Process: 327/2014-T

Date: June 18, 2015

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Arbitral Process 327/2014-T addresses the subjective incidence of Vehicle Circulation Tax (IUC/UCT) in the context of financial leasing operations. The claimant, a company engaged in vehicle purchase, sale, and long-term leasing, challenged ex officio IUC assessments totaling €40,066.84 for tax years 2008-2013. The central legal issue concerns Article 3 of the Vehicle Circulation Tax Code, which establishes that passive tax subjects are vehicle owners as registered, while equating financial lessees and holders of purchase option rights to owners. The company argued that despite remaining as registered owner in the vehicle database, it had transferred ownership through sales or the vehicles were total losses with cancelled registrations. The claimant contends the ownership presumption based on vehicle registration is rebuttable, citing Article 7 of the Land Registry Code and invoking Constitutional Court Decision 211/2003 which prohibits irrebuttable presumptions under the constitutional principle of equality. The company provided contrary evidence through sales invoices and salvage documentation, arguing acquirers failed to timely effect vehicle re-registration. The arbitral tribunal was constituted on June 20, 2014, under Decree-Law 10/2011 (RJAT framework), with the first hearing held October 29, 2014. This case illustrates the tension between formal registration requirements and actual ownership transfer in determining IUC tax liability, particularly relevant for financial leasing companies where registration updates may lag commercial transactions.

Full Decision

CASE NO. 327/2014-T

ARBITRAL DECISION

The arbitrator Guilherme W. d'Oliveira Martins, appointed by the Ethics Board of the Administrative Arbitration Centre (CAAD) to form the present Arbitral Tribunal, constituted on 20 June 2014, decides as follows:

I. REPORT

  1. The company A..., Ltd., TIN ..., filed a request for the establishment of a single-member arbitral tribunal, in accordance with the combined provisions of articles 2 and 10 of Decree-Law No. 10/2011 of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as LFATM), in which the Tax and Customs Authority (TCA) is the respondent, with a view to the annulment of acts of assessment of the Unique Circulation Tax (UCT) in the total amount of € 40,066.84.

  2. The request for the establishment of the arbitral tribunal was accepted by the President of CAAD on 14-04-2014 and notified to the Tax and Customs Authority on 16-04-2014.

  3. Pursuant to the provisions of paragraph (a) of article 6(2) and paragraph (b) of article 11(1) of Decree-Law No. 10/2011 of 20 January, as amended by article 228 of Law No. 66-B/2012 of 31 December, the Ethics Board appointed the undersigned as arbitrator of the single-member arbitral tribunal, who communicated acceptance of the corresponding position within the applicable time period.

  4. On 30.12.2013 the parties were duly notified of that appointment and did not express any intention to refuse the appointment of the arbitrator in accordance with the combined provisions of article 11(1), paragraphs (a) and (b) of the LFATM and articles 6 and 7 of the Code of Ethics.

  5. Thus, pursuant to the provisions of paragraph (c) of article 11(1) of Decree-Law No. 10/2011 of 20 January, as amended by Law No. 66-B/2012 of 31 December, the Arbitral Tribunal was constituted on 20.06.2014.

  6. On 29.10.2014 the first meeting of the Tribunal was held, in accordance with the terms and for the purposes of article 18 of the LFATM, and minutes thereof were drawn up, which are also attached to the case file.

  7. Upon the opening of the meeting, the word was given to the Representative of the Respondent to pronounce on the maintenance of the act, which she declared to maintain.

  8. Next, in accordance with the terms and for the purposes of the provisions of article 18 of the LFATM, the word was given to the representatives of the Claimant and the Respondent to, in that order, pronounce on the necessity of scheduling a new meeting for the conduct of oral arguments.

  9. In the exercise of their right to speak, the representatives of the Claimant and the Respondent declared that they dispensed with oral arguments.

  10. The Tribunal scheduled 20.12.2014 for the delivery of the arbitral decision.

  11. Orders extending the time for decision were issued on 23/12/2014, 24/02/2015, 23/03/2015, 11/04/2015, 20/04/2015, 28/04/2015, 12/05/2015.

  12. On 22/05/2015 the joinder of a request by the respondent TCA was admitted and the Claimant was notified for response, without prejudice to the provisions of article 19 of the LFATM.

  13. On the same day, the issuance of the decision was extended by a further 10 days, pursuant to article 21(2) of the LFATM, this extension being extended until 20/06/2015 by orders of 05/06/2015 and 16/06/2015.

  14. The grounds of the Claimant's request are as follows:

  • In the context of the activity of purchase and sale and rental of machines and motor vehicles carried out by it, the Claimant provides solutions for the acquisition of motor vehicles, within the scope of long-term lease and sale of motor vehicles.

  • The TCA assessed UCT against the Claimant ex officio and notified various notices of ex officio assessment of UCT and respective compensatory interest, as well as fines relating to the vehicles indicated and for the years 2008, 2009, 2010, 2011, 2012 and 2013.

  • The Claimant was notified on 31 January 2014 of the rejection of the following gracious claims (relating to the UCT, compensatory interest and respective fines):

a) Gracious claim No. ... 2014..., relating to the ex officio assessments of UCT for the years 2009, 2010, 2011, 2012 and 2013, referring to the DUC identified in the initial request and reproduced in document no. 2, referring to a copy of the notification of the rejection of the claim;

b) Gracious claim No. ... 2014..., relating to the ex officio assessments of UCT for the years 2009, 2010, 2011, 2012 and 2013, referring to the DUC identified in the initial request and reproduced in document no. 3, referring to a copy of the notification of the rejection of the claim;

c) Gracious claim No. ... 2014..., relating to the ex officio assessments of UCT for the years 2009, 2010, 2011, 2012 and 2013, referring to the DUC identified in the initial request and reproduced in document no. 4, referring to a copy of the notification of the rejection of the claim;

  • The Claimant invokes and requests the joinder of claims, since in the case at hand tax assessment acts relating to UCT are under review for the years 2008, 2009, 2010, 2011, 2012 and 2013 relating to the claimant and the same principles or rules of law are under consideration, in accordance with article 3(1) of the LFATM.

  • The claimant, in order to avoid future tax executions and the costs inherent to the provision of guarantees for the suspension of said proceedings, opted to settle the UCTs in question, compensatory interest and respective fines, having paid the total amount of 45,066.84 Euros, an amount that it now petitions for in the present proceedings.

  • Thus, UCT for the years 2008 to 2013 is at issue, relating to vehicles identified in the administrative proceeding:

a) which were the object of sale to third parties (customers of the claimant) at a moment prior to the taxation period – as shown by the sales invoices attached to the gracious claims (contained in the administrative proceeding);

b) which were declared as total loss and in relation to which the respective registrations were already cancelled at a moment prior to the taxation period - as shown by the sales invoices attached to the gracious claims (contained in the administrative proceeding);

  • Pursuant to article 3 of the UCTC: "1- The passive subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name the same are registered." and "2 - Financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract are equated to owners." The legislator thus presumes that the owners are the persons in whose name the vehicles are registered.

  • According to the Claimant, the passive subject is the owner or equated person, being considered as such the entity that appears in the vehicle registration as owner, but admitting contrary proof, invoking for such purpose the presumption contained in article 7 of the Land Registry Code, applicable to vehicle registration, established by case law of the Coimbra Court of Appeal, of 3 June 2008 and

  • The Claimant presented, during the course of the administrative proceeding, contrary proof, which consists, with respect to the sold vehicles, of the sales invoices and with respect to the lost vehicles, of the salvage invoices.

  • It further adds that the acquirers of the vehicles did not timely effect the respective registrations of the vehicles at the Vehicle Registration Conservancy, so that in the database the claimant continues to appear as owner thereof.

  • Finally, it invokes that, pursuant to the provisions of article 73 of the LGT, the presumptions enshrined in the rules of tax incidence always admit contrary proof, being that in other words, irrebuttable presumptions are prohibited – invoking to that end Decision No. 211/2003 of 28 April of the Constitutional Court, which concludes that an irrebuttable presumption would violate the constitutional principle of equality connected with that of contributory capacity.

  • In view of the foregoing, they request the granting of the request for annulment of the TCA's decisions rejecting the gracious claims, by virtue of such decisions being based on a misinterpretation of the law, namely the provisions of article 3(1) of the UCTC and, consequently of the tax acts of assessment of the UCTs contained in the Collection Documents identified and which were the subject of the gracious claims ... 2014..., ... 2014..., ... 2014... invoked which were entirely rejected, on the ground of error regarding the facts, in accordance with article 99(a) of the TCPT, combined with article 3(1) of the UCTC.

  1. In response to the Claimant's request, the TCA:

The TCA maintains the acts which are the subject of the initial request with the following grounds:

· Article 3 of the UCTC does not contain a presumption, but rather an express and intentional provision of who is considered to be the passive subject of UCT;

· The passive subject is the owner of the vehicle, with ownership being attested by the registration in the national territory (article 6(1) of the UCTC).

· With respect to the tax acts which continue to be discussed, the vehicles to which they relate were registered in favor of the passive subject during the period in question, so that such should be the passive subject to be taxed.

  • It extensively grounds in the response that the understanding propounded by the claimant stems from a biased reading of the letter of the law:

· As the adoption of an interpretation that does not attend to the systematic element, violating the unity of the regime enshrined throughout the UCTC, and,

· More broadly throughout the entire legal-tax system;

· But also of an interpretation that ignores the ratio of the regime enshrined in the article at issue, and likewise, throughout the UCTC.

  • To this end the respondent resorts to examples from the legal system, as well as minutes of parliamentary sessions of 2008-03-12, in which it is established that "the entry into force of the unique circulation tax (…) now taxes the owner of the vehicle and not the circulation.

  • The TCA further alleges that from a comparison of the invoices attached by the Claimant results only that the same were issued to various entities – natural or legal persons – being the description "sale of the asset", "residual value", and occasionally "sale of used vehicle", concluding thus that the Claimant fails to demonstrate which vehicles were the object of sale to a third party and which vehicles were declared as total loss and that it claims already have the respective registrations cancelled (at a date prior to the taxation period).

  • In these terms, the TCA requests that the request for arbitral pronouncement be considered unfounded as to the acts of assessment of the UCT which are maintained.

II. RECTIFICATION

  1. The Tribunal is competent and is regularly constituted, in accordance with articles 2(1)(a), 5 and 6, all of the LFATM.

  2. The parties have legal capacity and standing, are legitimate and are legally represented, in accordance with articles 4 and 10 of the LFATM and article 1 of Order No. 112-A/2011 of 22 March.

  3. The proceeding does not suffer from nullities and no prior questions were raised that warrant analysis.

  4. The conditions are thus met to assess the merits of the request.

III. REASONING

III.A ESTABLISHED FACTS

Before proceeding to assess the questions of merit, it is necessary to present the factual matter relevant for their respective understanding and decision, which, having examined the documentary evidence and the tax administrative proceeding attached to the case file and also having regard to the facts alleged, is established as follows:

  • In the context of the activity of purchase and sale and rental of machines and motor vehicles carried out by it, the Claimant provides solutions for the acquisition of motor vehicles, within the scope of long-term lease and sale of motor vehicles.

  • The TCA assessed UCT against the Claimant ex officio and notified various notices of ex officio assessment of UCT and respective compensatory interest, as well as fines relating to the vehicles indicated and for the years 2008, 2009, 2010, 2011, 2012 and 2013.

  • The Claimant was notified on 31 January 2014 of the rejection of the following gracious claims (relating to UCT, compensatory interest and respective fines):

a) Gracious claim No. ... 2014..., relating to the ex officio assessments of UCT for the years 2009, 2010, 2011, 2012 and 2013, referring to the DUC identified in the initial request and reproduced in document no. 2, referring to a copy of the notification of the rejection of the claim;

b) Gracious claim No. ... 2014..., relating to the ex officio assessments of UCT for the years 2009, 2010, 2011, 2012 and 2013, referring to the DUC identified in the initial request and reproduced in document no. 3, referring to a copy of the notification of the rejection of the claim;

c) Gracious claim No. ... 2014..., relating to the ex officio assessments of UCT for the years 2009, 2010, 2011, 2012 and 2013, referring to the DUC identified in the initial request and reproduced in document no. 4, referring to a copy of the notification of the rejection of the claim;

  • Thus, UCT for the years 2008 to 2013 is at issue, relating to vehicles identified in the administrative proceeding:

a) which were the object of sale to third parties (customers of the claimant) at a moment prior to the taxation period – as shown by the sales invoices attached to the gracious claims (contained in the administrative proceeding);

b) which were declared as total loss and in relation to which the respective registrations were already cancelled at a moment prior to the taxation period - as shown by the sales invoices attached to the gracious claims (contained in the administrative proceeding);

  • From the invoices attached by the Claimant results that they were issued to various entities prior to the taxation periods in question, a fact which the TCA does not dispute – natural or legal persons

· Being the general description "sale of the asset", "residual value", and occasionally "sale of used vehicle",

· Being the special description "sale of salvage" (invoice 99.09090 of 10/08/2012 relating to vehicle …-…-…), "compensation for total loss" (transfer note No. 22.00405 of 14/05/2013, relating to vehicle …-…-… and invoice 72.11591 of 26/11/2012, relating to vehicle …-…-…).

III.B UNPROVEN FACTS

There are no alleged or known facts relevant to the decision that have not been established as proven.

III.C MOTIVATION

The establishment of the factual matter was based on the administrative proceeding, on the documents attached to the initial petition or in the course of the present proceeding and on statements of the Claimant that are not contested by the Tax and Customs Authority.

III.D ON THE JOINDER OF CLAIMS

Given the identity of the tax facts, of the tribunal competent to decide and of the grounds of fact and law invoked, nothing prevents, in view of the provisions of articles 104 of the TCPT and 3 of the LFATM, the joinder of claims verified in the present case.

III.E ON THE LAW

a) As to the rebuttability of the presumption of ownership right vesting in the Claimant

In the request for arbitral pronouncement, the Claimant invokes two circumstances which, in its view, disqualify it from the position of passive subject of UCT with respect to the vehicles and taxation periods at issue, the circumstance that, as of the date to which the tax event giving rise to the assessment relates, it was not the owner of the vehicle.

It thus believes that the Claimant is not a passive subject of UCT by virtue of not satisfying the requirements of subjective incidence of the tax provided for in article 3 of the UCTC, combined with articles 4 and 6 of the same Code.

The core of the discussion underlying the present proceedings concerns the definition of the subjective incidence of UCT: according to the TCA's thesis, the passive subject of this tax is the person in whose name the vehicle is registered; for the Claimant, the rule of incidence provided for in article 3(1) of the UCT establishes a presumption, derived from the registration, rebuttable by virtue of the provisions of article 73 of the LGT.

Thus, regarding the quality of passive subject of the tax obligation imputed to it, the Claimant alleges that, as of the date of the occurrence of the tax events, it had already sold or declared the vehicles as lost. As proof of the alleged, it attaches to the request for arbitral decision copies of the sales invoices or documents evidencing the total loss in which the vehicles are identified as well as the respective acquirers.

It happens, however, that, according to the actions taken by the TCA, in the case of vehicles with respect to which the tax acts are maintained, the respective acquirers had not, as of the date of the tax events, effected the registrations of acquisition or cancellation of registrations with the Vehicle Registration Conservancy, so that, in its database, the Claimant continued to appear as owner thereof.

Article 3 of the UCTC, under the heading "subjective incidence", provides as follows:

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

2 - Financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract are equated to owners.

With relevance to the decision to be made in the present proceeding, the question to be analyzed thus centers on the interpretation of the rule of article 3(1) of the UCTC, in order to determine whether the rule of subjective incidence inscribed therein admits, or not, that the person in whose name the vehicle is registered at the Conservancy may demonstrate, through the means of proof admitted in law, that notwithstanding such fact, is not the owner[1] of the vehicle in the period to which the tax relates and, thus, to remove the tax obligation that rests upon it. It is therefore a question of whether such rule enshrines a legal presumption of tax incidence, susceptible to rebuttal, under the general terms, as the Claimant contends or whether, as the TCA understands, "the tax legislator, in establishing in article 3(1) who are the passive subjects of UCT established express and intentionally that these are the owners (or in the situations provided for in article 2, the persons therein enumerated), being considered as such the persons in whose name the same are registered".

Now, while it is true that the legislator of the UCTC chose vehicle registration as the structuring element of this tax (which results, immediately, from article 6 of the Code, relating to the definition of the taxable event of the tax obligation, whose article 1 provides that it is constituted by the ownership of the vehicle, as attested by the registration in the national territory), being, moreover, from the elements of vehicle registration that one extracts the moment of the beginning of the taxation period (article 4(2) of the UCTC), as well as the moment until which the tax is due (article 4(3) of the UCTC) and the respective tax base (article 7 of the UCTC), another question is that of the interpretation that should be given to the rule of subjective incidence provided for in article 3 of the UCTC, which must obey general principles of interpretation of tax rules, not limiting itself solely to the normative environment created by the remaining rules of the UCTC.

Pursuant to the provisions of article 73 of the LGT, presumptions enshrined in tax incidence rules always admit contrary proof. However, in order for the establishment of a presumption to be detected in a tax incidence rule, must it always expressly provide for it, or may, on the contrary, a presumption be extracted from a tax incidence rule that is not expressly stated therein?

For example, within the framework of the regulation of the Municipal Vehicle Tax[2], which the current UCT replaced, a presumption was established in express form, the law saying that "the tax is due by the owners of the vehicles, being presumed as such, until contrary proof, the persons in whose name the same are registered or matriculated". Now, within the framework of the UCTC, the legislator chose to replace the word "presumed" with the word "considered". Should this fact be considered in the manner defended by the TCA, to the point of saying that the rule does not provide for a presumption, but rather establishes that the owners of vehicles as such recorded in the vehicle registration are always the passive subjects of the tax?

This is not our interpretation of the legal text. In fact, there being no substantive reasons that would allow one to detect a reason for the change in the legislator's stance on this point – that is, there being no reasons to believe that the legislator actually wished to eliminate the possibility of other persons, besides the owner of the vehicle, being passive subjects of UCT, it seems to us that one should read the referred semantic alteration as exactly that – a mere semantic alteration, without impact on the rule that follows from the legal text. Thus, we understand that the rule that follows from article 3(1) of the UCTC continues to be a presumption of subjective incidence regarding the owner of the vehicle as so registered with the Vehicle Registration Conservancy, which does not eliminate the possibility of contrary proof. In fact, it seems to us that the rule enshrined in article 3(1) of the UCTC has the structure of a presumption rule as this is described in article 349 of the Civil Code, that is, as an inference that the law, or the judge, draws from a known fact to establish an unknown fact. In the concrete case, the law draws from the known fact (the ownership of the vehicle in terms of vehicle registration), the presumption about the subject that should bear the tax burden relating to the vehicle in question. However, it will always be possible for the owner recorded in the registration to eliminate the application to itself of the rule of incidence, provided that it makes proof that the contributory capacity that justifies the tax imposition belongs to another, for example, by virtue of the sale of the vehicle at a moment prior to the occurrence of the tax event, or the conclusion of a financial lease contract of which the same is the object.

Presumptions of tax incidence may be rebutted through the adversarial procedure provided for in article 64 of the TCPT or, alternatively, through the channel of gracious claim or judicial challenge of the tax acts which are based thereon. In the present case, the Claimant did not use that specific procedure, so the present request for arbitral decision is a proper means to rebut the presumption of subjective incidence of UCT that supports the tax assessments whose annulment is the object of the request, as it is a matter that falls within the material jurisdiction of this arbitral tribunal in accordance with the provisions of articles 2 and 4 of the LFATM.

b) As to the proof of transmission of ownership of the vehicles

Admitting the rebuttability of the presumption, it is now necessary to analyze whether in the case sub judice it is sufficient to rebut the presumption contained in article 3(1) of the UCTC.

To rebut the presumption derived from the registration of vehicle registration, the Claimant offers the following elements relating to the vehicles which are now under review:

a) copies of the invoices of the vehicles which were the object of sale to third parties (customers of the claimant) at a moment prior to the taxation period;

b) copies of the invoices of the vehicles which were declared as total loss, at a moment prior to the taxation period.

It thus becomes necessary to analyze what value should be recognized to these elements to prove the transmission of ownership of the vehicles by the Claimant.

For this it should first address the question of the probative force of vehicle registration.

Vehicle registration is a public registry, which has the purpose of "giving publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce" (article 1 of the Vehicle Registration Code (VRC)). In the notion of security of legal commerce is evidently included the exercise of rights by third parties based on the facts registered.

As is stated in the decision of the Lisbon Court of Appeal of 24-3-2011 (proceeding no. 195/09.8TBPTS.L1-2), "land registration pursues, at one time, purposes of a private nature and purposes of a characteristically public nature. It pursues purposes of a private nature, given that it guarantees security in the domain of private rights, specifically in the field of rights with real effect – security of legal commerce (…), globally considered – facilitates traffic and the exchange of assets, and ensures the fulfillment 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 the security of legal commerce, and as a guarantee of the updating of the registry against the fact publicized".

Now, what the Claimant seeks in these proceedings is not merely to rebut a tax presumption. It is to rebut the presumption of truthfulness of the facts that are registered publicly, and which are registered for purposes of public interest, a presumption from which any person should be able to avail themselves, on pain of uselessness of the registry.

Under conditions of compliance with the law, the rebuttal of the presumption of truthfulness of the registry is very simple. When the purchase and sale of a vehicle occurs, a document intended for vehicle registration is filled out – a filling out which does not constitute an essential formality of the transaction – and which contains a declaration by both parties regarding the conclusion of the contract (in accordance with article 25(1), paragraphs (a) and (b) of Decree-Law No. 55/75).

This document is a bilateral private instrument, because it is signed by both parties to the contract. And precisely because the purchase and sale of a movable property is a non-formal transaction, the Vehicle Registration services need only this private instrument as proof to proceed with the alteration of the registry. The seller may then promote the registration in the name of the acquiree, armed with a simple copy of that declaration.

But we have also already mentioned that, if the seller is an entity that engages in the trade of motor vehicles, it may promote the registration, in the name of the acquiree, through a simple request, as provided for in article 25(1), paragraphs (c) and (d) of the Vehicle Registration Regulation.

What the Claimant presents as proof, however – invoices not signed by the buyer/acquiree/transferee – which are solely private documents, of a commercial nature, and unilateral, i.e., for the issuance of which there was no intervention by the buyer. This means that the buyer may deny that the invoice corresponds to any transaction actually concluded, thereby invalidating any probative value of the invoice and not even being required to produce any counter-proof to that effect (Lisbon Court of Appeal, Decision of 4-2-2010, Proc. No. 224338/08.7YIPRT.L1-8).

To these private documents, because they are unilateral, one can recognize only a very limited probative value[3].

If this is so in the context of relations between merchants regarding facts of their commerce, what value can be attributed to this type of documents in the context of relations with third parties who are not merchants?

On this subject, the higher courts have also pronounced themselves. Thus, in a decision of the Lisbon Court of Appeal of 26-11-2009 (Lisbon Court of Appeal, Decision of 26-11-2009, Proc. No. 29158/03.5YXLSB.L1-2), it is stated that "the probative force of the private document is limited to the declarations of its subscriber".

We thus understand in this case, as has already been stated above, what the Claimant would have to prove, in order to rebut the presumption that derives, both from article 3(1) of the UCTC and from the Vehicle Registration itself, is that it, the Claimant, was not the owner of the vehicles in question during the period to which the assessments being challenged relate, as it is this fact that results from the registration presumption.

For this it would not be sufficient to prove that, one day, several years ago, it had concluded a contract for purchase and sale of a vehicle, for even if that contract had been concluded, the ownership of any vehicle could have returned to the title of the Claimant. That is, proving that A, in the year 2001, alienated the asset X, does not imply proving that A, in the year 2011, is not the owner of asset X.

Thus, the Claimant would have to prove that it was not the owner of the vehicles as of the date to which the assessments relate, which would imply, in the concrete case, proving who was the current owner.

This proof would be easy to make, it would suffice for the Claimant to update the registry, for which it has the legitimacy as seller – and not only the legitimacy but also the obligation, since 2001, in light of the Road Code – by promoting the registration of the vehicles in the name of the buyer, through a simple request, in accordance with article 25(1), paragraphs (c) and (d) of the Vehicle Registration Regulation (provisions which establish a special regime for promoting the registration for entities that commercialize motor vehicles).

The Claimant's thesis, in so far as it concerns the probative part, seeking to neutralize the legal proof that constitutes the registry by presenting unilateral documents, which have diminished probative value in the context of substantive evidentiary law, would imply making it impossible for the tax administration to administer the Unique Circulation Tax.

And it is certain that, from the value in tax litigation of the principles of inquiry or investigation and free appreciation of evidence, and also of the principle of procedural acquisition, it follows that, although there being no formal burden of proof, charged, specially or exclusively, to any of the procedural participants, in this field a substantial, objective, or material burden of proof is of paramount importance, in the sense that the decision must naturally disfavor whoever fails to have the facts materially proven on which its position is based (cf. in this regard Vieira de Andrade, J. C., "Administrative and Tax Law, Lessons to the 3rd year of the 1995/96 Course", Coimbra, 1996, p. 186; and Saldanha Sanches, J. L., "The Burden of Proof in Tax Proceedings", Notebooks of Technical and Fiscal Science No. 151, pp. 122 et seq.).

In summary, the proof presented by the Claimant is constituted, exclusively, by private, unilateral and internal documents, with insufficient value to, in light of substantive evidentiary law, deny the validity of facts – the ownership of vehicles – on which there exists a legal proof – a legal presumption – which relieves the Respondent of any burden of proof, and which is not challengeable through mere counter-proof, which casts doubt on the facts proven by the presumption.

From all the foregoing[4] it results that the Claimant does not rebut the presumption that rests upon it regarding the ownership of the vehicles on which the UCT assessments at issue are based and that, consequently, the assessments at issue do not suffer from any illegality.

The Claimant's claim regarding the illegality of the assessments at issue based on error in the legal requirements is therefore unfounded, due to the lack of requirements for the subjective incidence of the Tax regarding the Claimant.

The understanding endorsed in the present decision is, in the opinion of the Tribunal, the one that best reconciles the lawfulness of taxation, the rights of taxpayers, the duties of taxpayers and the principle of efficiency in taxation.

Such understanding, based, on the one hand, on the acceptance of the thesis that article 3(1) of the UCTC contains a rebuttable presumption, and, on the other, on the conviction that the presumption of ownership derived from vehicle registration cannot be rebutted with the mere resort to unilateral documents, does not leave without defense the holder of the registry who, possibly, would not have had the effective possession of the vehicles as of the date of the tax events, since the right to raise objection to execution will always be available, in accordance with article 204(1)(b) of the TCPT, alleging and proving not to have been, during the period to which said executable debt relates, the possessor of the vehicles.

IV. DECISION

In these terms, and with the grounds set forth, the Arbitral Tribunal decides to judge the request for arbitral pronouncement entirely unfounded.

The value of the proceeding is set at € 40,066.84, in accordance with article 97-A(1)(a) of the TCPT, applicable by virtue of article 29(1), paragraphs (a) and (b) of the LFATM and article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings.

The value of the arbitration fee is set at € 2,142.00, in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be paid entirely by the Claimant, in accordance with articles 12(2) and 22(4), both of the LFATM, and article 4(4) of the cited Regulation.

Lisbon, 18 June 2015

The arbitrator,

Guilherme W. d'Oliveira Martins

[1] Which, for this purpose, also occurs when a financial lease contract was concluded in terms of which it is another person who is the lessee of the vehicle.

[2] Cf. article 3(1) of the Regulation of the Municipal Tax on Vehicles, approved by Decree-Law No. 143/78 of 12 June.

[3] See further, that even within the context of relations between merchants regarding facts of their commerce – a field which is, as is known, that in which commercial documents and business records have the greatest probative value – commercial invoicing and business records do not constitute full proof, the commercial owner of the books being able even to produce counter-proof of their own entries (Supreme Court of Justice, Decision of 18-10-2007, Proc. No. 06B3818).

[4] And following closely the case law of this Centre contained in proceedings 63/2014-T, 130/2014-T, 150/2014-T and 220/2014-T.

Frequently Asked Questions

Automatically Created

What is the subjective incidence of Stamp Tax (Imposto de Selo) in financial leasing operations under Portuguese tax law?
Under Portuguese tax law, the subjective incidence of Vehicle Circulation Tax (IUC) in financial leasing operations is governed by Article 3 of the IUC Code. The passive tax subjects are vehicle owners as defined by vehicle registration, with financial lessees, acquirers with reservation of ownership, and holders of purchase option rights by virtue of lease contracts being equated to owners. This creates a legal presumption that the registered owner is the tax debtor. However, as established in CAAD Process 327/2014-T, this presumption is rebuttable under Article 73 of the General Tax Law (LGT), which provides that presumptions in tax incidence rules always admit contrary proof. Financial leasing companies can therefore challenge assessments by demonstrating actual ownership transfer through sales invoices, salvage documentation, or other evidence showing they are no longer the economic owners despite remaining as registered titleholders due to acquirers' failure to update vehicle registration records.
Can a financial leasing company challenge Vehicle Circulation Tax (IUC) assessments through CAAD tax arbitration?
Yes, financial leasing companies can challenge Vehicle Circulation Tax (IUC) assessments through CAAD tax arbitration under the framework established by Decree-Law 10/2011 (RJAT). Process 327/2014-T demonstrates this procedural capacity. The claimant filed a request for establishment of a singular arbitral tribunal after exhausting administrative remedies (gracious claims were rejected on January 31, 2014). The request was accepted by CAAD's President on April 14, 2014, and the Tax Authority was notified on April 16, 2014. The Ethics Board appointed a sole arbitrator, and the tribunal was constituted on June 20, 2014. The case involved joinder of claims under Article 3(1) of RJAT, as multiple IUC assessment acts for years 2008-2013 involved the same legal principles. The company had paid €45,066.84 (including compensatory interest and fines) to avoid tax executions while pursuing arbitration, demonstrating that payment does not preclude challenging the legality of assessments and seeking reimbursement through the CAAD arbitral procedure.
How does CAAD arbitral tribunal process 327/2014-T address the tax liability of lessees versus lessors for IUC?
CAAD Process 327/2014-T addresses the distribution of IUC tax liability between lessees and lessors by examining the application of Article 3(2) of the IUC Code, which equates financial lessees to owners for tax purposes. The tribunal analyzes whether the legal presumption that the registered owner is the passive tax subject can be overcome by factual evidence. The lessor company argued that despite formal vehicle registration in its name, actual ownership had transferred to third parties (lessees or purchasers) through sale contracts or vehicles were total losses. The case establishes that while Article 3 UCTC creates a presumption favoring registered ownership, this presumption is rebuttable pursuant to Article 73 of the General Tax Law. The lessor provided sales invoices and salvage documentation as contrary proof. The core issue is whether administrative non-compliance by acquirers (failure to update vehicle registration) should result in continued tax liability for the former owner/lessor. This case clarifies that tax liability should follow actual economic ownership and control rather than merely formal registration status, protecting financial leasing companies from assessments on vehicles no longer in their patrimony.
What are the legal grounds for annulment of Vehicle Circulation Tax (IUC) liquidation acts totaling €40,066.84?
The legal grounds for annulment of the €40,066.84 in IUC liquidation acts in Process 327/2014-T rest on three principal arguments: First, violation of Article 3 of the IUC Code regarding subjective tax incidence—the claimant argues it is not the legitimate passive tax subject because ownership transferred before the taxation periods through documented sales or vehicles were total losses with cancelled registrations. Second, misapplication of the rebuttable presumption doctrine under Article 73 of the General Tax Law (LGT), which prohibits irrebuttable presumptions in tax incidence rules. The claimant invokes Constitutional Court Decision 211/2003 establishing that irrebuttable presumptions violate constitutional principles of equality and taxation according to economic capacity. The Tax Authority allegedly refused to accept contrary evidence (sales invoices and salvage documentation) proving ownership transfer, thereby treating the registration presumption as irrebuttable. Third, the failure of vehicle acquirers to timely update registration records should not result in tax liability for the former owner who demonstrated through documentary evidence that it no longer possessed ownership rights, economic control, or use of the vehicles during the assessed tax periods. These grounds collectively challenge both the factual basis and legal interpretation underlying the ex officio assessments.
What is the procedure and timeline for filing a singular tax arbitration request under Decree-Law 10/2011 (RJAT) in Portugal?
The procedure for filing a singular tax arbitration request under Decree-Law 10/2011 (RJAT) in Portugal, as illustrated by Process 327/2014-T, involves several stages with specific timelines: (1) Exhaustion of administrative remedies—the claimant must first file gracious claims with the Tax Authority; in this case, claims were rejected January 31, 2014. (2) Filing the arbitration request with CAAD under Articles 2 and 10 of RJAT, specifying the challenged acts and legal grounds. (3) CAAD President's acceptance of the request—occurred April 14, 2014, followed by notification to the Tax Authority on April 16, 2014. (4) Arbitrator appointment by the Ethics Board under Article 6(2)(a) and Article 11(1)(b) of RJAT—parties are notified and have opportunity to refuse the appointment per Articles 6-7 of the Code of Ethics. (5) Tribunal constitution—occurred June 20, 2014 under Article 11(1)(c). (6) First hearing under Article 18 of RJAT—held October 29, 2014, where the Tax Authority maintains or withdraws the contested acts and parties declare whether oral arguments are necessary. (7) Decision issuance—the tribunal must decide within the statutory period, subject to extensions under Article 21(2) RJAT. Multiple extension orders were issued in this case through June 2015.