Process: 330/2014-T

Date: January 8, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 330/2014-T) addresses the critical issue of subjective incidence for Portugal's Single Motor Vehicle Tax (IUC) when vehicles are sold but not re-registered by the buyer. The applicant company, A, LDA, challenged IUC assessments for tax years 2010, 2011, and 2012, arguing that vehicles had been sold before the tax became due, and therefore the company should not be liable as it was no longer the actual owner. The core legal dispute centered on the interpretation of Article 3(1) of the IUC Code (CIUC), which states that passive subjects of IUC are vehicle owners, defined as persons in whose name the vehicles are registered. The applicant contended this provision establishes a rebuttable legal presumption (juris tantum), allowing registered owners to prove they transferred ownership through sales contracts, thereby shifting liability to actual owners. The company argued that since sale contracts are consensual and registration is merely declarative, proving the sale should rebut the presumption. The Tax Authority countered that the legislator deliberately chose the phrase 'are considered' rather than 'are presumed,' establishing a legal definition rather than a rebuttable presumption. The AT emphasized that IUC liability is intentionally tied to registration for reasons of legal certainty, administrative efficiency, and systematic consistency within the tax framework. The respondent argued that accepting the applicant's interpretation would undermine tax system efficiency, violate constitutional principles of legal certainty and confidence, and create administrative burdens. The AT also questioned whether invoices alone constitute adequate proof of valid sale contracts, noting they lack evidence of buyer acceptance. This case illustrates the tension between formal registration requirements and actual ownership in Portuguese tax law, with significant implications for taxpayers who sell vehicles but face delays in buyer re-registration.

Full Decision

ARBITRATION DECISION

CAAD: Tax Arbitration

Case no. 330/2014 – T

Subject: IUC – subjective incidence; legal presumption.

A – STATEMENT OF FACTS

  1. A, LDA, legal entity no. ..., with registered office at Industrial Park ..., ..., ..., ...-... ..., filed a request for the constitution of an arbitral tribunal, pursuant to the provisions of art. 2, no. 1, a) and 10, no. 1 and 2 of the Legal Framework for Tax Arbitration, as provided for in Decree-Law 10/2011, of 20 January, hereinafter referred to as "RJAT" and articles 1 and 2 of Ordinance no. 112-A/2011, of 22 March, with a view to obtaining a declaration of illegality and consequent annulment of the assessment acts for the Single Motor Vehicle Tax, relating to the years 2010, 2011 and 2012, more specifically assessments no. ...603, ...403, ...903, ...103, ...003, ...603 and ...903, with the Tax Authority and Customs Authority (hereinafter referred to as "AT") being cited as respondent.

  2. The request for the constitution of the single arbitral tribunal having been admitted, and the applicant not having chosen to designate an arbitrator, in accordance with the provisions of paragraph a) of no. 2 of article 6 and paragraph b) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed the undersigned as arbitrator.

The parties were notified of this appointment, and neither manifested the wish to challenge the arbitrator's appointment, in accordance with the joint provisions of article 11, no. 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics, and, in accordance with the requirements of paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 23-06-2014.

  1. Notified, the AT submitted a reply in which it did not raise any objection.

  2. The meeting referred to in art. 18 of the RJAT was held, at which oral arguments were presented by the parties.

  1. The applicant seeks a declaration of illegality and consequent annulment of the assessment acts for the Single Motor Vehicle Tax relating to the years 2010, 2011 and 2012, alleging in summary:

a) She received the IUC assessments in question in these proceedings, relating to vehicles ...-...-..., ...-...-..., ...-...-..., ...-...-..., ...-....-....

b) She sold all motor vehicles, with the exception of the one with registration ...-...-..., which was scrapped, to which the assessments relate, on dates prior to their respective issuances.

c) She filed an administrative complaint against said assessments, which was dismissed.

d) The assessments only occurred for reasons beyond the taxpayer's control and which cannot burden him, namely because whoever acquired the ownership of these vehicles had not registered them properly, as is their obligation.

e) The Tax Administration should only impute the passive subject status for IUC to the actual owners of the vehicle on which the objective incidence of the tax falls.

f) In the years 2010, 2011 and 2012, the ownership and possession of said vehicles were no longer rights at the disposal of the passive subject, and to that extent, the duties inherent to the right of ownership of the same also cannot be imputed to the passive subject.

g) Despite having knowledge, through documents attached to the administrative complaint, that the ownership of said vehicles was transferred on a date prior to the date of obligation to pay the taxes in question, the AT chose to dismiss the administrative complaint that was filed.

h) The legislator only intended, in no. 1 of art. 3 of the CIUC, to introduce an enunciative element of who holds ownership, establishing a legal presumption.

i) The contract for the sale of a motor vehicle is merely consensual, with registration being merely declarative or functional in nature.

j) The presumption in art. 7 of the Property Registration Code, applicable to motor vehicle registration, being rebuttable (juris tantum), entails the reversal of the burden of proof, placing on the other party the burden of proving the contrary of the fact that serves as the basis for the presumption or the presumed fact itself.

k) The passive subject, by obtaining proof of the transfer of ownership of said motor vehicles, on a date prior to the date of tax exigibility, rebutted this presumption arising from the registration.

l) Ownership, by mere effect of the corresponding sales contracts, was transferred on a date prior to those on which the IUC was exigible and the applicant does not constitute the passive subject of the tax.

  1. In turn, the respondent replied by alleging, in summary:

a) The understanding of the applicant results from a biased reading of the wording of the law, as well as the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system, and, lastly, it results from an interpretation that ignores the rationale of the regime established in the article in question, and likewise, throughout the entire CIUC.

b) The tax legislator, by establishing in article 3, no. 1, who are the passive subjects of the IUC, established expressly and intentionally that these are the owners (or in the situations provided for in no. 2, the persons enumerated therein), being considered as such the persons in whose name the same are registered.

c) It emphasizes that the legislator did not use the expression "are presumed", as it could have done, for example, in the following terms: "the passive subjects of the tax are the owners of the vehicles, being presumed as such the natural or legal persons, of public or private law, in whose name the same are registered".

d) The tax provision is full of provisions analogous to that established in the final part of no. 1 of article 3, in which the tax legislator, within his legislative discretion, expressly and intentionally establishes what should be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodisation of taxable profit, for purposes of residence, of location, among many others.

e) The tax legislator intentionally and expressly wished that the persons in whose name [the vehicles] are registered be considered as owners, lessees, acquisitions with reservation of ownership or holders of the right to purchase option in long-term leasing.

f) In light of a teleological interpretation of the regime established throughout the Code of the IUC, the interpretation advocated by the applicant to the effect that the passive subject of the IUC is the effective owner, regardless of not appearing in the motor vehicle register, the registration of this quality, is manifestly wrong, insofar as it is the very rationale of the regime established in the Code of the IUC that constitutes clear proof that what the tax legislator intended was to create a Single Motor Vehicle Tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle register.

g) The interpretation conveyed by the applicant is contrary to the Constitution, insofar as it violates the principle of confidence and legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

h) Apart from being offensive to the principle of efficiency of the tax system, insofar as it results in an obstruction and increase in costs of the competencies assigned to the respondent, with obvious prejudice to the interests of the Portuguese State.

i) An invoice is not apt to prove the celebration of a synallagmatic contract such as a sale and purchase, as that document does not reveal by itself an essential and unequivocal declaration of intent (i.e. acceptance) on the part of the purported purchaser.

j) With respect to the invoice contained in document no. 2, the mention of the vehicle contained in point no. 5 of the request for pronouncement (...-...-...) does not coincide with the registration of the invoice embodied in document 2 (...-...-...).

k) It maintains that the tax acts in dispute are valid and legal, because they conform to the legal regime in force at the date of the tax facts, such that no error attributable to the authority occurred in this case.

l) It was not the respondent who gave rise to the filing of the request for arbitral pronouncement, but rather the applicant itself who, moreover, only now submitted documentary proof relating to the purported transfer of ownership, which did not occur in the course of the prior administrative procedure.

m) Consequently, the applicant should be condemned to pay the arbitral costs arising from this request for arbitral pronouncement, in accordance with article 527, no. 1 of the New Code of Civil Procedure ex vi of article 29, no. 1-e) of the RJAT, and the same reasoning applies with respect to the request for condemnation to payment of compensatory interest formulated by the applicant.

  1. The Arbitral Tribunal was regularly constituted and is materially competent.

The parties have judicial personality and capacity and are legitimate (arts. 4 and 10, no. 2, of the same statute and art. 1 of Ordinance no. 112-A/2011, of 22 March).

The proceedings do not suffer from any nullities.

B. DECISION

  1. MATTERS OF FACT

1.1. FACTS ESTABLISHED

The following facts are considered established:

a) The AT issued the assessments for the Single Motor Vehicle Tax, relating to the years 2010, 2011 and 2012, no. ...603, ...403, ...903, ...103, ...003, ...603 and ...903, relating to vehicles ...-...-..., ...-...-..., ...-...-..., ...-...-... and ...-....-....

b) The applicant issued sales invoices relating to vehicles with registrations ...-...-..., ...-...-... and ...-....-....

c) The applicant issued a sales invoice on which the registration ...-...-... is recorded.

d) The purchaser of the motor vehicles ...-...-..., ...-...-... and ...-...-... signed a declaration of assumption of responsibility arising from her acquisition.

e) The buyers of the motor vehicles did not register their ownership.

f) The applicant requested, from the IMTT, the impoundment of the vehicle with registration ...-...-....

g) The vehicle with registration ...-...-... was scrapped on 05-07-2010.

h) The applicant filed an administrative complaint against the assessments subject to these proceedings, in which a decision of dismissal was issued on 27-03-2014.

i) The applicant filed, on 10-04-2104, the request for arbitral pronouncement that gave rise to these proceedings.

1.2 The facts were established based on documents submitted to the proceedings by the applicant, whose authenticity was not challenged by the respondent.

1.3 FACTS NOT ESTABLISHED

There are no facts established as not proven with relevance for the assessment of the request.

1.4 THE LAW

The substantive issue to be assessed resides in the interpretation to be given to no. 1 of art. 3 of the CIUC in order to ascertain whether the rule of subjective incidence contained therein establishes a rebuttable legal presumption (juris tantum) – and, as such, capable of being rebutted (as the applicant argues) or, on the contrary, an express and intentional definition of the personal incidence, to the effect that it is necessarily the passive subject of the tax whoever is registered in the name of the motor vehicle as the owner.

Article 3, no. 1 of the CIUC provides: "the passive subjects of the tax are the owners of the vehicles, being considered as such the natural and legal persons, of public or private law, in whose name the same are registered".

Based on the wording of this provision, the respondent - AT - argues that the personal incidence basis that it defines does not today comprise any legal presumption, since it transmits expressly and intentionally the thought of the tax legislator, to the effect that it is considered, in an irrefutable manner, as passive subjects of the IUC the persons in whose name the motor vehicles are registered.

It adduces in support of its thesis, hermeneutical reasons for the interpretation of the law, with recourse not only to its wording, but also to the systematic and teleological elements.

An invocation full of meaning, insofar as, in accordance with the provisions of art. 11 of the LGT, "in determining the meaning of tax norms and in qualifying the facts to which they apply, the rules and general principles of interpretation and application of laws are observed". As Diogo Leite Campos, Benjamin Rodrigues, J. Lopes de Sousa state – LGT 4th ed., in annotation to such article, "... without departing from the letter of the law, which must be the principal reference and starting point of the interpreter, its automatic application is excluded, supposing that in laws there is an operating rationality that the interpreter must strive to reconstruct".

It is, therefore, within this framework of interpretation of tax law, in this case art. 3, no. 1 of the CIUC, that we must find the answer to the antagonism of positions between the applicant and the AT.

For the AT, it is decisive for the determination of the passive subject of the IUC the registration of ownership of the motor vehicle, so that it will be considered as such, in an irreversible manner, whoever is registered in the name of this vehicle.

The registration of ownership of vehicles is, given the provisions of art. 5, no. 1, a) and no. 2 of Decree-Law 54/75, of 12 February, mandatory, such that any property right that falls on the vehicle is subject to registration, with which the security of legal commerce is intended, as well as the publicity of the legal situation of the same.

Such registration enjoys, in accordance with the provisions of art. 7 of the Property Registration Code (applicable to motor vehicle registration by virtue of art. 29 of the aforementioned Decree-Law 54/75), the "… presumption that the right exists and belongs to the registered owner, in the precise terms in which the registration defines it".

We have, therefore, that the registration entry of ownership of the vehicle is, also itself, a presumption that the right of ownership over the same exists in the terms contained in the registration.

That is to say, the registration of motor vehicle ownership does not constitute any condition of validity of the contracts subject to it, as is the case with property registration (whose regime, as we have already pointed out, is extended to motor vehicle registration); the registration has merely a declarative function.

However, art. 5, no. 1 of the Property Registration Code, requires that "the facts subject to registrations produce effect against third parties only from the date of their respective registration". From which it appears that this would suffice for the AT to invoke the absence of registration to immediately put into effect art. 3, no. 1 of the CIUC, demanding payment of the tax from whoever is registered in the name of the vehicle, as being the passive subject of the tax.

It happens that no. 4 of art. 5 of the Property Registration Code restricts this understanding, by determining that "third parties, for registration purposes, are those who have acquired from a common author rights that are incompatible with each other". Whence it results that, by this route, the AT would never be entitled to invoke the lack of registration, insofar as it does not meet the concept of third party.

Having stated this in general terms, it must be determined whether, notwithstanding what has been mentioned, no. 1 of art. 3 of the CIUC contains, or does not contain, a legal presumption.

Everything is, in sum, in determining whether the expression "being considered", used therein, has the nature of a legal presumption.

As a starting point, the answer seems to us to be negative.

It seems offensive to the unity of the legal system – and even, with due adaptations, in opposition to no. 2 and 3 of art. 11 of the LGT - that an individual would be considered as not being the owner of a good for civil purposes and would necessarily have to be for tax purposes.

To which is added the fact that the AT must guide its activity by observance of the principles of legality, of inquisition and discovery of material truth, inherent to the constitutional dictate of contributory capacity.

Be that as it may, it seems evident that, both from the systematic and teleological point of view, the expression "being considered", adopted in no. 1 of art. 3 of the CIUC contemplates a true presumption, to which the apparent literalness of the expression does not oppose, nor does the tax system.

In this regard, Diogo Leite Campos, Benjamin Rodrigues, J. Lopes de Sousa state – LGT 4th ed., in annotation to art. 73, page 651: "presumptions in matters of tax incidence can be explicit, revealed by the use of the expression "presume-se" or similar, as is the case, for example, in no. 1 to 5 of art. 6, in paragraph a) of no. 3 of art. 10, in art. 19 and 40, no. 1, of the CIRS. However, presumptions can also be implicit in rules of incidence, particularly of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not impossible to ascertain the actual value …", then enumerating a set of examples.

We understand that it is precisely this case that art. 3, no. 1 of the CIUC contemplates: an implicit presumption. A presumption, moreover, that has always existed in the field of motor vehicle circulation tax, although previously defined explicitly.

On the other hand, in compliance with the principles - with establishment in our community order - of the polluter-pays and equivalence, the CIUC imports concerns of an environmental and energy nature, intending that the costs arising from environmental damage caused by the use of motor vehicles be borne by the actual owners (and not by the presumed owners).

It is, therefore, necessary to conclude that art. 3, no. 1 of the CIUC establishes a presumption of subjective incidence.

Now, no. 2 of art. 350 of the Civil Code establishes that legal presumptions can be rebutted by proof to the contrary, except in cases expressly provided for in law.

And, with regard to the rebuttal of presumptions, we consider as good the doctrine to which the Supreme Court of Justice resorted in the grounds of Assent no. 1/91 of 03-04-1991 (DR no. 114, of 18 May) - to classify as rebuttable (juris tantum) a presumption established in a labor statute - defended by Vaz Serra [Proofs (material probationary law), BMJ 110-112, page 35], as well as by Mário de Brito (Annotated Civil Code, page 466) and Mota Pinto (General Theory of Civil Law, page 429): "… rebuttable presumptions (juris tantum) constitute the rule, with absolute presumptions (jure et de jure) being the exception. In doubt, a legal presumption is rebuttable, as it should not be considered, absent a reference in the law, that it was intended to prevent the production of proof to the contrary, imposing a formal truth to the detriment of the actual proven".

In turn, within the scope of tax law, art. 73 of the LGT provides that "presumptions established in the rules of tax incidence always admit proof to the contrary". Which means that all presumptions in matters of tax incidence, such as that which no. 1 of art. 3 of the CIUC establishes, are rebuttable (juris tantum) and, as such, capable of being rebutted.

From the evidence brought to these proceedings by the applicant, it results that she was no longer the owner of the vehicles to which the assessments subject to this arbitral request relate, on the deadline dates of their respective payments.

The veracity of such documents was not challenged.

Only the respondent questioned the fact that one of the sales invoices submitted by the applicant mentions the registration ...-...-..., which allegedly was intended to prove the transfer of the vehicle with registration ...-...-....

Having been raised this incongruity by the respondent, the applicant said nothing further, such that the arbitral tribunal does not have elements that can, in full, conclude that the questioned invoice actually relates to the registration ...-...-....

Whence it cannot be established that that motor vehicle was sold by the applicant.

As for the remaining vehicles, we consider it established that it was not called into question that the sales transactions of the motor vehicles were completed, and it is certain that the sales and purchase contract is consensual, requiring no special form.

Proven the transfer of ownership and given that the AT has no legitimacy to oppose the absence of registration, as it is not for such purposes considered to be a third party, it is necessary to annul the IUC assessments subject to this arbitral request.

The considerations in the reply regarding compensatory interest rest on a manifest oversight, insofar as no such request was formulated, nor did the applicant address this matter.

With respect to responsibility for payment of costs.

In order to rebut the presumptions provided for in the rules of tax incidence, the interested party may avail itself of the proper administrative procedure provided in art. 64 of the CPPT, as an alternative form to the administrative complaint or judicial impugnation.

Contrary to what the respondent alleges in the reply, already in the course of the administrative complaint the applicant had submitted the same documents that it attached to the request for arbitral pronouncement, which, nevertheless, led to that being dismissed.

It was, therefore, the AT that gave rise to this cause.

  1. DECISION

Given the foregoing, it is decided:

a) to uphold in part, for breach of law, the request for annulment of the tax acts subject to the arbitral request, and consequently, to annul the IUC assessments relating to the years 2010, 2011 and 2012, relating to vehicles with registrations ...-...-..., ...-...-..., ...-...-... and ...-...-...;

b) to condemn the applicant and the respondent to pay the costs of this proceeding in proportion to their respective success.

VALUE OF THE PROCEEDING: In accordance with the provisions of art. 306, no. 2 of the Code of Civil Procedure, art. 97-A, no. 1, a) of the Code of Tax Procedure and Processing and art. 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is set at 844.77 € (eight hundred and forty-four euros and seventy-seven cents).

COSTS: In accordance with the provisions of art. 22, no. 4, of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is set at 306.00 € (three hundred and six euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, being 244.80 € charged to the Tax Authority and Customs Authority and 61.20 € charged to the applicant.

Notify the parties.

Lisbon, 08 January 2015

The Arbitrator

(António Alberto Franco)

Text prepared on computer, in accordance with no. 5 of article 131 of the CPC, applicable by referral of paragraph e) of no. 1 of article 29 of Decree-Law no. 10/2011, of 20/01.

The wording of this decision follows the old Portuguese spelling.

Frequently Asked Questions

Automatically Created

Who is liable for IUC when a vehicle has been sold but not re-registered by the buyer?
Under Portuguese tax law, the registered owner remains liable for IUC even after selling a vehicle until the buyer completes the re-registration process. Article 3(1) of the IUC Code establishes that passive subjects are vehicle owners, legally defined as persons in whose name vehicles are registered. The Tax Authority's position, supported by systematic interpretation of the CIUC, holds that this is not a rebuttable presumption but rather a deliberate legislative definition linking tax liability to registration for purposes of legal certainty and administrative efficiency. The seller's remedy is to ensure proper transfer of registration at the time of sale, rather than challenging tax assessments after the fact.
Can the registered owner challenge IUC assessments based on the legal presumption of vehicle ownership?
The ability to challenge IUC assessments based on actual versus registered ownership is severely limited. While taxpayers may argue that Article 3(1) creates a rebuttable presumption of ownership, tax authorities consistently maintain that the provision establishes a legal definition rather than a presumption. The legislator's choice to state owners 'are considered' those registered, rather than 'are presumed,' indicates intentional policy to base IUC liability on registration records. Challenges based on proof of prior sale face obstacles including: questions about the probative value of invoices to prove valid contracts, constitutional concerns about undermining legal certainty and tax system efficiency, and the systematic interpretation that registration determines tax liability regardless of actual ownership transfers.
What is the legal presumption of subjective incidence under the Portuguese IUC Code?
The legal presumption of subjective incidence under Article 3(1) of the Portuguese IUC Code defines passive subjects (taxpayers) as vehicle owners, with ownership legally attributed to persons in whose name vehicles are registered in the motor vehicle registry. The key interpretive dispute concerns whether this constitutes a rebuttable legal presumption (juris tantum) or an absolute legal definition. Tax authorities argue the latter: registration definitively determines tax liability as a matter of legislative policy prioritizing certainty, efficiency, and reliance on official records. This interpretation prevents taxpayers from shifting liability by proving actual ownership differs from registered ownership, maintaining that the registered owner bears tax obligations until registration is formally transferred through proper administrative procedures.
How does CAAD arbitration handle disputes over IUC liability for previously sold vehicles?
CAAD arbitration tribunals handling IUC disputes over previously sold vehicles must resolve the fundamental interpretive question of whether registered ownership is presumptive or definitive for tax purposes. The process involves examining: whether proof of sale (contracts, invoices) sufficiently rebuts any presumption from registration; whether Article 3(1) CIUC establishes a legal fiction rather than a presumption; the systematic and teleological interpretation of the entire IUC Code framework; constitutional principles including legal certainty, efficiency, and proportionality; and the probative value of documents submitted to prove ownership transfer. CAAD decisions typically consider that allowing challenges based on actual versus registered ownership would create administrative burdens, uncertainty for tax collection, and incentivize non-compliance with registration obligations, though tribunals must balance these concerns against taxpayer rights and factual realities.
What remedies are available to taxpayers who receive IUC assessments for vehicles they no longer own?
Taxpayers receiving IUC assessments for vehicles they no longer own have limited remedies under Portuguese law. Primary options include: (1) filing administrative complaints (reclamação graciosa) with the Tax Authority, though these face high rejection rates when based on unregistered sales; (2) pursuing tax arbitration through CAAD to challenge the assessments' legality, arguing the presumption is rebuttable; (3) ensuring immediate re-registration at time of sale to prevent the problem prospectively; (4) seeking civil remedies against buyers who failed to complete registration, potentially recovering tax amounts paid; and (5) in cases of vehicle scrapping, providing official deregistration certificates. The most effective remedy is preventive: requiring buyers to complete registration transfers immediately upon sale, or retaining vehicle documentation until confirmation of successful re-registration. Post-sale challenges face significant legal obstacles given tax authorities' interpretation that registration definitively determines liability.