Process: 353/2015-T

Date: January 25, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

Process 353/2015-T addresses the subjective incidence of Portugal's Single Circulation Tax (IUC) for vehicles under financial leasing arrangements. A financial institution challenged IUC assessments totaling €11,378.69 for tax periods 2011-2014, arguing it should not be liable for vehicles already transferred to third parties by sale or delivered to lessees under financial leasing contracts. The central legal dispute concerns interpretation of Article 3 of the IUC Code, which designates registered owners as taxpayers while equating financial lessees to owners. The claimant contended that registration creates a rebuttable presumption under Article 73 of the General Tax Law, allowing evidence that economic ownership had transferred. The Tax Authority maintained that the provision expressly and intentionally establishes taxpayer status based on Motor Vehicle Registry records, not as a presumption. The CAAD arbitral tribunal accepted jurisdiction over multiple joined assessment acts involving different vehicles and tax periods, given the identity of legal grounds. Preliminary objections were raised regarding missing annexed assessment documents. The case illustrates tensions between formal registration requirements and economic reality in financial leasing transactions, particularly where lessees default without returning vehicles or where sale contracts remain unregistered. The tribunal's decision would determine whether leasing companies bear IUC liability despite lacking possession or economic benefit from vehicles, with implications for reimbursement of amounts paid plus compensatory interest.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A..., S.A., legal entity no...., with registered address at Building..., Plot..., 2nd floor, in Lisbon, applied for the establishment of an arbitral tribunal in tax matters, submitting a request for arbitral decision against the assessment acts for Single Circulation Tax (IUC) and compensatory interest for the periods from 2011 to 2014 and for the motor vehicles which, in a table annexed to the petition, it identifies by their respective registration plate numbers. As a consequence of the aforementioned annulment, it requests the condemnation of the Tax Administration to reimburse the amount which it considers wrongfully paid, in the total amount of € 11,378.69, plus the corresponding indemnity interest.

  2. As the basis for the request, submitted on 2 June 2015, the Claimant alleges, in summary, that, in all cases covered by the request for arbitral decision, the assessed tax concerns:

  • Vehicles which, prior to the date of the tax liability, had already been the subject of transfer by purchase and sale contract;

or which

  • were delivered to their respective lessees under financial leasing contracts then in force; or, furthermore, which having been the subject of lease, the lessees were in breach of contract without, however, having returned the leased assets to the lessor.

  1. In response to what was requested, the Tax and Customs Authority (AT) ruled in the sense of the lack of merit of this request for arbitral decision, maintaining in the legal order the tax acts contested and, accordingly, for the acquittal of the defendant entity, however raising preliminary objections regarding the failure to annex the IUC assessments which constitute the subject matter of the request as well as documents to prove what is alleged.

  2. The application for establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 15 June 2015.

  3. Pursuant to the provisions of subsection a) of paragraph 2 of Article 6 and of subsection b) of paragraph 1 of Article 11 of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Deontological Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of that appointment on 28 July 2015.

  4. Duly notified of that appointment, the parties did not manifest any intention to challenge the appointment of the arbitrator, in accordance with the combined provisions of Article 11, paragraph 1, subsections a) and b) of the RJAT and of Articles 6 and 7 of the Deontological Code.

  5. Thus, in accordance with the provisions of subsection c) of paragraph 1 of Article 11 of the RJAT, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the single arbitral tribunal was constituted on 12 August 2015.

  6. With the arbitral tribunal duly constituted, it has material jurisdiction in view of the provisions of Articles 2, paragraph 1, subsection a), of the RJAT.

  7. The parties have legal personality and capacity and have standing (Articles 4 and 10, paragraph 2, of the RJAT, and Article 1 of Regulation no. 112-A/2011, of 22/03).

  8. By order of 4 November 2015, the date of 15 of the same month was set for the holding of the meeting provided for in Article 18 of the RJAT. The Parties having been duly notified, the Defendant requested dispensation from holding that meeting. With the agreement of the Claimant and in view of the knowledge arising from the case documents, considered sufficient, the request for dispensation was accepted, and the Parties were given the opportunity to submit written submissions.

  9. No submissions were presented. However, the Claimant sent, to be annexed to the case file, copies of the contested assessments, to which the Defendant objects on the grounds of untimeliness of that annexation.

II. FACTUAL MATTER

  1. With relevance for the assessment of the issues raised, the following factual elements are highlighted, which, on the basis of the documentary evidence annexed to the case file, are considered proven:

12.1. The Claimant is a financial credit institution, subject to supervision by the Bank of Portugal.

12.2. In the context of its activity, it grants financing intended for the acquisition of motor vehicles, namely through the execution of financial leasing contracts.

12.3. The Claimant was duly notified of ex officio assessment acts for IUC, relating to the tax periods and vehicles identified in a table annexed to the petition, which is here given as fully reproduced, in the total amount of € 11,378.69, of which € 11,066.99 relates to tax and € 311.70 to compensatory interest.

  1. The remaining facts alleged by the Claimant are not considered proven.

III. JOINDER OF CLAIMS

  1. This request for arbitral decision concerns several IUC assessments. However, given the identity of the tax facts, the tribunal competent to decide and the grounds of fact and law invoked, the tribunal considers that nothing prevents, in view of the provisions of Articles 3 of the RJAT and 104 of the CPPT, the joinder of claims.

IV. LEGAL MATTER

  1. In the request for arbitral decision, the Claimant submits to the appraisal of this tribunal the legality of the IUC assessment acts, relating to the periods from 2011 to 2014 and to the vehicles which it identifies in a table annexed to said request, invoking the circumstance that, as of the date to which the tax facts that gave rise to them relate, the vehicles had already been the subject of transfer to third parties or were delivered to their respective lessees under financial leasing contracts, in which it figures as lessor, the majority of which would have already reached the end of their term without the lessee having exercised the purchase option, nor proceeded with the return of the leased vehicle. Therefore, consequently, it does not assume the status of taxpayer in respect of the tax assessed against it.

  2. What is at issue, then, is to determine whether the Claimant should or should not be considered the taxpayer in respect of IUC regarding the vehicles and periods to which the tax relates, duly identified in the request, which had already been transferred to third parties or in respect of which financial leasing contracts had been executed, even though the transfers or such contracts, not having been registered with the Motor Vehicle Registry, remained registered there with the lessor as the registered owner.

  3. With regard to this matter, Article 3 of the IUC Code provides, in its paragraphs 1 and 2, that:

"1 - The taxpayers 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.

  1. Financial lessees, purchasers with retention of ownership, as well as other holders of purchase option rights by virtue of a lease contract are equated to owners."

  2. According to the Defendant's understanding, said rule does not involve any legal presumption, considering that "the tax legislator when establishing in Article 3, paragraph 1, who the taxpayers of IUC are, established expressly and intentionally that these are the owners (or in the situations provided for in paragraph 2, the persons stated therein), being considered as such the persons in whose name they are registered."

  3. For its part, the Claimant maintains that that rule enshrines a legal presumption, rebuttable according to general terms and, in particular, by force of the provisions of Article 73 of the General Tax Law, according to which presumptions of tax incidence always admit proof to the contrary.

PRELIMINARY OBJECTIONS

  1. Having summarized the relevant factual elements as well as the positions which, regarding the interpretation of the applicable law, are sustained by the Parties, it is important, first and foremost, to analyse and decide the preliminary objections raised by the Defendant, which concern the fact that the Claimant did not annex to the request copies of the contested assessments or documents which, in the Defendant's view, would be necessary to prove what is alleged.

  2. The Defendant considers that "this request for arbitral decision is, at the very least, irregular, given the clear and manifest violation of the provisions of subsection b) of paragraph 2 of Article 10 of the RJAT, with the Claimant not having annexed to the case file the tax acts concerning the IUC assessments, the legality of which it intends to review in this arbitral tribunal."

  3. In the Defendant's view, said elements should have been presented in the request for the application for arbitral decision, concluding, thus, that having failed to do so, the possibility of doing so at a later date is foreclosed.

  4. And, with that basis, the Defendant maintains that "the present Claimant makes no proof of the timeliness of the application for establishment of the arbitral tribunal regarding all other contested assessments".

  5. With regard to this issue, the Tribunal considers that, given that the contested assessments are duly identified by the Claimant in the request it submitted, consisting of a table annexed thereto with the identification of each vehicle, by indication of its respective registration plate number, the period to which the tax relates as well as the number of the corresponding collection document, the documents to which the Defendant refers do not assume relevance for the decision.

  6. In fact, said documents are official documents, issued by the Tax Administration itself, contained in its respective records, namely computerized ones, and cannot fail to be part of the respective administrative file, since notification of the assessment constitutes, in legal terms, a condition of its effectiveness.

  7. The Tribunal also considers that the Defendant claims that documents were not annexed to the request which could support the thesis defended by the Claimant, namely proof of payment of the tax and compensatory interest, receipt of the price of sale of the vehicles and breach of contract.

  8. This, however, does not correspond to the reality of the facts. In fact, the Claimant presented the evidence elements which it considered relevant, namely copies of duplicate invoices which would substantiate the alleged sales and copies of the leasing contracts executed. Whether the documents presented constitute or not sufficient proof of what is alleged by the Claimant, it will be up to the Tribunal to decide.

  9. From the above, it follows, then, that the preliminary objections raised by the Defendant are to be considered inconsistent, recognizing that the tax acts contested are identified with precision and that documents have been presented which are intended to prove what is alleged by the Claimant.

  10. Therefore, the Tribunal considers the preliminary objections raised by the Defendant to be lacking in merit.

ON THE MERITS OF THE REQUEST

  1. This matter has been the subject of numerous decisions within the scope of arbitral tribunals operating at CAAD, generally in the sense of the merit of the respective requests, on the grounds that the rule in question contains a legal presumption that admits proof to the contrary [i].

  2. Adhering without reservation to the position referred to above, it is dispensed, as unnecessary and tedious, the reproduction of the respective reasoning, since in this proceeding nothing new is advanced on that matter.

  3. Concluding, in the wake of the interpretation which has invariably been followed by arbitral case law, that the rule of subjective incidence of IUC enshrines a rebuttable presumption, it is important to analyse the documentation offered by the Claimant in order to know whether it constitutes, or not, sufficient proof for its rebuttal.

  4. As referred to above, with regard to the factual matter, there are several situations to which this request refers:

  • The assessments concern vehicles which would have already been the subject of transfer as of the date of the tax liability;

  • The assessments concern vehicles which are the subject of financial leasing contracts or which, having been, the lessees entered into a situation of breach of contract, without return of the leased vehicle.

  1. Concerning the situation first referred to, copies of duplicate invoices which would substantiate the transaction are presented as evidence, and, as to the second, copies of the financial leasing contracts.

ON THE REBUTTAL OF THE PRESUMPTION

  1. Presumptions of tax incidence may be rebutted through the contradictory procedure specifically provided for in Article 64 of the CPPT or, alternatively, through the means of administrative review or judicial challenge of the tax acts based on them.

  2. In this case, the Claimant did not use that specific procedure, so this request for arbitral decision is the appropriate means to rebut the presumption of subjective incidence of IUC which supports the tax assessments whose annulment constitutes the object of the request, since it is a matter which falls within the material jurisdiction of this arbitral tribunal (Articles 2 and 4 of the RJAT).

  3. With the Claimant appearing in the Motor Vehicle Registry as owner of the vehicles identified in the request during the taxation period to which the questioned assessments relate, and with the vehicles in question, as of the date of the tax liability, having passed to the ownership of third parties, by purchase and sale contracts, or, in other cases, being transferred to third parties under leasing contracts, it remains to evaluate the proof presented, in order to determine whether it is sufficient to rebut the presumption established in paragraph 1 of Article 3 of the same Code or to establish the rule of subjective incidence provided for in paragraph 2 of the same article.

  4. To rebut said presumption, derived from the registration in the Motor Vehicle Registry, the Claimant offers copies of duplicate sale invoices as well as copies of the financial leasing contracts.

ON THE REBUTTAL OF THE PRESUMPTION ON THE BASIS OF COMMERCIAL INVOICES

  1. Pronouncing on the documentary evidence presented, the Defendant alleges that the invoices annexed to the case file do not constitute suitable documents to effect the proof sought in the sense that the Claimant is not the owner of the vehicles in the taxation periods to which the assessments in question relate.

  2. To that end, the Claimant maintains that "Invoices are not suitable to prove the conclusion of a synallagmatic contract such as purchase and sale, since such documents do not reveal by themselves an essential and unequivocal declaration of intent (i.e., acceptance) on the part of the alleged purchasers."

  3. Beyond the aspect referred to above, the Defendant points out that from the analysis of the duplicate invoices annexed by the Claimant it can be verified that they present distinct mentions in their description.

  4. In fact, the Defendant emphasizes, "By way of example, see the invoice concerning the vehicle ...-...-... which reads "SALE NOT LEASED", the invoice concerning the vehicle ...-...-... which reads "RESCISSION", vehicle ...-...-... "SALE OF ASSET ON CREDIT", the invoice concerning the vehicle ...-...-... "TOTAL LOSS INSURANCE".

  5. In light of the discrepancies pointed out, the Defendant maintains that, given that a supposed single type of contract is at issue (i.e., a motor vehicle purchase and sale contract), it would be expected to note the existence of a uniform description, which is not evident in this case, given that several invoices annexed to the request for arbitral decision include different descriptions, so one is necessarily led to conclude the existence of two distinct realities.

  6. The Defendant therefore concludes that "showing the invoices to be non-conforming, as they show themselves to be, it is then necessary to conclude that such documents can never benefit from the presumption of truth to which Article 75 of the LGT refers."

  7. What is at issue, then, is whether invoices that substantiate commercial transactions constitute an element of proof for the rebuttal of the presumption contained in Article 3 of the IUC Code and, if this is admitted, whether the copies of invoices presented by the Claimant constitute sufficient proof for that purpose.

  8. For that purpose, it is important to bear in mind that, in the situation being analysed, one is dealing with purchase and sale contracts which, relating to movable property and not being subject to any special formality (Civil Code, Article 219), result in the corresponding transfer of real rights (Civil Code, Article 408, paragraph 1).

  9. Given that these are contracts which involve the transfer of ownership of movable property, by means of the payment of a price, they have, as essential effects, among others, that of delivering the thing (Civil Code, Articles 874 and 879).

  10. However, given that a purchase and sale contract which has as its object a motor vehicle is at issue, in which registration is mandatory, its timely performance presupposes the issue of the declaration of sale necessary for registration of the corresponding acquisition in favour of the purchaser, as has been understood by the case law of the superior courts.[ii] Such declaration, relevant for registration purposes, may constitute proof of the transaction, but does not constitute the sole or exclusive means of proof of the transaction.

  11. For registration purposes, no special formality is required either, it sufficing to present to the competent entity an application subscribed by the purchaser and confirmed by the seller who, through a declaration of sale, confirms that the ownership of the vehicle was acquired by that party by verbal purchase and sale contract (see Motor Vehicle Registration Regulation, Article 25, paragraph 1, subsection a)).[iii]

  12. Notwithstanding these being the rules resulting from the provisions of civil law, relating to the informality of the transfer of movable property and, where applicable, of its registration, one cannot fail to take into account that, in the situation being analysed, we are dealing with commercial transactions, effected by a business entity in the context of the activity which constitutes its business purpose.

  13. In that context, the selling company is bound by compliance with specific accounting and tax norms, in which invoicing assumes special relevance.

  14. Immediately, by force of tax norms, the entity transmitting the goods is obliged to issue an invoice in respect of each transfer of goods, regardless of the status of the respective purchaser (IVA Code, Article 29, paragraph 1, subsection b)).

  15. Also in accordance with the provisions of tax norms, the invoice must conform to a certain form, detailed regulated in Articles 36 of the IVA Code and 5 of Decree-Law no. 198/90, of 19 June.

  16. It is on the basis of that document issued by the supplier of the goods that the purchaser, when a business operator, will be able to deduct the IVA to which it is entitled (IVA Code, Article 19, paragraph 2) - except if the tax borne in the acquisition of the vehicle, by its characteristics, is not deductible - and record the expense of the operation (Corporate Income Tax Code, Articles 23, paragraph 6 and 123, paragraph 2).

  17. For its part, it is also on the basis of the invoicing issued that the supplier of the goods must record the respective income, as results from the provisions of subsection b) of paragraph 2 of Article 123 of the Corporate Income Tax Code.

  18. Provided they are issued in the legal form and constitute supporting elements of the accounting entries in accounts organized in accordance with commercial and tax legislation, the data contained therein are covered by the presumption of truthfulness to which Article 75, paragraph 1, of the General Tax Law refers.

  19. Considered, therefore, the relevance attributed by the tax legislation to invoices issued, in accordance with legal requirements, by commercial companies in the context of their business activity and the presumption of truthfulness of the operations substantiated by them, it cannot fail to be considered that they may constitute, by themselves, sufficient proof of the transfers invoked by the Claimant.

  20. However, the issue of invoices, in the legal form, presupposes that they contain, among other relevant elements, the usual designation of the transferred goods, as results from the tax law (see IVA Code, Article 36, paragraph 5).

  21. As the Defendant correctly points out, that is manifestly not the situation evidenced in this proceeding.

  22. In fact, analysing the copies of the duplicate invoices presented as proof of the transfer, by purchase and sale, of various vehicles, it is verified that, as regards the mention of the object of the transaction, operations are described as "Sale not leased", "Residual Value", "Rescission". Such description, not reflecting the usual designation of the transferred asset required by tax law, does not permit the conclusion that they substantiate a purchase and sale contract for anything whatsoever.

  23. In these terms, aligning with the Defendant's position, it is considered that the elements presented by the Claimant do not constitute sufficient proof of the facts alleged for purposes of rebuttal of the presumption in question - sale of the vehicles at a time prior to the date of tax liability - and therefore, the tax acts to which they refer in the documents of collection identified in the table annexed to the request for arbitral decision must be maintained in the legal order.

  24. With regard to various situations, duly identified in the table annexed to the request for arbitral decision, the Claimant bases the challenge to the respective assessments on the circumstance that they concern vehicles which, as of the date of the tax liability, were delivered to the lessees under financial leasing contracts.

  25. Under these conditions, having regard to the provisions of Article 3, paragraph 2, of the IUC Code, which provides for the equating to owners of financial lessees, the Claimant considers that it cannot be attributed to it, in relation to said vehicles, the status of taxpayer in respect of the tax liability.

  26. As proof of what is alleged, the Claimant annexed to the request a copy of financial leasing contracts relating to various vehicles, noting, however, that in some cases, the contracts do not identify the vehicle to which they relate, referring only to "Heavy goods vehicle" or containing only a reference to the brand and model of the vehicle but, in any event, without the respective registration plate number being contained in the contract.

  27. On this matter, the Defendant understands, referring in general to the situations which involve financial leasing contracts, that "if the thesis propounded by the Claimant regarding the fact that Article 3 of the IUC Code enshrines a rebuttable presumption were to be followed, it would necessarily have to be concluded that such presumption would only be removed by timely compliance with the norm of Article 19 of the same Code, which establishes, for lessors, the obligation to communicate to the Tax Administration the identification of the lessees."

  28. This provision establishes that "For the purposes of the provisions of Article 3 of this code, as well as of paragraph 1 of Article 3 of the law of its enactment, entities which proceed to the financial leasing, operational leasing or long-term rental of vehicles are obliged to provide to the Tax Authority the data relating to the tax identification of the users of the leased vehicles."

  29. From the norm of paragraph 2 of Article 3 of the IUC Code, combined with the aforementioned Article 19 of the same Code, there remain no doubts that, given that the vehicles are under a financial leasing regime, the taxpayer of this tax will be the lessee and not the respective owner, thus removing the rule of subjective incidence of paragraph 1 of that article, provided that such communication is made or, alternatively, sufficient proof is made to rebut the presumption which it contains.

  30. Such, however, will not be the understanding of the Defendant, which, admitting by way of mere hypothesis that "if the thesis propounded by the Claimant regarding the fact that Article 3 of the IUC Code enshrines a rebuttable presumption were to be followed, it would then be necessary to conclude that the functioning of that article (i.e., the rebuttal of the presumption) equally depends on compliance with the provisions of Article 19 of the IUC Code, as is gathered from its literal element ("for the purposes of Article 3 of this Code...").

  31. In the sequence of that understanding, the Defendant maintains that "In the matter of financial leasing and for purposes of the rebuttal of Article 3 of the IUC Code, it is necessary that financial lessors (such as the Claimant) comply with the obligation inherent in Article 19 of that Code to exonerate themselves from the obligation of payment of the tax."

  32. Concluding that the Defendant "made no proof of compliance with this obligation, as was in fact its responsibility to do, so necessarily the alleged rebuttal of Article 3 here at issue must lack merit" and "not having the Claimant complied with that obligation, it is necessary to conclude that it is the taxpayer in respect of the tax."

  33. Recognizing, however, that financial lessors of motor vehicles are bound by the obligation to communicate to the Tax Administration the tax identification of the lessees, it is not possible to follow the Defendant's understanding in the sense that owners only exonerate themselves from the tax liability if they complied with said obligation.

  34. This matter has been the subject of various arbitral decisions, recalling, in this connection, the Arbitral Decision of 14 July 2014, in Proc. 136/2014-T:

"In fact, the provisions of Article 3, paragraph 2 of the IUC Code is very clear regarding the subjective incidence of IUC, in the term of financial leasing contracts, subjecting the lessee to that obligation, when it equates him to the owner for that purpose.

Thus, with the law not attributing that obligation to the owner-lessor, there will be no place for any exoneration on the part of the latter, through the communication provided for in Article 19 of the IUC Code, for the simple reason that it was never subject to payment of the tax.

The subjective incidence of IUC is established, in all its elements, in Article 3 of the IUC Code, and it will be through the application of this normative rule that the taxpayer will be determined, with the failure to comply with the aforementioned ancillary obligation being irrelevant for purposes of the incidence of the tax."[iv]

  1. It is, therefore, to this case law orientation that, without reservation, adherence is given.

  2. Concluding, thus, that, in the situation being analysed, documentary proof would have to be made that, as of the date of the tax liability, financial leasing contracts were in effect in relation to the vehicles duly identified by their respective registration plate numbers so that it could be considered that the presumption of ownership derived from the Motor Vehicle Registry contained in paragraph 1 of Article 3 of the IUC Code has been rebutted.

  3. As referred to above, that is not the case, since the copies of the contracts presented do not identify with exactitude the vehicles to which they relate, through indication of their respective registration plate numbers, so it is considered that they do not constitute sufficient proof of the facts alleged for purposes of rebuttal of the presumption in question.

  4. Consequently, the tax acts to which the documents of collection identified in the table annexed to the request for arbitral decision refer must be maintained in the legal order, in the part concerning the alleged leasing contracts which, supposedly, would have been in effect.

  5. Founding the request, the Claimant further alleges that in various situations which it identifies, the vehicles were transferred on financial lease and in the sequence of breach by each of the customers, it saw itself obliged to put an end to the respective contractual relationships, which were terminated early without, however, the lessees having proceeded with the return of the leased property.

  6. In fact, it is verified from a copy of the leasing contracts annexed by the Claimant that the termination thereof would have occurred in 2009, that is, well before the date of the tax liability to which the contested assessments relate.

  7. It will be, therefore, with regard to these contracts that the Claimant alleges that they ceased without the lessee having exercised the purchase option or proceeded with the return of the leased vehicle.

  8. These are, thus, vehicles which, as of the date on which the tax assessed became due, constituted the property of the Claimant, although, according to it, they would not have been returned to it by the respective lessees.

  9. It is certain that, as the documents annexed by the Claimant prove, the financial leasing contract was no longer in effect as of the date of the tax liability assessed, and it is thus not evidenced that the rule of paragraph 2 of Article 3 of the IUC Code has been satisfied.

  10. In fact, this rule attributes the status of taxpayer in respect of the tax liability to financial lessees, as well as to purchasers with retention of ownership, and other holders of purchase option rights by virtue of the lease contract. Manifestly, that is not the case which is evidenced in this proceeding: at the moment of the tax liability, the leasing contract had already reached its end and, with the purchase option not having been exercised by the respective lessee, the lessor retained ownership of the vehicles.

  11. The situation of breach of contract as well as non-return of the leased property does not assume relevance in tax terms, with the rule of paragraph 1 of Article 3 prevailing, which attributes the status of taxpayer to the owner of the vehicles, being considered as such the persons in whose name they are registered.

  12. In these terms, and with regard to the vehicles which are in said conditions, the request lacks merit, and therefore, the questioned assessments must be maintained.

ON THE REQUEST FOR INDEMNITY INTEREST

  1. In addition to the annulment of the assessments, and consequent reimbursement of the amounts wrongfully paid, the claimant further requests that it be recognized the right to indemnity interest, under Article 43 of the General Tax Law.

  2. However, given that the annulment of the assessments in question has not been determined, the assessment of the Claimant's request regarding recognition of its right to indemnity interest is rendered moot.

V. DECISION

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

a) To find the preliminary objections raised by the Tax Administration to be lacking in merit.

b) To find the request to be entirely lacking in merit insofar as it concerns the assessments relating to the vehicles identified in the table annexed to this request for arbitral decision.

c) To find the request to be lacking in merit insofar as it concerns the recognition of the right to indemnity interest in favour of the Claimant.

Process Value: € 11,378.69

Costs: In accordance with Article 22, paragraph 4, of the RJAT, and pursuant to Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, I fix the costs in the amount of € 918.00, to be borne by the Claimant.

Lisbon, 25 January 2016,

The Arbitrator, Álvaro Caneira.

[i] By way of merely illustrative example, see Procs. 14/2013-T, 26/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, 217/2013-T, 256/2013-T, 289/2013-T, 294/2013-T, 21/2014-T, 42/2014-T, 43/2014-T, 50/2014-T, 52/2014-T, 67/2014-T, 68/2014-T, 77/2014-T, 108/2014-T, 115/2014-T, 117/2014-T, 118/2014-T, 120/2014-T, 121/2014-T, 128/2014-T, 140/2014-T, 141/2014-T, 152/2014-T, 154/2014-T, 173/2014-T, 174/2014-T, 175/2014-T, 182/2014-T, 191/2014-T, 214/2014-T, 219/2014-T, 221/2014-T, 222/2014-T, 227/2014-T, 228/2014-T, 229/2014-T, 230/2014-T, 233/2014-T, 246/2014-T, 247/2014-T, 250/2014-T, 262/2014-T, 302/2014-T, 333/2014-T, 414/2014-T, 646/2014-T, all available at www.caad.org.pt.

[ii] See STJ, Judgments of 23.3.2006 and 12.10.2006, Procs. 06B722 and 06B2620.

[iii] It is noted that, within the scope of the special procedure for the registration of ownership of vehicles acquired by verbal purchase and sale contract, approved by Decree-Law no. 177/2014, of 15 December, the invoice constitutes, among others, a document which evidences the actual purchase and sale of the vehicle, provided that it contains the registration plate number of the vehicle as well as the name of the seller and the purchaser.

[iv] See, among others, Procs. 128/2014-T, 134/2014-T, 136/2014-T, 137/2014-T, 224/2014-T, 228/2014-T, 232/2014-T, 233/2014-T and 341/2014-T.

Frequently Asked Questions

Automatically Created

Who is liable for IUC on vehicles transferred by sale or under financial leasing agreements in Portugal?
Under Article 3 of the IUC Code, liability for IUC depends on registration status and contractual arrangements. Paragraph 1 establishes that taxpayers are vehicle owners, considered as those in whose name vehicles are registered in the Motor Vehicle Registry. Paragraph 2 specifically equates financial lessees, purchasers with retention of ownership, and lease purchase option holders to owners for tax purposes. Therefore, once a financial leasing contract is executed and the vehicle is delivered to the lessee, the lessee becomes liable for IUC as they are equated to owners. For vehicles transferred by sale, if the transfer is properly registered, the new owner becomes liable. However, if transfers or leasing contracts are not registered, the person remaining in the registry as registered owner may face assessment, creating disputes over whether registration constitutes a rebuttable presumption or definitive determination of taxpayer status.
Can a leasing company challenge IUC assessments for vehicles already delivered to lessees or sold to third parties?
Yes, a leasing company can challenge IUC assessments through CAAD arbitration under Article 2(1)(a) of the RJAT (Arbitration Regime in Tax Matters). In Process 353/2015-T, the financial institution successfully initiated arbitral proceedings to contest assessments for vehicles it argued had been delivered to lessees or sold to third parties. The challenge is based on Article 3(2) of the IUC Code, which equates financial lessees to owners, thereby shifting tax liability from the lessor to the lessee upon delivery. The claimant argued that Article 3(1) creates a rebuttable legal presumption under Article 73 of the General Tax Law, allowing proof that despite registry records showing the leasing company as owner, the economic reality and legal framework place liability on the lessee. The tribunal accepted jurisdiction and allowed joinder of multiple assessment acts under Articles 3 of RJAT and 104 of CPPT, given identity of legal grounds, demonstrating that leasing companies have procedural standing to contest such assessments systematically across multiple vehicles and tax periods.
What happens to IUC liability when a lessee defaults on a financial leasing contract but does not return the vehicle?
When a lessee defaults on a financial leasing contract without returning the vehicle, IUC liability becomes disputed between lessor and lessee. According to Article 3(2) of the IUC Code, financial lessees are equated to owners during the contract term, making them the taxpayers. However, the text indicates this situation creates practical complications: the lessee may have abandoned the vehicle or ceased payments without formally returning it, while the lessor (leasing company) no longer has possession or economic benefit but remains the registered owner in the Motor Vehicle Registry. The Tax Authority's position suggests that until registration is updated, the registered owner bears liability. The claimant's position argues that the lessee's equated owner status under paragraph 2 persists regardless of default or non-return, as the leasing contract technically continues until formally terminated and the vehicle is recovered. This creates ambiguity about which party should bear IUC liability during the gap between default and vehicle recovery, particularly when the lessor cannot locate or repossess the vehicle to update registration records.
How does the CAAD arbitral tribunal handle disputes over IUC subjective incidence for multiple tax periods?
The CAAD arbitral tribunal handles multiple IUC assessments through joinder of claims under Articles 3 of RJAT and 104 of CPPT when there is identity of tax facts, competent tribunal, and legal grounds. In Process 353/2015-T, the tribunal consolidated assessments for multiple vehicles across tax periods 2011-2014 into a single proceeding, as all contested acts involved the same legal issue: whether the claimant qualified as taxpayer under Article 3 of the IUC Code for vehicles transferred or under financial leasing. The procedure followed standard CAAD protocols: application acceptance, automatic notification to Tax Authority, arbitrator appointment by the Deontological Council, constitution of single arbitral tribunal, and scheduled hearing under Article 18 of RJAT (which parties waived by agreement). The Defendant raised preliminary objections regarding failure to annex IUC assessment documents initially, though the claimant later submitted copies. The tribunal evaluated timeliness objections while proceeding with substantive analysis. This consolidated approach enables efficient resolution of systematic assessment errors affecting multiple vehicles under the same legal theory, avoiding duplicative proceedings while addressing the total amount of €11,378.69 plus requested compensatory interest.
Is the Tax Authority required to reimburse unduly paid IUC amounts with compensatory interest after annulment?
Yes, upon successful annulment of IUC assessment acts, the Tax Authority must reimburse unduly paid amounts with compensatory interest. The claimant in Process 353/2015-T explicitly requested condemnation of the Tax Administration to reimburse €11,378.69 (the wrongfully paid amount) plus corresponding indemnity interest. This reimbursement obligation flows from general principles of tax law regarding unlawful assessments. When an arbitral tribunal or court annuls a tax assessment as illegal, the taxpayer is entitled to full restitution of amounts paid in compliance with that invalid assessment. Compensatory interest (juros indemnizatórios) compensates the taxpayer for the State's use of funds that were not legally due, calculated from the payment date until reimbursement. The interest rate and calculation method are established by tax legislation. This reimbursement right is fundamental to taxpayer protection, ensuring that procedural victory in contesting assessments translates into complete financial restoration. The Tax Authority cannot retain amounts collected under annulled assessments, as this would constitute unjust enrichment. The arbitral tribunal has authority under RJAT to order such reimbursement as consequential relief when annulling contested acts, making the Tax Authority's reimbursement duty enforceable through the arbitral decision.