Process: 339/2014-T

Date: December 15, 2014

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (339/2014-T) addresses a fundamental dispute over IUC (Imposto Único de Circulação - Vehicle Single Circulation Tax) liability when vehicle registry records diverge from actual ownership. The claimant company sought annulment of IUC assessments totaling €53,835.74 for vehicles that were either sold or declared total losses before the relevant tax dates, despite remaining registered in the company's name. The central legal question concerns whether Article 3(1) of the IUC Code creates a rebuttable presumption or a definitive legal qualification of tax liability. The claimant argued that vehicle registration constitutes only a rebuttable presumption under Article 7 of the Land Registration Code, which can be overcome by presenting sales invoices proving ownership transfer prior to the tax obligation arising. The Tax Authority contended that the legislator intentionally used the expression 'are considered' rather than 'are presumed,' establishing a definitive legal qualification linking IUC liability exclusively to registered owners. The Tax Authority emphasized that disregarding registration would undermine the tax system's efficiency, violate legal certainty principles, generate excessive administrative costs, and ignore that taxpayers have readily available mechanisms (timely registration updates) to align registry with reality. The case illustrates the tension between substantive tax justice (taxing actual owners/users) and administrative efficiency (relying on official registries). The dispute also raised jurisdictional questions regarding CAAD's competence over late payment penalties and addressed claims for tax refunds plus compensatory and indemnity interest under Article 43 of the General Tax Law.

Full Decision

ARBITRATION DECISION

Case No. 339/2014-T

ARBITRATION DECISION

Subject: Vehicle Single Circulation Tax – Passive Tax Subject; Presumption of Vehicle Ownership Based on Registration

Claimants: A

Respondent: AT - Tax and Customs Authority

I – REPORT

1. Application

A, taxpayer no. …, with registered office at …, hereinafter referred to as the Claimant, filed, on 17.04.2014, pursuant to the provisions of paragraph a) of section 1 of article 2nd and article 10th of Decree-Law no. 10/2011, of 20 January ("Legal Framework for Arbitration in Tax Matters" – RJAT), a request for arbitration in which the AT - Tax and Customs Authority is the Respondent, seeking to:

  • The annulment of the assessment acts for Vehicle Single Circulation Tax (IUC) and corresponding compensatory interest, identified in the administrative proceedings attached to the case file;

  • The reimbursement of the amount of 53,835.74 euros corresponding to the tax paid with respect to such assessments plus compensatory interest;

  • The annulment of the regulatory breach acts consisting of the imposition of penalties for late payment of the assessed tax;

  • The payment to the Claimant of indemnification interest for the deprivation of said amounts, pursuant to article 43 of the General Tax Law (LGT).

To support its claim, the Claimant alleges, in essence, the following:

  • Although the vehicles subject to the Vehicle Single Circulation Tax assessed were registered in the name of the Claimant on the date of the tax facts underlying all the disputed assessments, some of them were alienated by the Claimant at a date prior to the tax facts and the remainder were written off as total loss, with the result that the respective registrations were cancelled, with no correspondence between the registration situation and the legal reality;

  • Although the definitive registration, pursuant to article 7 of the Land Registration Code (CRPred.), applicable to vehicle registration by virtue of article 29 of the Vehicle Registration Code (CRAut.), constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it, such presumption is rebuttable;

  • To rebut the presumption resulting from registration, it is necessary to prove the nullity of the registration, demonstrate the invalidity of the transaction or that the ownership of the right belongs to another;

  • The Claimant proved that the ownership of the vehicles belongs to another, through invoices for the sale of the same, dated at a moment prior to the tax obligation required;

  • The purchase and sale contract has a real nature, the real effect being an effect of the contract itself, not depending on any subsequent act, such as registration;

  • Also the presumptions contained in the tax laws regarding the incidence of taxes are rebuttable, and the norm contained in article 3, section 1 of CIUC should be considered a legal presumption;

  • Considering that Tax Law is more concerned with substance than form, one should attend to the substantial reality of transfer of vehicle ownership attested by the invoices for the sale of vehicles submitted by the Claimant as a means of proof rather than a mere formal presumption resulting from registration;

  • This reality is that which best conforms to the nature of the tax itself, which is subordinated to the idea that taxpayers should be burdened in proportion to the cost they cause to the environment and the road network.

2. Response

In its response to the request for arbitration presented by the Claimant, the Respondent AT - Tax and Customs Authority contends for the dismissal of the application, alleging, in summary, the following:

a. By exception

  • The arbitration tribunals established under the RJAT do not have jurisdiction to consider matters relating to tax regulatory breaches.

b. By objection

  • The tax legislator, in establishing in article 3, section 1 who are the passive tax subjects of the IUC, established expressly and intentionally that these are the owners (or in the situations provided for in section 2, the persons there enumerated), being considered as such the persons in whose names the same [vehicles] are registered;

  • The legislator did not use the expression "are presumed", as it could have used;

  • On the other hand, the tax rule is replete with provisions similar to that enshrined in the final part of section 1 of article 3, in which the tax legislator, within his legislative freedom of configuration, expressly and intentionally, enshrines what should be considered legally, for the purposes of incidence, income, exemption, determination and periodization of taxable profit, for the purposes of residence, location, among many others;

  • By way of example, reference is made to articles 2 of the Tax Code on Onerous Transfers of Immovable Property (CIMT), 2, 3 and 4 of the Tax Code on Income of Natural Persons (CIRS) and 4, 17, 18 and 20 of the Tax Code on Income of Legal Persons (CIRC), in which the expression "is considered" is used to qualify a situation for tax purposes, without such expression being able to be seen as a presumption;

  • In these terms, it is imperative to conclude that, in article 3, section 1 of CIUC, the legislator established expressly and intentionally that are considered as such (as owners or, in the situations provided for in section 2, the holders there enumerated) the persons in whose names the same [the vehicles] are registered, because this is the interpretation that preserves the unity of the legal-tax system, and an interpretation to the contrary would be an interpretation against the law;

  • The said understanding corresponds to that adopted in the case law of our courts, having been endorsed by the Administrative and Tax Court of Penafiel, in Case no. 210/13.0BEPNF;

  • This results from various norms of CIUC, in addition to article 3, section 1, which link the tax mechanism to registration;

  • Also the consideration of the teleological element leads to the conclusion that the legislator intended that the passive tax subjects of the tax should be the persons in whose name the vehicles are registered, since CIUC carried out a reform of the taxation of motor vehicles, the passive tax subjects of the tax becoming the owners listed in the property register, regardless of the circulation of the vehicles on the public highway;

  • The interpretation proposed by the Claimant would also violate the constitutional principles of the efficiency of the tax system, legal trust and security and proportionality;

  • The interpretation defended by the Claimant, devaluing the registration reality to the detriment of an "informal reality" and not susceptible to minimal control by the Respondent, is offensive to the basic principle of legal trust and security that should inform any legal relationship, including here the tax relationship.

  • Disregarding the registration reality, which constitutes the cornerstone upon which the entire structure of IUC is based, would generate for the Respondent, and ultimately for the Portuguese State, additional administrative costs, obstruction of the performance of its services, absence of control of the tax and uselessness of the registration information systems;

  • Finally, the argumentation put forward by the Claimant represents a violation of the principle of proportionality, insofar as it completely disregards it in the confrontation with the principle of tax capacity, when in reality the Claimant has at its disposal the necessary and appropriate legal mechanisms for safeguarding that tax capacity (e.g., vehicle registration), without, however, having exercised them in due time;

  • Regarding the issue of proof of the alienation of the vehicles, the evidentiary documents offered by the Claimant – the invoices relating to the sale of the vehicles – are not apt to prove the conclusion of a synallagmatic contract, such as purchase and sale;

  • Furthermore, the Claimant does not indicate which vehicles were "written off as total loss" and does not attach any proof of this fact nor of the cancellation of the respective registrations;

  • Finally, the Respondent contends that, should the assessments be considered invalid, the Respondent should never be condemned to pay indemnification interest, since there exists in the assessments no error attributable to the services, as required by article 43, section 1 of the LGT.

3. Final Written Submissions

In final submissions, the Claimant reiterated all the arguments already alleged in the initial application.

With respect to the factual matter, the Claimant further alleges:

  • The sales invoices presented are registered in the Claimant's accounting, which means that the purchase and sale contracts were effectively carried out;

  • The invoices enjoy the presumption of truthfulness and sufficient force to rebut the registration presumption;

  • The Respondent possesses all information relating to the accounting of the invoices presented, through the Claimant's Value Added Tax (VAT) declarations, and cannot accept the invoices for the purposes of Income Tax (IRC) and VAT and not accept them for the purposes of rebutting the presumption of article 3, section 1 of CIUC;

  • With regard to the Tribunal's jurisdiction to assess the legality of the fixing of penalties for late payment of the assessed tax, the Claimant alleges that, should it succeed in rebutting the presumption of ownership of the vehicles, the grounds for the application of the penalties must also be unfounded, since they are based on the premise that the tax should have been assessed, when it is precisely this assumption that the Claimant seeks to attack in the present case.

The Respondent also submitted final submissions, in which it reaffirmed the argumentation set out in its response.

II – PRELIMINARY DETERMINATION

The Tribunal has jurisdiction and is regularly constituted, pursuant to articles 2, section 1, paragraph a), 5 and 6, all of the RJAT.

The parties have legal personality and capacity, are legitimately involved and are regularly represented.

The joinder of claims is admissible, as all the requirements established in article 3, section 1 of the RJAT are met.

No procedural nullities were identified, and nothing prevents the substantive examination of the application.

III – ISSUES TO BE DECIDED

The following issues are identified as requiring decision:

  • The Tribunal's jurisdiction to consider the application with respect to the penalties imposed for failure to pay the tax within the voluntary payment period;

  • The interpretation of article 3, section 1 of the Vehicle Single Circulation Tax Code (CIUC) as establishing or not a presumption regarding the qualification as owner of a vehicle of the entity in whose name the ownership thereof is registered;

  • If the qualification of that norm as a presumption is concluded, its actual rebuttal in the case at hand.

IV – REASONING

A. FACTUAL MATTER

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

  • The Claimant was notified of 687 ex officio assessments (copies of which are found in the administrative proceedings attached to the case file and whose content is hereby reproduced) of Vehicle Single Circulation Tax (IUC), increased by compensatory interest and aggravated with penalties for late payment of the assessed tax within the voluntary payment period.

  • Following those notifications and prior to the filing of the present request for arbitration, the Claimant paid in full the assessed tax and filed complaints (copies of which are found in the administrative proceedings attached to the case file and whose content is hereby reproduced) seeking the annulment of all assessments.

  • The Claimant issued sales invoices (copies of which are found in the administrative proceedings attached to the case file and whose content is hereby reproduced) for all vehicles subject to the assessed tax.

  • The Claimant was notified, on 29 January 2014, of the dismissal of the following administrative complaints, relating to Vehicle Single Circulation Tax increased by compensatory interest and respective penalties, as per copies of the respective orders found in the administrative proceedings attached to the case file and whose content is hereby fully reproduced:

  • Administrative complaint no. … 2014..., relating to ex officio assessments of vehicle single circulation tax for the years 2009, 2010, 2011, 2012 and 2013;

  • Administrative complaint no. ... 2014..., relating to ex officio assessments of vehicle single circulation tax for the years 2009, 2010, 2011, 2012 and 2013;

  • Administrative complaint no. ... 2014…, relating to ex officio assessments of vehicle single circulation tax for the years 2009, 2010, 2011, 2012 and 2013.

  • The Claimant was notified, on 30 January 2014, of the dismissal of the following administrative complaints, relating to Vehicle Single Circulation Tax increased by compensatory interest and respective penalties, as per copies of the respective orders found in the administrative proceedings attached to the case file and whose content is hereby fully reproduced:

  • Administrative complaint no. ... 2013…, relating to ex officio assessments of Vehicle Single Circulation Tax for the years 2009, 2010, 2011, 2012 and 2013;

  • The Claimant was notified, on 31 January 2014, of the dismissal of the following administrative complaints, relating to Vehicle Single Circulation Tax increased by compensatory interest and respective penalties, as per copies of the respective orders found in the administrative proceedings attached to the case file and whose content is hereby fully reproduced:

  • Administrative complaint no. ... 2013…, relating to ex officio assessments of Vehicle Single Circulation Tax for the years 2009, 2010, 2011, 2012 and 2013;

  • Administrative complaint no. ... 2013…., relating to ex officio assessments of Vehicle Single Circulation Tax for the years 2009, 2010, 2011, 2012 and 2013;

  • The vehicles subject to the assessed tax were, all of them, registered in the name of the Claimant on the date of the tax facts.

The proven facts were established on the basis of the documentary evidence contained in the administrative proceedings attached to the case file and also on the basis of facts alleged by the parties and not contradicted, according to the principle of free appreciation of evidence.

It is not proven that a request was made for the cancellation of registrations.

B. REGARDING THE MATTER SUBJECT TO EXCEPTION

The jurisdiction of arbitration tribunals established under the regime instituted by Decree-Law no. 10/2011, of 20 January is defined by article 2 of this same decree, which provides:

1 – The jurisdiction of arbitration tribunals comprises consideration of the following claims:

a) The declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and payment on account;

b) The declaration of illegality of acts of determination of taxable matter when not giving rise to the assessment of any tax, of acts of determination of taxable matter and of acts of determination of property values.

The jurisdiction of arbitration tribunals does not therefore include tax regulatory breach matters, and it is thus prohibited for the Tribunal to pronounce on the legality of acts fixing penalties.

C. REGARDING THE MERITS OF THE CASE

1. Regarding the interpretation of article 3, section 1 of CIUC, to determine whether it establishes a presumption of vehicle ownership

On this issue, in the exact terms in which it is presented here, there has been previous pronouncement by the arbitration award handed down in case no. 63/2014-T, to which full adherence is given and which, for that reason, is now cited:

"Article 3 of CIUC provides:

Article 3

Subjective Incidence

1 - The passive tax 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, purchasers with reservation of title, as well as other holders of purchase option rights by virtue of lease contracts are equated with owners.

The passive tax subjects of IUC are, first and foremost, the owners of the vehicles, and may also be equated with owners the "financial lessees, purchasers with reservation of title, as well as other holders of purchase option rights by virtue of lease contracts."

The ownership of motor vehicles is subject to compulsory registration (article 5, sections 1 and 2 of DL no. 54/75, of 12 February).

The obligation to carry out the registration falls on the purchaser – active subject of the act subject to registration, which in this case is the ownership of the vehicle (article 8-B, section 1 of the Land Registration Code, applicable to Vehicle Registration by virtue of article 29 of DL no. 54/75, of 12 February and in conjunction with paragraph a) of section 1 of article 5 of DL no. 54/75)

However, the Vehicle Registration Regulations contain a special regime, in force since 2008, for entities engaged in the commercial activity of selling motor vehicles. According to this regime, which is established in article 25, section 1, paragraphs c) and d), registration may be promoted by the seller, by means of a request signed only by himself.

Since 2001, the obligation to report the sale by the seller "to the competent authority for registration" is also expressly established in the Highway Code (now in its article 118, section 4).

Registration must be made within 30 days from the date of acquisition of the vehicle (article 42 of the Vehicle Registration Regulations (Decree-Law no. 55/75, of 12 February).

The current IUC is designed to function in integration with vehicle registration, which is inferred from article 3 itself of CIUC. The alternative to this articulation would be the obligation to communicate to the AT – Tax and Customs Authority all transfers of vehicles, similar to what happens with the IMT Code, a highly bureaucratic solution that the legislator rejected.

In a situation of full compliance with the law, if the alienation of motor vehicle ownership occurs, this change in ownership will be registered in due time.

The AT - Tax and Customs Authority will thus be able, at any moment, to know which vehicles are registered in Portuguese territory and who their respective owners are, for the purposes of tax assessment.

There is thus a close articulation between Vehicle Registration and the Vehicle Single Circulation Tax, such that, if the Tax Authority cannot avail itself of the data contained in Vehicle Registration, this will result in an inevitable loss of efficiency, not to say paralysis, in the administration of the tax.

For that reason, section 1 of article 3 of CIUC, after establishing that "the passive tax subjects of the tax are the owners of the vehicles" adds that are considered as such "the natural or legal persons, of public or private law, in whose name the same are registered".

In the present case, in which the Claimant alleges having transferred the ownership of all vehicles to which the disputed assessments relate, prior to the dates to which the assessments pertain, the same Claimant remained, on the date of the tax facts, as holder of the registration of ownership of the allegedly sold vehicles.

But since such transfers were not communicated to Vehicle Registration, the Tax Authority adopted the only procedure it could adopt: it applied article 3, section 1 of CIUC, considering the Claimant as owner of the vehicles, by being the entity in whose name the vehicles were registered. It should be noted that, even if article 3 of CIUC did not contain the expression "being considered as such the natural or legal persons, of public or private law, in whose name the same are registered", the Tax Administration would always benefit from this presumption of ownership since this results from Vehicle Registration itself.

Indeed, article 7 of the Land Registration Code (CRPred), applicable to vehicle registration, by virtue of article 29 of the Vehicle Registration Code, stipulates that "the definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it."

The Claimant acknowledges that, in the period to which the assessments refer, it was the holder of the vehicle ownership registration, but alleges that it was no longer the actual owner of the same because it had in the meantime alienated them.

The issue that arises in this situation is the value of the second part of the provision, in determining that "the passive tax 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".

In saying that "are considered as owners of the vehicles the persons in whose name the same are registered", is the law establishing a legal presumption?

Or, on the contrary, is the law saying that the persons in whose name the vehicles are registered are "owners" for tax purposes, i.e. are passive tax subjects?

The Claimant contends that the law contains a legal presumption, basing itself for this on the example of various legal provisions in force in the legal order which, employing the verb "consider", undoubtedly contain presumptions.

The Claimant's thesis is also supported by the merely declarative value of vehicle registration.

If the Claimant's thesis is correct, then, in accordance with the provisions of article 73 of the General Tax Law, and because it is a rule of incidence, the presumption is necessarily rebuttable, which means it admits contrary proof. Which in this case means that the Objecting party could prove that it was not owner of the vehicles in the period to which the assessments pertain and, therefore, was not passive tax subject of the assessed tax.

In the opposite sense, the Respondent contends that in the provision in question no presumption is established, and that the legislator established expressly and intentionally that are considered as such ("as owners or, in the situations provided for in section 2, the persons there enumerated") the persons in whose name the vehicles are registered, because this is the interpretation that preserves the unity of the legal-tax system.

The Respondent relies, like the Claimant, on the example of various tax law provisions, which, using the verb "consider", do not contain presumptions, but non-presumptive qualifications. Examples would be articles 2 of the Tax Code on Onerous Transfers of Immovable Property (CIMT), 2, 3 and 4 of the Tax Code on Income of Natural Persons, and 4, 17, 18 and 20 of the Tax Code on Income of Legal Persons (CIRC).

By the examples provided by both parties, it is evident from the outset, that it is possible to find in the legal order as many examples of provisions that use the verb "consider" in the sense of "presume" as examples of legal provisions that use the verb "consider" to establish non-presumptive legal qualifications, and therefore these arguments are not conclusive.

If there is a presumption in article 3, section 1 of CIUC, it consists of the presumption regarding the quality of owner: "the passive tax 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".

On the other hand, if one understands that the norm does not establish a legal presumption, then one must consider that the law non-presumptively qualifies as owners of the vehicles, the persons in whose name the vehicles are registered.

We would, in that case, have a legal fiction, disconnected from the concept of civil law, and which consists of a legal expedient that considers a situation or fact as distinct from reality in order to attribute to it certain legal consequences.

Article 11, section 2 of the General Tax Law constitutes the starting point on this issue, saying that "whenever tax provisions employ terms proper to other branches of law, they must be interpreted in the same sense they have there, unless otherwise directly results from the law".

It is therefore necessary to ascertain whether it results unequivocally from the provisions of article 3 of CIUC that the legislator intended to establish there a concept of "vehicle owner" peculiar to tax law, which encompasses persons who are not holders of such a right according to the rules of civil law.

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

And, in the sequence of the previous question, another question imposes itself: why would the legislator not have simply stipulated - since it would obtain exactly the same useful effect but eliminating any margin of legal insecurity or uncertainty - that "the passive tax subjects of the tax are the persons in whose name the vehicles are registered, whether as owners, or as financial lessees, as purchasers with reservation of title, or as other holders of purchase option rights by virtue of lease contracts"? A question all the more pertinent, and hypothesis all the more attractive, given that the legislator was aware of the negative experience, which keeps repeating itself, of the previous Circulation Tax?

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

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

It is certain that the efficiency of taxation determines the need for IUC to rest on vehicle registration and, consequently, requires that the tax authority can rely on this same vehicle registration.

But the principle of efficiency of taxation cannot be superimposed in absolute terms on the principle of tax capacity, to the point of eliminating it as a criterion of subjective incidence. And it is also certain that the tax legislator would have at its disposal other means of holding the vehicle seller responsible, at fault with respect to its duty to report the vehicle sale, for the payment of the tax, without being as direct taxpayer (by configuring, for example, a case of tax liability for third party debt).

And, if it is so, it must also necessarily be concluded that article 3, section 1 can only establish a presumption of vehicle ownership, even with all the negative consequences that this conclusion will undoubtedly entail, in terms of the efficiency of the tax administration."

It is thus concluded, following the cited decision, that article 3, section 1 of CIUC contains a presumption regarding the tax incidence, relating to the quality of owner of a vehicle.

2. Regarding the rebuttal of the presumption of ownership of the right to property that rests upon the Claimant

Having concluded that section 1 of article 3 of CIUC establishes a presumption that the holder of vehicle registration is its owner, it follows from this that such presumption is rebuttable, pursuant to article 73 of the LGT.

On the other hand, vehicle registration constitutes a presumption that the holder of the right of ownership is the entity in whose favor the same right is registered. This presumption is expressly established in article 7 of the Land Registration Code, applicable to Vehicle Registration by virtue of article 29 of the Vehicle Registration Code.[1]

If it is true that the presumption of article 3, section 1 of CIUC is established with a view to the purposes of taxation, the presumption established by the registration law has in view legal security in general, and there is no ground for judging that this presumption does not apply in the scope of tax legal relationships.

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

With respect to the rebuttal of the presumption of vehicle registration, there is established case law to the effect that it is necessary to prove that the ownership of the registered right belongs to another (cfr. judgment of the Court of Appeal of Coimbra of 22-01-2013, case no. 3654/03.2TBLRA.C1; judgment of the Court of Appeal of Coimbra of 3-06-2008, case no. 245-B/2002.C1).

To prove that the right of ownership over the vehicles belongs to another, the Objecting party presents invoices relating to the sale of the vehicles in question. And seeks, with such documents, to prove that it alienated the vehicles.

However, in the view of this Arbitration Tribunal, and in consonance with the arbitration decision previously cited, neither do the invoices prove the alienation, nor does proving that an alienation occurred at a moment that in many of the cases in question would have occurred several years before the tax fact, amount, in the abstract, to proving that the ownership of the registered right belongs to another, at the moment of the tax fact. And indeed, what the Claimant would have had to do to rebut the presumption of vehicle registration was not to prove that it alienated years ago, but that, at the moment of the tax fact, the right of ownership belonged to another. Proving that the right belongs to another, for its part, implies proving to whom the right of property registered in its name belongs.

Being purchase and sale a bilateral contract, proving that the contract of purchase and sale was concluded presupposes proving that effective declarations of will were made by both parties to the contract. The invoice, however, is a unilateral document, which can only serve as proof of the declaration of its issuer.

In this sense there is solid case law of the civil courts relevant to the case at hand, cited in the arbitration decision referenced above.

In a judgment of the Court of Appeal of Lisbon of 4-2-2010, (Case no. 224338/08.7YIPRT.L1-8) it is stated, referring to the invoices presented as a means of proof of a contract of purchase and sale: "The documents submitted are limited to the existence of the declarations contained therein, that is, that invoices were issued relating to goods supplied to the defendant/appealed party with the corresponding delivery note".

In another judgment of the same Court of 26-11-2009 (Case no. 29158/03.5YXLSB.L1-2), it is stated that "the evidentiary force of the private document is limited to the declarations of its respective signatory".

And in yet another judgment of the same Court of 5-6-2008 (Case 1586/2008-8), the Court holds that "the requirement of a payment by invoice is not sufficient to prove that the contract to which the payment relates was concluded with the entity invoiced."

In light of the foregoing, it is necessary to conclude, as in the arbitration decision cited, that the Claimant failed to prove the alienation of the vehicles.

The accounting records that the Claimant protested to attach, should it be considered necessary, are equally unilateral and internal documents. They would not therefore add any evidentiary value to the invoices, when it is a question of proving the existence of a bilateral contract.

However, as was stated previously, and as is stated in the judgments previously cited, to rebut the presumption of truthfulness of the facts contained in the registration, in this case the presumption of vehicle ownership, the Claimant had to prove that another was the holder of the registered right on the date of the tax facts.

Now, proving – which was not proven – that a contract of purchase and sale was concluded at a given moment does not imply that it is proven that, several years later, another is the holder of the right, by the most elementary rules of logic.

It is irrelevant, for this issue, any consideration regarding the concrete and particular circumstances of the transaction at issue, since the issue being analyzed is not a question of fact, but a question of substantive law of evidence. The question of substantive law of evidence at issue is whether a private and unilateral document has evidentiary force to, by itself, destroy the full proof that registration constitutes.

Being a question of law, what matters to know is whether a private and unilateral declaration should, in the abstract, be considered sufficient to destroy the registration presumption.

On this issue, the following is cited from the arbitration award handed down in arbitration case no. 126/2014-T, to whose doctrine full adherence is given without reservation:

"On the rebuttal of the presumption of truthfulness of registration, Mouteira Guerreiro says (Mouteira Guerreiro, J. A., Notions of Registration Law, 2nd ed. Coimbra ed.1994, p. 70): "The protection conferred by registration is expressed in our system, in a rebuttable presumption. But we cannot forget, it is a legal presumption. (…) What registration reveals cannot be impugned, even in court, without simultaneously requesting its cancellation.

The same author (Ibidem, p. 71) adds: "It follows from the principle of presumption of truth or exactness the rule provided for in article 8 of the LRC. If definitive registration presumpts that the right exists and belongs to the registered holder "in the precise terms in which the registration defines it", it would make no sense to judicially attack this publicly advertised truth, without simultaneously attacking the registration itself. Therefore, anyone wishing to contest the truthfulness of the facts inscribed in the registration will equally have to request the cancellation of the registration. If they do not, the action will not proceed after the pleadings, because there would be the risk of arriving at an actual contradiction: on the one hand, having a judgment declaring legally irrelevant or false certain facts and, on the other hand, there existing a registration presuming erga omnes the truthfulness and validity of those same facts".

The understanding set out is sanctioned by the case law of the superior courts. See the judgments previously cited, in which it is stated that, to set aside the presumption of ownership resulting from vehicle registration, it is necessary to prove that the ownership of the registered right belongs to another, but that not being sufficient, it is still necessary to request, simultaneously, its cancellation (cfr. judgment of the Court of Appeal of Coimbra of 22-01-2013, case no. .../03.2TBLRA.C1; judgment of the Court of Appeal of Coimbra of 3-06-2008, case no. 245-B/2002.C1).

That is, given the function of guaranteeing the security of legal relationships relating to goods subject to registration, in order that the evidentiary function of registration not be destroyed, one who seeks to set aside the presumption must be in a position to request the cancellation of the registration. (…)".

It must therefore be concluded that the documents presented by the Claimant do not prove that another is the holder of the registered right, as was required in order for the registration presumption to be considered rebutted.

From all of the foregoing it follows that the Claimant has not rebutted the presumption that rests upon it regarding the ownership of the vehicles on which the disputed IUC assessments are imposed, and that, consequently, the disputed assessments do not suffer from any illegality.

The Claimant's claim for the illegality of the disputed assessments is therefore unfounded on the basis of error in the legal premises, due to the absence of the requirements of the subjective incidence of the Tax with respect to the Claimant.

V. DECISION

For the reasons stated, this Tribunal decides to dismiss in its entirety the present request for arbitration.

Value of the case: The value of the case is fixed at 53,835.74 euros.

Costs: Pursuant to article 22, section 4, of the RJAT, the amount of costs is fixed at 2,142.00 euros, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Let it be registered and notified.

Lisbon, Centre for Administrative Arbitration, 15 December 2014.

The Arbitration Tribunal

(Nina Aguiar)

[1] DL no. 54/75, of 12 February.

Frequently Asked Questions

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What is the presumption of vehicle ownership for IUC tax purposes based on the automobile registry in Portugal?
Under Portuguese IUC legislation, Article 3(1) of the IUC Code establishes that vehicle owners are considered the passive tax subjects, specifically defining owners as persons in whose names the vehicles are registered. The Tax Authority interprets this as a definitive legal qualification rather than a rebuttable presumption, arguing the legislator intentionally used 'are considered' instead of 'are presumed.' This interpretation links IUC liability directly and exclusively to vehicle registration records. However, taxpayers argue that Article 7 of the Land Registration Code, applicable to vehicle registration through Article 29 of the Vehicle Registration Code, creates a rebuttable presumption that ownership belongs to the registered holder. The practical effect is that Portuguese tax authorities assess IUC based solely on registry data, placing the burden on taxpayers to maintain accurate registration records that reflect actual ownership status.
Can the IUC passive subject rebut the registration-based ownership presumption by presenting sales invoices?
The Tax Authority firmly opposes rebutting the registration-based determination of IUC liability through sales invoices alone. While taxpayers argue that sales invoices prove ownership transfer occurred before the tax obligation arose (citing the real nature of purchase-sale contracts under Portuguese civil law, where ownership transfers upon contract conclusion without requiring subsequent registration), the Tax Authority maintains that Article 3(1) of the IUC Code creates a definitive legal qualification, not a presumption. The Tax Authority argues that accepting informal documentation like sales invoices would undermine legal certainty, create excessive administrative burdens, obstruct tax collection efficiency, and render vehicle registration systems meaningless. Furthermore, the Tax Authority contends that taxpayers have readily available legal mechanisms (timely vehicle registration updates) to align registry with reality, and failing to use these mechanisms cannot justify avoiding tax liability based on unregistered transactions. Courts have diverged on this issue, with some accepting the Tax Authority's interpretation emphasizing registration formality over substantive ownership reality.
What are the legal grounds for annulling IUC tax assessments when vehicles have been sold or declared a total loss?
Legal grounds for annulling IUC assessments when vehicles have been sold or written off depend on proving that the taxpayer was not the actual owner (for sales) or that vehicles were no longer suitable for circulation (for total losses) at the relevant tax date. For sales, taxpayers must demonstrate ownership transfer through valid purchase-sale contracts predating the tax obligation, though the Tax Authority disputes that sales invoices alone suffice without corresponding registration updates. For vehicles declared total losses and deregistered, taxpayers must prove cancellation of registration occurred before the tax assessment reference date. Under Article 43 of the General Tax Law, successful annulment entitles taxpayers to refund of amounts paid plus compensatory interest for delayed payment and indemnity interest for wrongful deprivation of funds. However, CAAD arbitral tribunals lack jurisdiction over late payment penalties associated with IUC assessments, as regulatory breach matters fall outside their statutory competence under the RJAT (Legal Framework for Tax Arbitration). The burden of proof rests on taxpayers to demonstrate why registration-based assessments should be annulled.
How does CAAD arbitration handle disputes over Imposto Único de Circulação liability when registry records do not reflect actual ownership?
CAAD (Centro de Arbitragem Administrativa) arbitration handles IUC disputes involving registry-ownership mismatches by examining whether Article 3(1) of the IUC Code creates a rebuttable presumption or definitive legal qualification. Arbitrators must balance competing principles: substantive tax justice (taxing actual owners who benefit from vehicle ownership and impose environmental/infrastructure costs) versus administrative efficiency and legal certainty (relying on official registries). The Tax Authority emphasizes that the teleological interpretation of IUC reform supports registry-based liability, as the tax shifted from taxing vehicle circulation to taxing ownership itself, making registered owners the natural tax subjects regardless of actual vehicle use. Arbitrators consider whether taxpayers provided sufficient evidence of ownership transfer (sales contracts, invoices, total loss declarations) and whether they exercised due diligence in updating registrations. CAAD decisions have reflected divergent approaches, with some emphasizing formalistic registry adherence and others considering substantive ownership evidence. These disputes typically involve requests for assessment annulment, tax refunds, compensatory interest, and indemnity interest under Article 43 LGT, though jurisdictional limits exclude penalty matters from CAAD competence.
Is a taxpayer entitled to a refund and indemnity interest after successfully challenging unlawful IUC tax assessments?
Yes, taxpayers who successfully challenge unlawful IUC assessments are entitled to refunds and interest under Portuguese tax law. Article 43 of the General Tax Law (LGT) establishes taxpayers' right to compensatory interest (juros compensatórios) for tax amounts paid beyond legal deadlines when assessments are later annulled or reduced, calculated from payment date until refund. Additionally, taxpayers may claim indemnity interest (juros indemnizatórios) for wrongful deprivation of funds when tax authorities acted unlawfully, compensating for financial loss caused by improper tax collection. The refund amount includes the principal IUC tax incorrectly assessed plus any compensatory interest that was charged on alleged late payments. However, obtaining these remedies requires successfully demonstrating that IUC assessments were unlawful—either because the taxpayer was not the actual owner at the relevant tax date, vehicles were deregistered before assessment, or the Tax Authority misapplied legal provisions. The practical challenge lies in overcoming the Tax Authority's position that registration definitively determines liability, requiring robust evidence of ownership transfer or vehicle deregistration. CAAD arbitral tribunals have jurisdiction to order such refunds and interest payments when ruling in taxpayers' favor, though execution depends on the specific factual and legal findings in each case.