Process: 329/2018-T

Date: November 26, 2018

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (329/2018-T) addressed the subjective incidence of IUC (Imposto Único de Circulação - Unique Circulation Tax) on vehicle importers. The Claimant, a vehicle importer operating as the exclusive Portuguese distributor for a car brand, challenged 215 IUC self-assessments covering tax years 2009-2016, totaling €28,102.08 plus compensatory interest. The core legal question concerned who bears IUC liability when vehicles are registered in the importer's name but had already been sold to dealerships before registration. The Claimant argued it should not be liable for IUC because ownership had transferred to dealerships prior to the registration dates, evidenced by sales invoices predating vehicle registration. The importer distinguished between IA (Imposto Automóvel - Vehicle Tax), where it acknowledged being the registered operator responsible for introducing vehicles into consumption, and IUC, which under Article 3 of CIUC (Código do Imposto Único de Circulação) taxes the vehicle owner on the registration date. The Tax Authority maintained that the legal presumption under the Vehicle Registration system places IUC liability on the registered owner. The Claimant initiated official review (revisão oficiosa) proceedings under Article 78 of LGT (Lei Geral Tributária), arguing the request was timely filed within the four-year limitation period for assessments from December 2013 onwards. This case illustrates the complex interplay between civil ownership transfer, administrative vehicle registration procedures, and tax liability determination under Portuguese tax law, particularly relevant for automotive importers and dealerships managing inventory transitions.

Full Decision

ARBITRAL DECISION

Report:

A... – BRANCH IN PORTUGAL (hereinafter referred to as the "Claimant"), legal entity no. ..., with registered office in ..., ..., ..., filed a request for arbitral pronouncement and constitution of an arbitral tribunal on 27 March 2017, under the provisions of Article 4 and Article 10, No. 2 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 (hereinafter referred to as the "Respondent" or "TA") is the respondent.

The Claimant seeks in the said request for arbitral pronouncement that the Arbitral Tribunal declare:

  • The annulment, on grounds of illegality, of the decision rejecting the official review request No. ...2017...;

  • The annulment, on grounds of illegality, of 215 self-assessments relating to the Unique Circulation Tax (UCT), for the years 2009 to 2016, inclusive, and the corresponding compensatory interest, and the consequent reimbursement in the amount of € 28,102.08;

  • The recognition of the right to indemnificatory interest, in accordance with legal provisions; and

  • The condemnation of the Respondent to payment of the arbitration fee and other costs, if any.

The Claimant failed to appoint an arbitrator, and therefore, under the provisions of Article 6, No. 2, paragraph a) and Article 11, No. 1, paragraph b) of the LFATM, the President of the Deontological Council of the Centre for Administrative Arbitration (CAAD) appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and the parties did not express refusal of the appointment, in accordance with Article 11, No. 1, paragraphs a) and b) of the LFATM and Article 7 of the Deontological Code.

On 19 September 2018, the arbitral tribunal was constituted.

Notified for this purpose on 19 September 2018, the Respondent submitted, on 16 October 2018, its Response, arguing for the dismissal of the arbitral request, having submitted a copy of the administrative file.

On 31 October 2018, the arbitral meeting provided for in Article 18 of the LFATM was dispensed with, as well as the parties' submissions were dispensed with because the parties had set out their respective positions in the respective procedural documents and there was no adversarial process to be ensured.

The deadline for publication of the final decision was set for 3 December 2018.

The Claimant sustains its request, in summary, as follows:

The Claimant is the company that exclusively imports all vehicles of the B... brand for the national market.

The Claimant, in the scope of its commercial activity, imports vehicles into Portugal, in this case new ones, by virtue of orders placed directly by dealerships with the Claimant, which in turn places the order with C..., which places the manufacturing order at the factory.

Once imported, all vehicles are immediately sold to dealerships of the brand, which pay them on the day following the issuance of the invoice, either for immediate delivery to the final customer or simply to remain in the showroom of the dealership, for merely exhibition purposes (cases of new model launches) and/or awaiting interested customers.

When the vehicles are sent from the dealerships to the customers, the registration of the owner is changed to the name of the final customer.

Given that the vehicles were sold to dealerships before the date of their registration, these sales invoices do not contain their respective registration numbers – containing only the chassis numbers of the vehicles sold to dealerships.

Only the UCT/IA debits to dealerships, which occur after the date of the sales invoices for the vehicles, contain the registration number and the date of registration, because only thereafter, following the sale of the vehicles to dealerships, the Claimant argues, were the vehicles registered, as evidenced by the interconnection of these UCT/IA debits with the previous sales invoices for the respective vehicles – an interconnection that is evident given the coincidence of the chassis number on the sales invoice and in the subsequent "Vehicle Tax (UCT/IA)" debit.

The Claimant submits that it is the passive subject of the UCT, in accordance with Article 3, No. 1 of the CIUC – contrary to what occurs in the case of the UCT, a distinct tax from that one.

Being that, for UCT (Vehicle Tax) purposes, the Claimant, as a "registered operator" responsible for the introduction of the vehicle into consumption, is the passive subject of this tax (UCT) – which is not to be confused with the UCT, the tax at issue here.

For UCT purposes, "Registered Operators" are considered to be persons in whose name the Vehicle Customs Declaration (VCD) or the Supplementary Declaration of Vehicles (SDV) is issued (see Article 3 of the Vehicle Tax Code).

For UCT purposes, given that the vehicles in question were sold by the Claimant before the date of their respective registration, it is evident that the Claimant was not, as it argues, the owner of the same on the dates of registration – and therefore is not subject to UCT and the respective compensatory interest.

The Claimant further submits that, in accordance with the combined provisions of Article 42, No. 1 and No. 2 of the Vehicle Registration Regulation, approved by Decree-Law 55/75 of 12 February, the vehicle registration, in the case of initial registration of ownership, must be requested within 60 days from the date of assignment of the registration number.

In the case of the specific vehicles identified in the UCT assessments (and respective compensatory interest) now in question, the UCT due with reference to the date of registration is in question.

The vehicles in question, listed in the annex as doc. 5 to the initial petition, were not the property of the Claimant on the dates of their respective registrations, contrary to what was presumed by the TA, as they had already been sold to dealerships.

On the dates of registration of these vehicles, the Claimant had already sold them to third parties (the aforementioned dealerships), as it concludes.

Although the Claimant appeared in the Vehicle Register and with the IMTT as the owner of the vehicles on the dates of their respective registrations, reality also demonstrates that on the dates of registration of the vehicles in question, the Claimant was no longer their owner – as they had already been sold to dealerships.

From the provisions of Articles 1, 2, No. paragraphs a) and d), 3, 4, 6, and 11, it is understood that UCT falls on the owner or acquirer with reservation of ownership on the date of vehicle registration, it being presumed that the owner or acquirer with reservation on that date is the person in whose name the vehicle is registered or recorded;

All official assessments of UCT reported to the date of registration, as can be inferred from the content of the assessments and other documentation sent by the Respondent, however, the vehicles were not the property of the Claimant on the dates of their respective registrations, given that the Claimant had already sold them to third parties (the aforementioned dealerships);

Contrary to what was recommended by the Respondent in the decision rejecting the official review request, this is not timely only as to the assessments whose payment period ended on 31.10.2014 and is not timely in relation to the others.

The Claimant understands that the official review request was filed against the UCT self-assessments, all occurring from December 2013 onwards, within the 4-year period provided for in Article 78, No. 1 of the LGT, having raised and requested the declaration of illegality of UCT self-assessments.

Under Article 16, No. 2 of the CIUC, the assessment of the tax is made by the passive subject, and under No. 3 of the same legal provision, the assessment of the tax may also be made at any tax office, upon request of the passive subject. Under Article 17, No. 1 and 2 of the CIUC, in the year of registration or entry of the vehicle in national territory, the tax is assessed by the passive subject of the tax within 30 days following the end of the legally required period for its registration and, in subsequent years, the tax must be assessed by the end of the month in which it becomes due, in accordance with No. 2 of Article 4.

The Claimant understands that, as results from Article 18 of the CIUC, only exceptionally, when the taxpayer does not self-assess the UCT, does the TA proceed to make an official assessment of this tax.

It being certain that the TA, by imposition of the principles of equality, good faith, legal certainty, protection of confidence and legitimate expectations of taxpayers, is legally bound by its own interpretive doctrine of tax norms (Articles 55 and 68-A of the LGT, 55 of the CPPT, 6 and 10 of the CPA and 266, No. 2 of the CRP). Therefore, the official review request is timely in relation to all tax self-assessments in question.

According to the Claimant, CAAD jurisprudence considers that the law merely establishes a legal presumption of ownership based on registry data – allowing the interested party to allege and prove that, despite this presumption arising from the registry, it is not the actual owner of the vehicles on the dates considered in the official records, citing several arbitral decisions.

To thus consider, CAAD jurisprudence invokes the rules of legal interpretation, namely the very literal element of Article 3, No. 1 of the CIUC, the principles of equality, taxpaying capacity, legality, impartiality, proportionality, justice, pursuit of public interest, inquisitorial procedure, and discovery of material truth (Articles 55 and 58 of the LGT), as well as the rule of unity of the legal-fiscal system (Articles 11 of the LGT and 9 of the Civil Code);

Also the rational or teleological element of the law, which resides in the displacement of the tax burden from the moment of acquisition of vehicles to the circulation phase, given the principle of equivalence, the circumstances in which the law was enacted and the temporal conditions in which it arose, in addition to the principle of consensuality, according to which the legal-civil effects of the transmission of vehicles are produced immediately, by simple purchase and sale agreement; according to which the legal-civil effects of the transmission of vehicles, in particular the legal effect of the transmission of ownership of the vehicle, are produced immediately, by simple purchase and sale agreement between the parties ("casum sentit dominus" rule) – without the need for any act of physical delivery, written purchase contract, or any acts of publicity or registration (Article 408, No. 1 of the Civil Code).

Furthermore, given the principle of equivalence, according to which taxpayers should be burdened to the extent of the cost they actually cause to the environment and the road network, that is, depending on the actual prejudices that result to the community as a consequence of the use of motor vehicles (Article 1 of the CIUC).

That Article 7 of the Land Registry Code (LRC), applicable supplementarily to vehicle registration by virtue of Article 29 of the Vehicle Registration Act, provides that registration constitutes mere presumption that the right exists and belongs to the registered titleholder – therefore being a rebuttable presumption (juris tantum), as is unanimous jurisprudence, including of the Supreme Court of Justice itself.

That is, as is unanimous jurisprudence, according to the Claimant, registration has merely declarative effects, of opposability of the right against third parties, but never constitutive effects of the right – from which it follows that registration is not a condition of validity of the transmission of the vehicle from seller to buyer.

Article 18, No. 2 of the CIUC does not provide for any assessment of compensatory interest but only an official assessment of the UCT for voluntary payment within 10 days. The requirement of compensatory interest before the period for voluntary payment has elapsed suffers from a defect of violation of law, and furthermore, since there is no default in any UCT, the assessment of compensatory interest does not comply with Article 35 of the LGT regarding the verification of the legal prerequisites for its assessment;

For the assessment of compensatory interest, there would always be required an adequate causal nexus between the behavior of the passive subject and the delay in the tax assessment, according to the jurisprudence of the Superior Court of Administrative Courts (Decision of the Superior Court of Administrative Courts, 2nd Section, No. 587/2010, of 16 December 2010);

Since the assessments in question were paid, the Claimant, in addition to the reimbursement of taxes indebted, has the right to indemnificatory interest, for error of fact and law in the issuance of the assessments, in accordance with Article 43 of the LGT.

In summary, the Claimant argues that there is an error of fact and law in the interpretation and application of the norms of subjective incidence of UCT, and therefore the annulment of the 215 assessment acts relating to UCT, concerning the vehicles identified by registration number, and likewise the corresponding compensatory interest, should be determined, with such amounts being owed to the Claimant, in addition to indemnificatory interest.

The Respondent replied arguing for the dismissal of the request for arbitral pronouncement and alleging, in summary, that:

The Respondent, before submitting its response, considered that the said assessment acts should be maintained, given their enforceability, and therefore did not intend the option of revocation, rectification, reform, or conversion of the same, as is permitted by Article 13 of the LFATM.

The Respondent considers that the interpretation presented by the Claimant has no support in law, since the legislator did not use the expression "are presumed" in Article 3, No. 1 of the Unique Circulation Tax Code, and therefore the Respondent considers that the said normative provision establishes, expressly and intentionally, what should be considered legally as owners of vehicles.

In this case, the Claimant is the one appearing in the registry as owner, and therefore is the passive subject of the tax in question.

For this purpose, it argues that, under Article 17 of the CIUC, the introduction into consumption and tax assessment on vehicles not having national registration is governed by the issuance of a Vehicle Customs Declaration (VCD), and such issuance constitutes the taxable event, under the terms and for the purposes of the provision in Article 5 of the Vehicle Tax Code (VIUC).

Under Article 117, No. 4 of the Road Code, the registration is requested from the IMTT by the entity that proceeds with the admission or introduction into consumption of the vehicle, and under Article 24, No. 1 of the Vehicle Registration Regulation (approved by Decree-Law No. 55/75 of 12 February) (VRR), "the initial registration of ownership of vehicles imported, admitted, assembled, constructed or reconstructed in Portugal is based on the respective application and proof of compliance with fiscal obligations relating to the vehicle."

For UCT purposes, No. 1 of Article 3 of the CIUC establishes that "The passive subjects of the tax are the owners of vehicles, considering as such natural or legal persons, of public or private law, in whose name the same are registered."

As to the assessment period, No. 1 of Article 17 of the CIUC establishes that: "In the year of registration or entry of the vehicle in national territory, the tax is assessed by the passive subject of the tax within 30 days following the end of the legally required period for its registration."

From the provisions, the Respondent understands that, as to the scope of subjective incidence of UCT and the fact constituting the corresponding tax obligation, unequivocally result from Article 6 of the CIUC the legal situations that generate the birth of the tax obligation, namely the registration or entry in national territory.

On the other hand, No. 3 of the same Article 6 provides that "the tax is considered due on the first day of the taxation period referred to in No. 2 of Article 4."

That is, the Respondent understands that the moment from which the tax obligation is constituted presents a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear (No. 2 of Article 4 and No. 3 of Article 6, both of the CIUC, and No. 1 of Article 10 of the VRR).

By virtue of the combination of the express norms and in particular the provision in Article 24 of the VRR, it underlies that the initial registration of ownership of vehicles admitted (as is the case at hand), is based on the respective application and proof of compliance with fiscal obligations relating to the vehicle.

That is, the issuance of a registration certificate implies the presentation of a VCD by the Claimant and the payment of the amount corresponding to the Vehicle Tax, and automatically generates the registration of ownership of the vehicle, under Article 24 of the VRR in the name of the entity that proceeded with the import of the vehicle and request for registration, namely the Claimant.

Thus, the Respondent concludes that the first registration of each motor vehicle is executed in the name of the importing entity, in this case the Claimant.

This fact is clearly evident in the procedures undertaken by the Respondent and which underlie the UCT assessment acts, in which it is peremptory that the Claimant appears as the owner of the motor vehicles in question here.

Consequently, under Article 24 of the VRR, the importer appears in the registry as the first owner of the vehicle and in that sense, it is in accordance with the provisions of Articles 3 and 6 of the CIUC, passive subject of the tax.

Being that the attribution to the Claimant of a registration certificate constitutes, under Article 6 of the CIUC, the taxable event, and having the Claimant requested the issuance of a registration certificate, being the same registered in the name of the Claimant, the prerequisites of the taxable event of UCT are met, as well as its enforceability, with the Claimant being the passive subject of the tax.

The tax legislator in establishing in Article 3, No. 1 who are the passive subjects of UCT established expressly and intentionally that these are the owners (or in the situations provided in No. 2, the persons there listed), considering as such the persons in whose name the same are registered, as the legislator did not use the expression "are presumed."

The Respondent invokes exemplarily normative provisions, such as Articles 2 of the Transfer Tax Code, 2, 3, and 4 of the Personal Income Tax Code, and 4, 17, 18, and 20 of the Corporate Income Tax Code, to argue that Article 3, No. 1 of the CIUC does not establish any presumption.

The Respondent argues that it is imperative to conclude in the case at hand that the legislator in Article 3, No. 1 of the Unique Circulation Tax Code expressly and intentionally established that those in whose name the vehicles are registered are to be considered as owners, thereby preserving the unity of the legal-fiscal system. Moreover, it argued that considering this norm a presumption would be an interpretation contra legem.

The Respondent concludes therefore that Article 3, No. 1 of the Unique Circulation Tax Code does not establish a presumption, because what is really at issue is a legislative policy choice, whose intention was that those appearing in the vehicle registry be considered owners of vehicles. In this sense, the Respondent invokes the Sentence handed down by the Administrative and Tax Court of Penafiel, within the scope of case No. 210/13.0 BEPNF.

On the other hand, the Respondent also notes that the systematic element of legal interpretation demonstrates that the Claimant's understanding has no support in law. In this sense, the Respondent establishes the articulation between the subjective incidence of UCT and the fact constituting the tax obligation, and argues that only situations subject to registration generate the birth of the tax obligation.

According to the Respondent, the moment from which the tax obligation is constituted presents a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear.

The Respondent argues that having or being able to have access to the Vehicle Register and to the certificate in which all registered acts must appear, all necessary elements are conferred on the Respondent to determine the passive subject of the tax, without the need to resort to any contracts of a private nature that confer these rights. Thus, the Respondent argues that the lack of such registration or its being outdated, under Article 42 of the Vehicle Registration Regulation, is only attributable to the passive subject of the Unique Circulation Tax and not to the State.

According to the Respondent, the understanding defended by the Claimant would lead to the impracticability of the Unique Circulation Tax, since any person who had registered with the Vehicle Registry Office could avoid their responsibility for payment of the tax, simply by invoking the conclusion of a contract, even if oral, which was not registered, thereby also jeopardizing the statute of limitations for the tax and legal certainty and security.

The Respondent argues for its understanding by alleging that the reform of the vehicle taxation regime in Portugal altered the vehicle taxation regime, such that passive subjects of the tax became the owners appearing in the property registry, regardless of the circulation of vehicles, thereby avoiding the existence of many vehicles not registered in the name of the real owner.

Also according to the Respondent, although environmental concerns are evident in the Unique Circulation Tax Code, it cannot be ignored that the tax legislator intended when creating the Unique Circulation Tax that persons, natural and legal, in whose name vehicles are registered be considered passive subjects of this tax, regardless of the circulation of vehicles on public roads.

On the other hand, the Respondent further invokes that the Claimant's interpretation is contrary to the Constitution, having regard to the principle of confidence and legal certainty, the principle of efficiency of the tax system, and the principle of proportionality, articulated with the principle of taxpaying capacity, because it devalues registry reality to the detriment of an informal reality and unsuitable for minimum control by the Respondent. In this sense, the Respondent invokes Proposed Law No. 118/X, relating to the reform of vehicle taxation, because this reform also seeks to deepen the progress that has recently been made in the administration of taxes, particularly with regard to the management of a complete, organized, and reliable information system.

For that reason, the Respondent argues that the understanding defended by the Claimant is offensive to the principle of efficiency of the tax system, insofar as it translates an obstruction and increased cost of the Respondent's duties, preventing control of the tax and rendering registry information systems useless with prejudice to the interests of the Portuguese State.

The Respondent further invokes the absence of proof of transmission of the vehicles in question, since the Claimant has only submitted, for purposes of demonstrating the transmission of the vehicles, copies of sales invoices for each of the vehicles, which do not constitute an appropriate document to prove the sale of the vehicles, further adding that in the said invoices the name of the Claimant appears on the date in which the tax is due.

In fact, the Respondent considers that invoices do not prove an unequivocal declaration of intent on the part of the alleged acquirer, which should be effected through the submission of means of payment of the price or receipts of discharge of debt.

Regarding indemnificatory interest, the Respondent understands that the tax acts are valid and lawful and, in that sense, there is no error attributable to the services that would determine that the Claimant has the right to such interest.

Finally, the Respondent argued that the Claimant should be held responsible for payment of the arbitration costs, for the reason that it was the Claimant that was responsible for the filing of the request for arbitral pronouncement, for not having updated the vehicle registry.

In summary, the Respondent considers that the request for arbitral pronouncement should be judged to lack merit, with the challenged assessment acts thus being maintained.

B) Case Management Conference

The Tribunal is competent and is regularly constituted, under Articles 2, No. 1, paragraph a), 5, and 6, all of the LFATM.

The parties have legal capacity and standing, are properly represented, under Articles 4 and 10 of the LFATM and Article 1 of Ordinance No. 112-A/2011 of 22 March.

There are no nullities or preliminary procedural issues affecting the whole process, and therefore it is now necessary to address the merits of the request.

C) Subject Matter of the Arbitral Pronouncement

The Tribunal is asked to address the following matters, as described above:

  • Is the official review request timely in relation to all the tax self-assessment acts in question?

  • Should the 215 assessment acts relating to the Unique Circulation Tax, plus the corresponding compensatory interest, be declared annulled, with the amounts paid being reimbursed to the Claimant?

  • Does the Claimant have the right to indemnificatory interest?

  • Who is responsible for the costs and other charges?

D) Findings of Fact (Proven Facts)

The following facts are considered proven, with relevance for the decision, based on the documentary evidence submitted in the proceedings:

  • The Claimant is the company that exclusively imports all motor vehicles of the B... brand for the national market.

  • The Claimant, in the scope of its commercial activity, imports vehicles into Portugal, in this case all new ones, by virtue of orders placed directly by dealerships with the Claimant, which in turn places the order with C..., which places the manufacturing order at the factory.

  • Once the vehicles are imported, they are immediately sold to dealerships of the brand and the respective invoice is issued, which does not include the Vehicle Tax and contains the chassis number of the vehicle, but not the registration number, and the acquiring dealerships pay the invoiced amount on the day following the issuance of that document.

  • The Claimant requests the registration of each vehicle following the dealership's request.

  • When vehicles are sent from dealerships to customers, the ownership registration is changed to the name of the final customer.

  • The Claimant, by consulting its tax situation, issued the UCT collection documents for each of the vehicles on the list it submits in the proceedings and proceeded to their payment, in the total amount of € 28,102.08.

  • All self-assessments occurred from December 2013 onwards.

  • The official review request was filed on 07/08/2017.

  • The Claimant requested the official review of all UCT self-assessments and compensatory interest, in the total amount of € 28,102.08 in question in the proceedings, which was rejected on 2018/04/09.

The proven facts result from the tribunal's conviction based on examination of the documents submitted to the proceedings and the absence of controversy regarding them.

There are no unproven facts of interest for the decision of the case, considering the possible legal solutions.

E) On the Law

Is the official review request timely in relation to all the tax self-assessment acts in question?

The Claimant raises the question of timeliness of the official review request in relation to some of the self-assessment acts in question, which the tribunal, considering the necessity of defining the scope of the case, appreciates this matter of exception that the Claimant raised as a preliminary question.

On this question, we adopt the Claimant's understanding. The solution provided in Article 16, No. 2 of the CIUC provides that "the assessment of the tax is made by the passive subject itself through the internet, under conditions of registration and access to electronic declarations, being mandatory for legal entities."

As results from Decision No. 183/2014-T of the CAAD, it is at the moment of this "tax assessment that a unique collection document is issued which, certified by the means in use in the collection network, proves the proper payment of the tax" (Article 16, No. 4, CIUC).

Thus, under Article 18, No. 2, CIUC, there was clearly tax assessment by the passive subject, which constitutes manifestly a tax act, which can be challenged through a request for arbitral pronouncement.

In this manner, and considering the UCT self-assessments within the 4-year period provided for in Article 78, No. 1 of the LGT, the official review request is timely in relation to all the acts, and in that line, they are subject to substantive appreciation by the arbitral tribunal.

On the appreciation of the legality of the challenged assessment acts, plus the corresponding compensatory interest.

The issue underlying the present request for arbitral pronouncement takes into account the UCT assessments that the Claimant paid, relating to the years 2009 to 2016 in accordance with the appended list and assessments submitted to the proceedings, in a total of 215.

For this purpose, it will be necessary to determine the subjective incidence of the Unique Circulation Tax and likewise the moment at which the taxable event of this tax occurs.

Under Article 3, No. 1 of the CIUC, it is provided that "The passive subjects of the tax are the owners of vehicles, considering as such natural or legal persons, of public or private law, in whose name the same are registered."

Thus, it is necessary from the outset to analyze the subjective incidence in accordance with the provision in the Unique Circulation Tax Code.

With respect to this question, the Claimant argues that its object is the import of motor vehicles into Portugal of the B... brand and that, when it orders them from C..., it does so at the request of dealerships. In this sense, the Claimant argues that Article 3, No. 1 of the Unique Circulation Tax Code establishes a rebuttable presumption of "ownership," that is, one that admits proof to the contrary, namely through the demonstration that the vehicles in question were transmitted to third parties (to dealerships) before the tax became due.

To the contrary, the Respondent considered that the provision in Article 3, No. 1 of the CIUC does not provide a presumption; rather, it established expressly and intentionally that those in whose name the vehicles are registered are to be considered as owners.

Thus, the main question will be whether the legislator established in the subjective incidence norm referred to a presumption, capable of being rebutted, as the Claimant argues, or establishes that the persons in whose name the vehicles are registered are the owners, as argued by the Respondent.

As per the decision rendered in case No. 207/2017-T of the CAAD, for purposes of appreciation, it is necessary to analyze the effects of vehicle registration. Under Article 7 of the Land Registry Code, applicable ex vi Article 29 of Decree-Law No. 54/75 (Vehicle Registration), which "the definitive registration constitutes a presumption that the right exists and belongs to the registered titleholder in the precise terms in which the registration defines it."

This means that the registration of the ownership right of the vehicle has a merely declarative effect and not a constitutive effect of the right, and therefore is configured as a presumption of the existence of the right, in the terms in which it is registered, which can be rebutted, that is, it admits proof to the contrary.

As there is no legal provision, especially at the level of the Unique Circulation Tax Code, that attributes to vehicle registration any legal effect, including as a condition of validity or effectiveness of the underlying legal act, that is, the purchase and sale contract of which the vehicle is its mediate object.

If that is the case, that is, given the absence of any other effect to be attributed to the registration act and considering that ownership is thus transmitted through the conclusion of a purchase and sale contract, for which there is no legally required form, with the principle of freedom of form in force, under Article 879, paragraph a) of the Civil Code, one of the effects of this contract is exactly the real effect of transmission of the title of the right.

Thus, while it is undeniable that from the literal element of Article 3, No. 1 the legislator, contrary to what it had done previously, used the expression "considering as" and not "presuming," one could question whether the nature of presumption is or is not at issue in the present provision under analysis, but the truth is that from a complete analysis of the legislation and the absence of any provision that confers on registration any other effect beyond that referred to, we are led to conclude that the legislator indeed intended to use both expressions with identical meaning;

Following what was stated in Decision 43/2014-T, which we follow closely here, "it is verified, as an example, that in Articles 243, No. 3 of the Civil Code and 45, No. 6, and 89-A, No. 4 of the General Tax Law, the expression 'considers as' is also used, and yet we are dealing with legal presumptions, and therefore, in accordance with the general rules of interpretation provided for in Article 9, No. 2 of the Civil Code, it is considered that the minimum of verbal correspondence is ensured for purposes of determining the legislative thinking that is objectified in the provision in question – literal element. Note that with respect to the second legal provision referred to, Jorge Lopes de Sousa considers there to be a rebuttable presumption of notification for purposes of counting the statute of limitations for the right to make an assessment (see SOUSA, Jorge Lopes de, Annotated Code of Tax Procedure and Process, Vol. I, 6th Edition, Áreas Editora, S.A., Lisbon 2011, p. 388)."

That is, both expressions have been used by the legislator without this being able to conclude that it did not intend to establish, in fact, a legal presumption, and it cannot be inferred that the change in expression could lead to a different interpretive meaning, and therefore we are certain that the semantic argument referred to by the Respondent does not seem to us to merit approval.

On the other hand, as is drawn from the aforementioned Decision 43/2014-T whose position is endorsed, "still within the framework of the elements of interpretation in accordance with Article 9 of the Civil Code, it is important to consider the historical element. Thus, recalling Decree-Law No. 599/72 of 30 December and Decree-Law No. 116/94 of 3 May, with respect to subjective incidence, it was provided that the presumption that the passive subjects of UCT are the persons in whose name the vehicles were registered on the date of assessment."

Thus, as to this element of interpretation, it does not appear that the Respondent is correct.

On the other hand, considering the rational and teleological element, the UCT has as its premise the environmental and road cost of the actual use of the automobile, and therefore does not have as its addressees the importers of vehicles, since the activity of these does not give rise to any environmental cost.

The UCT thus has underlying the principle of equivalence provided for in Article 1 of the CIUC, with a view to "burdening taxpayers to the extent of the environmental and road cost they cause, in implementation of a general rule of tax equality."

Thus fulfilling the constitutional command provided in Article 66, in which sustainable development requires that the State ensure "that fiscal policy makes compatible development with the protection of the environment and quality of life" (paragraph h) of No. 2).

Promoting a principle of "polluter-pays," fulfilling the premise of material equality among all citizens who give rise to environmental cost, thereby embodying the UCT the environmental concerns that fiscal policy imposes.

Now, to consider that the tax legislator intended anything other than to admit a rebuttable presumption in Article 3, No. 1 of the Unique Circulation Tax Code would be to violate the principle of equivalence, placing on the registered owner and not on the actual owner the burden of payment of the tax, even though that owner (as would not be) gave rise to the environmental and road cost that the tax burden intended to burden.

Thus being, also in accordance with this element, Article 3, No. 1 of the CIUC should be interpreted to mean that there is indeed a genuine presumption.

It being irrelevant the change in expression, as alleged by the Respondent, as the currently established is similar and with the same meaning.

It is thus concluded that Article 3, No. 1 of the Unique Circulation Tax Code establishes a presumption, and this is rebuttable under Article 73 of the General Tax Law – "the presumptions established in tax incidence norms always admit proof to the contrary, and therefore are rebuttable."

Giving this as established, it is important now to verify whether the Claimant fulfills the burden of rebutting the presumption that applies "against" it, by being the one appearing in the vehicle registry as the owner of the vehicle, of being considered the passive subject of UCT.

By virtue of this presumption, the Claimant would have to demonstrate that it is not, on the one hand, the actual owner and, on the other hand, since when it is not.

The Claimant submitted to the proceedings no purchase and sale contract for any of the automobiles, submitting only invoices with mention of the sales of each of the automobiles to dealerships.

But, even though the invoices constitute a unilateral legal act by the Claimant that does not correspond to the underlying legal act that results from them described, the truth is that we cannot ignore that this underlying legal act in question, namely the purchase and sale of an automobile, is subject to a principle of freedom of form under the provisions of Article 875 of the Civil Code a contrario sensu.

Thus being, it does not appear necessary for the existence of any documentary support for validity or effectiveness of the underlying legal act, and yet it is true that such an element is not, or cannot be, the only one for proof of the fact that gives it rise.

Thus, absent documentary support, proof of the underlying legal act is possible by recourse to other documents or even other means of proof, such as the invoices submitted by the Claimant.

Given the invoices submitted, considering the practice that results from the type of commercial activity of the Claimant and of the dealerships, as well as the fiscal relevance of the invoices, all of which are known to the Respondent, we understand that the sales invoices submitted benefit from a presumption of truthfulness and, in this sense, of suitability and sufficient force to rebut the presumption that results from the assessments, in accordance with Article 75 of the General Tax Law.

In this sense, the invoices submitted are suitable to dispel the presumption that the Claimant was, on the date of UCT assessment, the owner of the motor vehicles.

Thus being, given that the owner of the vehicles, on the date of the taxable event, was not the Claimant, that is, the Claimant was not the passive subject of the tax, the requirements of Article 3, No. 1 of the CIUC are not met, which determines the annulment of the corresponding assessment acts.

On the other hand, as to the assessment and payment of the tax, Article 17, No. 1 of the Unique Circulation Tax Code establishes that, in the year of registration or entry of the vehicle in national territory, the tax is assessed by the passive subject of the tax within 30 days following the end of the legally required period for its registration. Being that, in accordance with Article 42, No. 2 of the Vehicle Registration Regulation, in the case of initial registration of ownership, the vehicle should be registered within 60 days from the date of assignment of the registration number.

That is, in the year of registration, it is only possible to determine the passive subject of the Unique Circulation Tax after the registration period, that is, the 60-day period counted from registration, and therefore only at that moment does the tax become due.

Corroborating this same understanding, the Unique Circulation Tax Code establishes in its Article 18, No. 1, paragraph a), ("Official Assessment") that, "In the absence of property registration of the vehicle effected within the legally required period, the tax due in the year of vehicle registration is assessed and collected: a) From the passive subject of the vehicle tax on the basis of the vehicle customs declaration, or on the basis of the supplementary declaration of vehicles on which the assessment of that tax is based, even though such tax is not due;"

That is, in accordance with this legal provision, only in situations where the ownership of the vehicle is not registered within the legal 60-day period (Article 42, No. 2 of the Vehicle Registration Regulation) is the tax demanded from the passive subject of the Vehicle Tax.

But the passive subject of the Vehicle Tax – the Registered Operator, here the Claimant – is not to be confused with the passive subject of the Unique Circulation Tax – the actual owner of the vehicle, who, under Article 3, No. 1, is presumed to be the person in whose name the registration appears, with the possibility of rebutting the presumption in the terms referred to.

Being that, notwithstanding the passive subject of the Vehicle Tax being responsible for the payment of the tax if, and only if, it is not possible to determine the passive subject of the Unique Circulation Tax after the legally established period for registration.

In all situations in which, as is the case at hand, the passive subject of the Vehicle Tax demonstrates that it transmitted the vehicles in question to third parties before the end of the registration period, it should be concluded that it succeeded in rebutting the presumption established in Article 3, No. 1 of the Unique Circulation Tax Code.

For all this, in the present case, the Claimant, as a Registered Operator, although in the exercise of its commercial activity it imported the vehicles in question, proceeded with their introduction into consumption through the issuance of the Vehicle Customs Declaration, paid the Vehicle Tax, and requested from the IMTT the assignment of registration, is not the passive subject of the Unique Circulation Tax, since it succeeded in demonstrating, through the submission of the identified means of proof, that within the 60-day registration period it transmitted the vehicles to third parties.

That is, the Claimant succeeded in demonstrating that the vehicles in question were transmitted within the 60-day registration period and, consequently, before the tax became due.

In light of the foregoing, and with respect to the enforceability of the tax, it is concluded that the ownership of the vehicles in question was transmitted through a purchase and sale contract and likewise that on the date the UCT became due, the Claimant was no longer the owner of the vehicles, as results from the invoices submitted to the proceedings.

This determines the annulment of the self-assessment acts of the taxes and, consequently, no compensatory interest is owed by the Claimant.

On the right to indemnificatory interest:

In addition to the annulment of the assessments and consequent reimbursement of the amounts indebted, the Claimant also petitions that it be recognized the right to indemnificatory interest, under Article 43 of the LGT.

Under the provision in Article 100 of the LGT, applicable to the case by virtue of the provision in paragraph a) of No. 1 of Article 29 of the LFATM, in which it is established that "The tax administration is obliged, in case of full or partial success of complaints or administrative appeals, or of judicial process in favor of the passive subject, to the immediate and full reconstitution of the situation that would have existed if the illegality had not been committed, including the payment of indemnificatory interest, under the terms and conditions provided by law."

The case contained in the present proceedings raises the application of the mentioned norms, given that following the illegality of the acts referenced in this process, by virtue of these norms, there must be reimbursement of the amounts paid, whether as tax or as compensatory interest, as a way to achieve the reconstitution of the situation that would have existed if the illegality had not been committed.

Thus, given what is established in Article 61 of the Tax Procedure Code and the requirements for the right to indemnificatory interest being met, that is, the existence of error attributable to the services from which results the payment of tax debt in an amount greater than that legally due, as provided for in No. 1 of Article 43 of the LGT, the Claimant has the right to indemnificatory interest at the statutory rate, counted from the date of payment relating to each of the annulled assessments.

Therefore, the Claimant has the right, in addition to the reimbursement of amounts indebted, to indemnificatory interest, calculated on those amounts relating to the annulled assessments.

On responsibility for payment of arbitration costs:

Under Article 527, No. 1 of the Code of Civil Procedure, ex vi Article 29, No. 1, e) of the Legal Framework for Tax Arbitration, it is established that the party that caused them or, if there is no winning claim, whoever derived profit from the proceedings will be condemned to costs.

In light of the foregoing, the Respondent should be condemned to arbitration costs.

F) Decision

In these terms, and with the grounds set forth, the present Arbitral Tribunal decides:

  1. To judge well-founded the request for annulment, on grounds of illegality, of the decision rejecting the official review request in question and the requests for declaration of illegality of the 215 UCT assessments and compensatory interest concerning the years 2009 to 2016, regarding all vehicles whose registration numbers are identified in the proceedings, thus annulling the corresponding assessment acts and the corresponding compensatory interest, and the consequent reimbursement in the amount of € 28,102.08.

  2. To judge well-founded the request for indemnificatory interest.

  3. To condemn the Respondent to the costs of the present proceedings.

G) Value of the Case

In accordance with the provision in Articles 306, No. 2 of the Civil Procedure Code and 97-A, No. 1 of the Tax Procedure Code and Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at € 28,102.08.

H) Arbitration Fee

The value of the arbitration fee is fixed at € 1,530.00, under Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Notify accordingly.

Lisbon, 26 November 2018

The Arbitrator

(Marisa Almeida Araújo)

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when vehicles are registered to an importer but sold to dealerships in Portugal?
Under Portuguese tax law, IUC liability falls on the person who is the vehicle owner or acquirer with reservation of ownership on the registration date, as established in Articles 1, 2, 3, 4, 6, and 11 of CIUC. There is a legal presumption that the owner is the person in whose name the vehicle is registered. However, this presumption can be challenged with proof that ownership had already been transferred before registration. In this case, the importer argued it had sold vehicles to dealerships before registration occurred, as evidenced by sales invoices with chassis numbers predating the registration dates and subsequent UCT/IA debits containing registration numbers. The key issue is whether actual civil ownership transfer takes precedence over administrative registration for determining IUC subjective incidence. Vehicle importers must carefully document ownership transfers with dated invoices and payment records to avoid being presumed the taxable person for IUC purposes.
Can a vehicle importer challenge IUC self-assessments through a request for official review (revisão oficiosa)?
Yes, a vehicle importer can challenge IUC self-assessments through a request for official review (revisão oficiosa) under Article 78 of the Lei Geral Tributária (LGT). The importer in this case filed an official review request against IUC self-assessments occurring from December 2013 onwards, within the four-year limitation period provided by Article 78(1) LGT. When the Tax Authority rejected the official review request, the importer exercised its right to arbitration under the RJAT (Regime Jurídico da Arbitragem em Matéria Tributária), filing an arbitration request with CAAD seeking annulment of the rejected decision and the underlying 215 IUC self-assessments. The Tax Authority argued that timeliness only applied to assessments with payment periods ending on 31.10.2014, but the Claimant contested this limitation. Under Article 16(2) of CIUC, IUC assessment is made by the passive subject (taxpayer), but Article 16(3) allows assessment at any tax office upon request, creating opportunities for both self-assessment challenges and administrative corrections through official review procedures before proceeding to arbitration.
What does subjective incidence mean for IUC (Imposto Único de Circulação) tax purposes?
Subjective incidence for IUC purposes refers to the identification of the taxable person (sujeito passivo) who bears legal liability for the tax obligation. Article 3(1) of CIUC establishes the passive subject of IUC as the vehicle owner or acquirer with reservation of ownership on the date of vehicle registration. This differs fundamentally from IA (Imposto Automóvel - Vehicle Tax), where the passive subject is the 'registered operator' responsible for introducing the vehicle into Portuguese consumption, as defined in Article 3 of the Vehicle Tax Code - typically the person named in the Vehicle Customs Declaration (DAV) or Supplementary Declaration of Vehicles (DCV). The subjective incidence determination relies on a legal presumption that the registered owner in the Vehicle Register and with IMTT (Instituto da Mobilidade e dos Transportes Terrestres) on the registration date is the IUC taxpayer. However, this presumption is rebuttable with evidence proving that actual ownership had transferred to another party before registration. The distinction between administrative registration and civil law ownership becomes critical in commercial contexts involving vehicle importers, dealerships, and end customers, where timing gaps between sale, payment, and registration can create disputes about which party in the distribution chain bears IUC liability.
How does CAAD arbitration handle IUC disputes involving multiple tax years (2009-2016)?
CAAD arbitration handles multi-year IUC disputes through a consolidated procedure that addresses all challenged assessments within a single arbitration case. In this instance, the tribunal consolidated 215 IUC self-assessments spanning eight tax years (2009-2016) into Process 329/2018-T. The arbitration followed the procedural framework established by Decree-Law 10/2011 (RJAT - Legal Framework for Arbitration in Tax Matters). After the Claimant filed the arbitration request on 27 March 2017 without appointing an arbitrator, the President of CAAD's Deontological Council appointed a sole arbitrator under Article 6(2)(a) and Article 11(1)(b) RJAT. The tribunal was constituted on 19 September 2018, and the Tax Authority submitted its response on 16 October 2018 with the administrative file. The arbitral meeting under Article 18 RJAT was dispensed with on 31 October 2018 since parties had fully presented their positions in written submissions and no additional adversarial process was necessary. The deadline for final decision was set for 3 December 2018. This streamlined procedure demonstrates CAAD's capacity to efficiently resolve complex tax disputes involving multiple assessment years through written submissions when factual and legal issues are sufficiently clear from documentation, avoiding lengthy oral hearings while maintaining procedural fairness and party participation rights.
Are compensatory interest and indemnity interest applicable in IUC annulment cases before CAAD?
Yes, both compensatory interest (juros compensatórios) and indemnity interest (juros indemnizatórios) are applicable in IUC annulment cases before CAAD. The Claimant specifically requested: (1) annulment of 215 IUC self-assessments for 2009-2016 and corresponding compensatory interest, with reimbursement of €28,102.08; and (2) recognition of the right to indemnificatory interest in accordance with legal provisions. Compensatory interest is charged by the Tax Authority under Article 35 of the LGT when tax payment is delayed, compensating the State for the time value of money during the period between the legal payment deadline and actual payment. When IUC self-assessments are annulled as illegal, the taxpayer becomes entitled to reimbursement of both the principal tax amount and any compensatory interest paid. Indemnificatory interest (juros indemnizatórios), governed by Article 43 of the LGT, compensates taxpayers for amounts unduly paid or collected by the Tax Authority, running from the payment date until reimbursement. The interest rate and calculation methodology are established by ministerial order. In arbitration proceedings, CAAD tribunals have jurisdiction to order reimbursement of illegally collected taxes with indemnificatory interest, providing full compensation for taxpayers' financial losses. The Claimant also requested that the Respondent be condemned to pay arbitration fees and other costs, which CAAD may order when the taxpayer prevails, pursuant to Article 22(4) RJAT.