Process: 282/2017-T

Date: November 11, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

In CAAD Process 282/2017-T, the arbitral tribunal examined who bears IUC (Imposto Único de Circulação) liability when vehicles are sold but remain registered in the seller's name. The applicant, A..., challenged IUC assessments for 2013 totaling €1,585.39 relating to two vehicles originally owned by B... Ltd. After enforcement against B... Ltd. failed, liability was reversed to A... as a subsidiary liable party under Portuguese tax enforcement rules. A... argued the vehicles had been transferred to third parties by sales contracts executed before the 2013 tax became due, contending that Article 3(1) of the IUC Code creates only a rebuttable presumption that the registered owner is the taxpayer. The Tax Authority maintained that registration definitively determines IUC liability regardless of actual ownership transfers. The case illustrates critical issues in Portuguese tax law: the interpretation of subjective incidence rules in the IUC Code, the evidentiary burden for proving vehicle transfers, and the procedural rights of parties facing subsidiary liability (reversão fiscal) in tax enforcement proceedings. The tribunal confirmed its jurisdiction under the RJAT (Legal Regime of Tax Arbitration) and recognized that reversed parties have standing under Articles 22(5) of the General Tax Law and 9(3) of the Tax Procedure Code to challenge underlying assessments, not merely the reversal itself.

Full Decision

ARBITRAL DECISION

I. REPORT

A..., taxpayer no. ..., resident at ... Street, Lot ..., ..., ... Santarém, requested the constitution of an arbitral tribunal in tax matters for the purpose of declaring the illegality and consequent annulment of the acts of assessment of Single Vehicle Circulation Tax (IUC), and respective compensatory interest, relating to the taxation period of 2013 and to motor vehicles with the registration numbers ...-...-... and ...-...-..., in the total amount of € 1,585.39.

2. As grounds for the application, submitted on 21-04-2017, the Applicant, in the capacity of party with reverted liability in the execution proceedings of which the original debtor is the company B... Ltd., invokes the illegality of the contested assessments, alleging, in summary, that the vehicles in question were no longer in the possession of the executed party during the period in question because they had already then been transferred to third parties by contracts of sale and purchase executed prior to the date when the tax in question became due which gave rise to the contested assessments.

3. In response to the request, the Tax and Customs Authority (AT) expressed itself in the sense of finding the present application for arbitral decision to be without merit, expressing the understanding that the tax act contested should be maintained in the legal order and, accordingly, that the tribunal should pronounce for the dismissal of the respondent entity.

4. The application for the constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 28-04-2017.

5. Under the terms of the provisions set out in item (a) of no. 2 of article 6 and item (b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20/01, as amended by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council appointed the signatory as arbitrator of the single arbitral tribunal, who communicated acceptance of the task within the applicable period, and notified the parties of such appointment on 14-06-2017.

6. Being duly notified of such appointment, the parties did not express any intention to refuse the designation of the arbitrator, under the combined provisions of article 11, no. 1, items (a) and (b) of the Legal Regime of Tax Arbitration (RJAT) and articles 6 and 7 of the Deontological Code.

7. Thus, in accordance with the provisions set out in item (c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31/12, the single arbitral tribunal was constituted on 30-06-2017.

8. Being duly constituted, the arbitral tribunal is materially competent, in accordance with the provisions set out in articles 2, no. 1, item (a), of the RJAT.

9. The parties have legal personality and capacity and are entitled (arts. 4 and 10, no. 2, of the RJAT, and art. 1 of Ordinance no. 112-A/2011, of 22/03).

10. Considering that the matter is essentially one of law and having regard to the knowledge arising from the procedural documents attached to the file, which is deemed sufficient, the Tribunal decided to dispense with the hearing to which article 18 of the RJAT refers.

II. STATEMENT OF FACTS

11. With relevance for the appraisal of the question raised, the following factual elements stand out which, based on the elements contained in the present proceeding, are considered to be proven:

11.1. On 26-04-2015, official assessments of the Single Vehicle Circulation Tax (IUC) were made, as well as the respective compensatory interest, with reference to the taxation period of 2013 and to the vehicles with the registration numbers ...-...-... and ...-...-..., in the respective amounts of € 976.92 and € 608.47.

11.2. Having been duly notified to the respective taxpayer, B... Ltd., and with the voluntary payment period having ended on 04-06-2015, execution proceedings nos. ...2015... and ...2015... were initiated at the ... Finance Service for coercive collection of the amounts owed (see Docs. 1 and 2).

11.3. Given the failure of the measures undertaken for the collection of the execution debts, orders were issued on 21-11-2016 by the head of finances of ... – the execution body – determining the reversal of the executions against the now Applicant, in the capacity of secondary liable person.

11.4. In such capacity, the now Applicant was served notice on 02-12-2016, as evidenced by documents attached to the file.

III. LEGAL QUESTIONS

12. The Applicant, in the capacity of party with reverted liability in the executions initiated against B..., Ltd., comes forward, with the legitimacy that derives from the provisions of articles 22, no. 5, of the General Tax Law and 9, no. 3, of the Code of Tax Procedure and Process, to contest the assessments of Single Vehicle Circulation Tax to which the debts relate in coercive collection in the above-identified execution proceedings.

13. It bases its application on the fact that, at the date when the tax in question became due, with reference to the period of 2013 and vehicles with registration numbers ...-...-... and ...-...-..., these were no longer in the patrimony of the original executed party, because they had already then been subject to transfer to third parties by contract of sale and purchase.

14. According to its claim, the fact that the vehicles in question were, at that date, registered at the Motor Vehicle Registration Office in the name of the original executed party, qualifying it as the taxpayer of the tax obligation, would give way before proof that it is not their owner, because the norm governing the subjective scope set out in article 3, no. 1, of the IUC Code enshrines a mere presumption, which can be rebutted under the general terms.

15. Different is the understanding of the Respondent, in the sense that the said norm does not contain any legal presumption, considering that "the tax legislator... expressly and intentionally established that these (the taxpayers of IUC) are the owners (or in the situations provided for in no. 2, the persons stated therein), being considered as such the persons in whose name the same are registered"

16. Meanwhile, by application of 10-10-2017, the Applicant, following notification of an order issued for the purpose of clarifying the date of service of notice of reversal of the executions, came to raise the potential subsequent futility of the case, considering that "... the AT, came in the proceedings for judicial challenge under P. .../15... BELRA, of the TAF of Leiria, where the now respondent is the challenger, to inform that with respect to the vehicle with registration number ...-...-..., in which there are contested IUC assessments relating to it, came to withdraw from the assessments because in light of 'certificate issued by the Lisbon Maritime Customs, which was declared for export through the export DAU no. ... of 03.03.2006...'"

17. In response to the allegations made by the Applicant, the Respondent comes "...to state that the application of the Applicant is devoid of merit, since the AT has not issued any administrative or tax act concerning the proceeding that is here under discussion, for which reason there is no subsequent futility of the case. Moreover, the AT is, at this procedural stage, prevented from taking any procedural action, under pain of all acts taken being null and void, under the terms of article 13, no. 3, of the Legal Regime of Arbitration..."

18. Indeed, it is extracted from the document attached to the application of the Applicant that in the challenge that it invokes as the basis for the application for declaration of subsequent futility of the case, there are indeed in question IUC assessments relating to the vehicle that it identifies, but with reference to the taxation periods of 2008 to 2011. Given that the present proceeding concerns an IUC assessment relating to said vehicle which pertains to the period of 2013, therefore, as the Respondent argues, the invoked futility does not exist.

19. However, prior to the appraisal of the merits of the application, the question arises of whether the application is timely, that is, of the possible expiration of the right to apply for arbitral decision.

20. As appears from the documents attached to the present proceeding following the order of 27-09-2017, the Applicant was served notice in both execution proceedings relating to the debts to which the contested assessments relate on 02-12-2016.

21. In accordance with the provisions of article 10, no. 1, item (a), of the Legal Regime of Tax Arbitration (RJAT), the application for constitution of the arbitral tribunal must be submitted "Within a period of 90 days, counted from the facts provided for in nos. 1 and 2 of article 102 of the Code of Tax Procedure and Process...".

22. The starting point of said period is situated, in the case of a challenge submitted by the party with reverted liability, under the provisions of article 22, no. 5, of the General Tax Law, on the date of service of notice of the secondary liable person in execution proceedings, as provided by article 102, no. 1, item (c).

22. In accordance, therefore, with the combined provisions of item (a) no. 1 of article 10 of the Legal Regime of Tax Arbitration (RJAT) and item (c), no. 1, of article 102 of the Code of Tax Procedure and Process, the Applicant had a period of 90 days to file the application, with that period being counted from 02-12-2016.

23. As it is settled jurisprudence, the period for submitting a challenge is a period of expiration, of substantive nature, continuous, being counted in accordance with the rules of article 279 of the Civil Code, as provided by article 20, no. 1, of the Code of Tax Procedure and Process.

24. From the foregoing it results, therefore, that the 90-day period for requesting the constitution of the arbitral tribunal is calculated under the terms of article 279 of the Civil Code: continuous calculation, initiated on the day following notification, with its deadline being transferred to the next working day, should it end on a Saturday, Sunday or public holiday.

25. The question of the nature of this period has been the subject of appraisal in arbitral proceedings and by the Supreme Administrative Court, as referred to in Case 314/2014-T, from which it is extracted: "55 - It should be noted, however, that, as it is settled and reiterated jurisprudence of the Supreme Administrative Court, as can be seen in, among others, the Decisions of the STA of 14-01-2004, Proc. 01208/03, of 30-01-2013, Proc. 0951/12 and of 15-01-2014, Proc. 01534/13, available at www.dgsi.pt, the period for submitting a challenge is a period of expiration, of substantive nature, continuous, integral to the very material legal relationship in dispute and counted in accordance with the rules of article 279 of the Civil Code (CC) and article 20, no. 1 of the Code of Tax Procedure and Process (CPPT). It is, in effect, a peremptory period, whose lapse extinguishes the right to perform the act, in this case, the application for constitution and decision of this Arbitral Tribunal."

26. Adhering, without reservation, to the reasoning and conclusion set out above, it is verified that the starting point of the period for submitting the application for arbitral decision is on 02-12-2016, so that, calculated in accordance with article 279 of the Civil Code, its deadline falls on 02-03-2017.

27. Thus, given that the application for arbitral decision was submitted to the Administrative Arbitration Centre (CAAD) on 21-04-2017, the right of action on the part of the Applicant had by then already expired.

28. In these terms, and with the grounds set out above, the Tribunal decides to find the application to be without merit on grounds of untimeliness and, consequently, to refrain from appraising the merits of the case and to condemn the Applicant to payment of the costs of the present proceeding.

Value of the proceeding: The value of the proceeding is fixed at € 1,585.39, under the terms of article 97-A, no. 1, item (a) of the Code of Tax Procedure and Process, applicable by reference to article 29, no. 1, items (a) and (b), of the Legal Regime of Tax Arbitration and article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings.

Costs: Under the terms of article 22, no. 4, of the Legal Regime of Tax Arbitration, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 306.00, to be borne by the Applicant.

Lisbon, 11 November 2017,

The arbitrator,
Álvaro Caneira

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) when a vehicle has been sold but not re-registered?
Under Article 3(1) of the IUC Code, the person in whose name a vehicle is registered at the Motor Vehicle Registration Office is considered the taxpayer. However, this case presents a fundamental dispute about whether registration creates an absolute rule or a rebuttable presumption. The applicant argued that actual ownership should prevail over formal registration when supported by evidence such as sales contracts executed before the tax due date. The Tax Authority contended that the tax legislator intentionally established that registered owners are definitively liable, regardless of subsequent transfers. This interpretation significantly impacts taxpayers who sell vehicles but whose buyers fail to complete re-registration formalities, potentially leaving sellers liable for IUC even after losing possession and control.
Can a taxpayer challenge IUC assessments through CAAD tax arbitration in Portugal?
Yes, taxpayers can challenge IUC assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration in Portugal. This case confirms that CAAD has material jurisdiction over IUC disputes under Article 2(1)(a) of the RJAT (Legal Regime of Tax Arbitration). Importantly, not only direct taxpayers but also parties facing subsidiary liability through reversão fiscal can access arbitral proceedings. Under Articles 22(5) of the General Tax Law (LGT) and 9(3) of the Tax Procedure Code (CPPT), reversed parties have standing to challenge the substantive legality of underlying tax assessments, not merely the procedural aspects of the reversal itself. The arbitral tribunal constitutes within defined timelines, and parties retain rights to accept or refuse arbitrator appointments under the Deontological Code.
What happens to IUC liability when a company sells vehicles before the tax becomes due?
When a company sells vehicles before the IUC tax becomes due for a given year, a critical question arises about who bears tax liability. In this case, B... Ltd. allegedly transferred two vehicles to third parties by sales contracts before 2013 IUC assessments were issued. The applicant argued that these transfers eliminated B... Ltd.'s tax obligation because it was no longer the owner when the tax liability arose. However, the vehicles remained registered in B... Ltd.'s name at the Motor Vehicle Registration Office. The Tax Authority's position is that registration status at the tax due date determines liability regardless of actual ownership changes. This creates significant risk for sellers whose buyers fail to re-register vehicles, potentially leaving original owners liable for years of IUC even after valid sales. Documentation such as notarized sales contracts and export certificates (as referenced for one vehicle exported via customs declaration in 2006) becomes crucial evidence.
How does subsidiary liability (reversão fiscal) apply to IUC in Portuguese tax enforcement?
Subsidiary liability (reversão fiscal) in Portuguese IUC enforcement follows a defined procedural sequence. First, the Tax Authority initiates enforcement proceedings against the primary taxpayer (here, B... Ltd.). When collection measures fail to recover the debt, the enforcement officer (head of finances) may order reversal against secondary liable parties under applicable legal grounds. In this case, reversal was ordered on 21-11-2016 and A... was notified on 02-12-2016. Critically, reversed parties are not limited to challenging only the reversal decision itself. Under Articles 22(5) of the LGT and 9(3) of the CPPT, they have full standing to contest the substantive legality of the underlying tax assessments—here, the 2013 IUC charges totaling €1,585.39. This allows reversed parties to raise defenses that the original taxpayer may have failed to pursue, including fundamental issues like whether tax liability correctly attached in the first place.
What evidence is required to prove vehicle transfer and avoid IUC subjective incidence?
To prove vehicle transfer and challenge IUC subjective incidence, taxpayers must overcome the registration presumption with concrete documentary evidence. In this case, the applicant relied on: (1) sales contracts executed before the tax due date showing transfer to third parties; (2) for one vehicle, a certificate from Lisbon Maritime Customs showing export via DAU (customs declaration) dated 03.03.2006, which led the Tax Authority to withdraw IUC assessments for that vehicle for earlier years (2008-2011). The evidentiary standard depends on whether Article 3(1) of the IUC Code creates a rebuttable or irrebuttable presumption. If rebuttable, notarized sales contracts, bank transfers showing payment, delivery receipts, insurance transfers, and customs export documentation could suffice. If registration is determinative, even conclusive proof of sale may be insufficient, placing the burden on sellers to ensure buyers complete re-registration or face continuing IUC liability despite loss of ownership and possession.