether Article 3(1) of the CIUC enshrines a presumption and its rebuttability;

  2. The rebuttal, in the present case, by the Claimant, of the presumption of ownership of the vehicles subject to tax.

IV – Proven Facts

The following are the proven facts considered relevant for the decision:

1st: The Claimant was notified of an IUC assessment with number 2013 …;

2nd: The IUC assessment relates to a vehicle whose ownership was registered in the name of the Claimant at the date of the taxable event;

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

V – REASONING

  1. On the issue of whether Article 3(1) of the CIUC enshrines a presumption and its rebuttability

This issue has already been the subject of numerous arbitral decisions. To the effect that Article 3(1) of the CIUC enshrines a presumption, the arbitral decisions rendered in proceedings no. 230/2014-T, no. 414/2014-T, no. 350/2014-T, 336/2014-T, no. 333/2014-T, no. 220/2014-T, no. 150/2014-T and 63/2014-T, among others, have pronounced themselves. To the same effect the Central Administrative Court of the South pronounced itself, in judgment of 19-3-2015 (Proceeding no. 08300/14).

In the last arbitral decision cited, whose reasoning we follow, it is stated with respect to this issue:

"Article 11(2) of the General Tax Law constitutes the starting point on this issue, stating that 'whenever, in tax rules, terms peculiar to other branches of law are used, the same shall be interpreted in the same sense that they have therein, unless otherwise directly provided by law.'

It is thus necessary to ascertain whether it unequivocally follows from the provisions of Article 3 of the CIUC that the legislator intended thereby to establish a concept of 'vehicle owner' peculiar to tax law, which would encompass persons who are not holders of such a right according to the rules of civil law.

Now, can the 'legislative discretion' which the legislator enjoys, to which the Respondent refers in paragraph 17 of its Response, go so far as to determine exhaustively who is the owner of a vehicle, even if only for tax purposes, radically dissociating that tax qualification from the qualification under civil law?

And, following the previous question, another question becomes necessary: why would the legislator not have simply stipulated – as it would obtain exactly the same useful effect but eliminating all margin of legal insecurity or uncertainty – that 'the taxable persons of the tax are the persons in whose names the vehicles are registered, whether as owners, or as financial lessees, as purchasers with reservation of ownership, or as other holders of purchase option rights by virtue of the lease contract'? A question all the more pertinent, and hypothesis all the more attractive, as the legislator was aware of the negative experience, which keeps repeating itself, of the previous Motor Vehicle Tax?

The answer appears evident: because, in this latter hypothesis, which the legislator did not follow, the subjective scope of the tax could become totally disconnected from any economic substance and would depend exclusively on a legal appearance.

Now, if the legislator had, as the Respondent contends, established in law a non-presumptive qualification regarding who is the owner of vehicles (a legal fiction), it would thereby be establishing, through a different formulation, a rule entirely identical to the hypothetical rule referred to. It would be basing the subjective scope of the tax on a legal fiction, in total disconnection from any economic substance as a basis for the subjective scope.

It is true that the efficiency of taxation requires that IUC be based on motor vehicle registration and, consequently, requires that the tax administration can rely on that motor vehicle registration.

But the principle of efficiency of taxation cannot absolutely override the principle of taxpaying capacity, to the point of eliminating it as a criterion of subjective scope. And it is also true that the tax legislator would have at its disposal other means of making the seller of the vehicle liable for payment of the tax, failing in their duty to notify the sale of the vehicle, without being as a direct taxpayer (by configuring, for example, a case of tax liability for third party debt).

And, if this is so, it is equally necessary to conclude that Article 3(1) can only establish a presumption of ownership of the vehicle, even with all the negative consequences that this conclusion will certainly entail, in terms of efficiency of tax administration."

Thus we follow the cited decision, concluding that Article 3(1) of the CIUC contains a rebuttable presumption (juris tantum).

  1. The rebuttal, in the present case, by the Claimant, of the presumption of ownership of the vehicles subject to tax

On the issue of the proof necessary to rebut the presumption of ownership, it must begin by bringing into the equation the issue of the presumption arising from motor vehicle registration.

The ownership of motor vehicles is subject to compulsory registration. And in accordance with Article 7 of the Land Registry Code, applicable to Motor Vehicle Registration by virtue of Article 29 of the Motor Vehicle Registry Code, the registration of the ownership of a vehicle gives rise to the presumption that the holder of the right of ownership is the entity in whose name that same right is registered.

If it is true that the presumption of Article 3(1) of the CIUC is established with a view to the purposes of taxation, the presumption established by registry law has in view legal certainty in general, there being no grounds to judge that this presumption does not apply within the scope of tax legal relations.

As stated in the judgment of the Court of Appeal of Lisbon of 24-3-2011 (proceeding no. 195/09.8TBPTS.L1-2), "the land registry pursues, at one and the same time, purposes of a private nature and purposes of a characteristically public nature. It pursues purposes of a private nature, since it guarantees security in the field of private rights, specifically in the realm of rights with real effect – security of legal commerce (…), considered globally – facilitates the traffic and exchange of goods, and ensures the fulfilment of the social function of real rights; it pursues purposes of public interest, as an instrument of legal certainty, of protection of third parties and of security of legal commerce, and as a guarantor of the updating of the registry in light of the publicized fact."

Therefore, with a registry presumption of ownership in favour of the Claimant, the Claimant, in order to dispel its qualification as owner, must dispel the presumption arising from motor vehicle registration.

In the present case, in order to rebut the registry presumption that the right of ownership of the vehicle belongs to it, the Claimant submits an invoice relating to a sale it made to the company B… – …, SA, an invoice for the sale of the same vehicle by the company C… SA to D…, and a letter addressed by B… – … to the Claimant, in which the former informs it of having proceeded with the sale of the same vehicle.

As to the invoices, an identical issue to this one was decided by the Central Administrative Court in the recently cited judgment. It is stated therein:

"In these terms, it should be noted that we are faced with mere private and unilateral documents, whose issuance does not assume the intervention of the counterparty in the alleged agreement, thus having reduced value to prove the existence of a synallagmatic contract, such as a contract of sale."

And further on:

"And recall that none of the accounting documents in question proves, even, the payment of the price by the buyer. Both the invoice and the debit note constitute accounting documents drawn up within the company and intended for external use. The invoice should be viewed as the accounting document through which the seller sends to the buyer the general conditions of the transaction carried out. In turn, the debit note consists of the document in which the issuer communicates to the recipient that the latter owes it a certain monetary amount. Both documents appear at the stage of settlement of the amount to be paid by the buyer, thus not proving payment of the price by the same buyer and, consequently, proof that the contract of sale was concluded."

Concluding the Court:

"Thus, it must be concluded that the respondent company did not even produce proof relating to the alleged sale of the vehicles, being that it would have to prove that it was not the owner of the vehicles at the date to which the assessments relate, which would imply, in the present case, proving who was the current owner.

Underlined from the doctrine expounded is the following aspect: the Court considers, in order to rebut the registry presumption, that whoever appears as owner in the registry must prove who is the current owner.

We consider the position of the Court to be justified by the fact that rebutting the presumption of registry truth is particularly demanding.

On the matter, says Mouteira Guerreiro (Mouteira Guerreiro, J. A., Notions of Registry Law, 2nd ed. Coimbra, 1994, p. 70): "The protection afforded by the registry translates itself in our system, into a rebuttable presumption. But, we cannot forget, it is a legal presumption. (…) What the registry reveals cannot be impugned, even in court, without simultaneously requesting its cancellation."

The same author (Ibidem, p. 71) adds: "It follows from the principle of presumption of truth or accuracy the rule provided for in Article 8 of the Land Registry Code. If the final registration presumes that the right exists and belongs to the registered holder 'in the precise terms in which the registration defines it,' it would make no sense to judicially attack that publicized truth, without simultaneously attacking the registry itself. Therefore, whoever wishes to contest the truthfulness of the facts recorded in the registry will equally have to request the cancellation of the registry. If they do not do so, the action will not proceed after the pleadings, because there would be a risk of arriving at an effective contradiction: on the one hand, having a judgment declaring legally irrelevant or untruthful certain facts and, on the other hand, having a registry presuming erga omnes the truthfulness and validity of those same facts."

The understanding expounded is sanctioned by the jurisprudence of the superior courts. See the aforementioned judgments, in which it is stated that, to dispel the presumption of ownership arising from the Motor Vehicle Registry, it is necessary to prove that the ownership of the registered right belongs to another, but such not being sufficient, it is still necessary to simultaneously request the respective cancellation (cf. judgment of the Court of Appeal of Coimbra of 22-01-2013, proc. no. 3654/03.2TBLRA.C1; judgment of the Court of Appeal of Coimbra of 3-06-2008, proc. no. 245-B/2002.C1).

Now, the argument expounded applies to all the proof offered by the Claimant. With that proof, the Claimant merely shows as probable facts which, had they occurred, would in turn make it probable that ownership did not belong to the Claimant. However, the rebuttal of a legal presumption is not satisfied with elements that cast doubt, which show the probability of contrary facts. The rebuttal of a legal presumption is only done with conclusive proof, and this would have to relate to the legal situation of the vehicle at the moment of the taxable event.

This tribunal considers that such proof was not made. Indeed, what the series of acts of sale that the documents submitted by the Claimant document, although imperfectly, is that, precisely, proving that a vehicle was sold ten years ago, does not permit drawing a safe conclusion about the situation of the vehicle at the present moment.

VI. DECISION

For the reasons stated, this Tribunal decides to rule totally against the present arbitral request.

Value of the economic utility of the proceedings: The value of the economic utility of the proceedings is fixed at 441.53 euros.

Costs: Pursuant to Article 22(4) of the RJAT, the amount of costs is fixed at 306.00 euros, in accordance with Table I attached to the Regulation on Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Let this arbitral decision be recorded and notified to the parties.

Lisbon, Administrative Arbitration Centre, 30 November 2015

The Arbitrator

(Nina Aguiar)

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle has been sold but registration was not transferred?
According to Article 3(1) of the IUC Code, the taxable person is the vehicle owner, 'being considered as such' the person in whose name the vehicle is registered. When a vehicle has been sold but registration was not transferred, there is a legal dispute: the seller argues that actual ownership (proven by sale contract) should prevail, as registration has merely declaratory effects and ownership transfers by contract under Article 408 of the Civil Code. The Tax Authority maintains that IUC liability follows registration records, as Article 6 of the IUC Code links the taxable event to 'ownership of the vehicle, as attested by the registration.' The resolution depends on whether courts interpret the registration requirement as creating a rebuttable presumption or as establishing a definitive criterion for tax purposes, independent of civil law ownership rules.
Can the seller be held liable for IUC tax if the buyer failed to update the vehicle registration?
Yes, under the Tax Authority's interpretation, the seller can be held liable for IUC if the buyer failed to update vehicle registration, because tax liability is determined by official registration records at the date of the taxable event. However, sellers argue this is unjust when: (1) they no longer possess or use the vehicle; (2) they cannot unilaterally update registration, as this duty falls on the acquirer; (3) they have proven the sale through valid contracts; and (4) they do not generate the environmental and road costs that justify the IUC. To avoid liability, sellers may attempt to rebut the presumption of ownership by proving the actual transfer through sale contracts, invoices, and other evidence showing they are no longer the true owner, though the Tax Authority contests both the legal possibility of such rebuttal and the sufficiency of evidence presented.
What does Article 3(1) of the IUC Code establish regarding subjective tax incidence and vehicle ownership?
Article 3(1) of the IUC Code establishes that 'the taxable persons of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered.' This provision creates two interpretative approaches: (1) Taxpayer perspective: The phrase 'being considered as such' introduces a rebuttable legal presumption where registration provides evidence of ownership but can be overcome by proving actual ownership lies elsewhere, consistent with Article 7 of the Land Registry Code and the declaratory (not constitutive) nature of vehicle registration under Decree-Law 54/75; (2) Tax Authority perspective: The provision definitively establishes that for IUC purposes, owners are those appearing in registration records, without creating a rebuttable presumption, ensuring legal certainty, tax system efficiency, and preventing taxpayers from avoiding obligations by claiming unregistered transfers. This systematic interpretation connects with Article 6 CIUC, which links the taxable event to registration-based ownership.
How does the CAAD arbitral tribunal address the legal presumption of ownership based on vehicle registration records?
The CAAD arbitral tribunal must decide whether the legal presumption arising from vehicle registration is rebuttable in the IUC context. The Claimant invokes Article 7 of the Land Registry Code, applicable to motor vehicle registration, which establishes a juris tantum (rebuttable) presumption that the registered person is the owner. The Claimant argues that by proving the 2004 sale through invoices and contracts, they successfully rebutted this presumption, demonstrating they were no longer the true owner at the 2013 taxable event. The Tax Authority contests this on two grounds: (1) substantively, Article 3(1) CIUC does not create a rebuttable presumption but rather defines taxable persons as registered owners, making registration a definitive criterion for tax purposes that ensures legal certainty and system efficiency; and (2) evidentially, the invoices presented fail to meet legal requirements under Article 36/5 of the VAT Code and lack essential elements proving a valid sale contract (particularly the buyer's acceptance). The tribunal must balance civil law property principles against administrative tax law certainty requirements.
What remedies are available to a taxpayer who paid IUC on a vehicle they no longer own, including reimbursement and compensatory interest?
A taxpayer who paid IUC on a vehicle they no longer own may seek the following remedies through arbitration or administrative proceedings: (1) Annulment of the tax assessment on grounds that the fundamental condition of subjective tax incidence was not met, as they were not the vehicle owner at the taxable event date; (2) Reimbursement of the tax improperly paid, as the assessment lacked legal basis when directed at a non-owner; (3) Default interest on the reimbursed amount, calculated from the payment date until actual refund, compensating the taxpayer for the State's unjust retention of funds; (4) Compensatory interest under Article 43 of the General Tax Law, where applicable, for delays in refunding improperly collected taxes. To obtain these remedies, the taxpayer must prove: (a) they are not the vehicle owner, rebutting the registration-based presumption through sale contracts, invoices, and evidence of transfer; (b) the impossibility of updating registration due to the buyer's failure to cooperate; and (c) timely compliance with procedural requirements for challenging the assessment and requesting arbitration under the RJAT.