Process: 376/2015-T

Date: March 23, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case addresses who bears IUC (Single Road Tax) liability when vehicles have been sold but remain registered in the seller's name. The Applicant company was assessed IUC on multiple vehicles still registered to it but which it claimed to have sold. The Tax Authority argued that vehicle registration creates a legal presumption of ownership that can only be rebutted by updating the registry itself, and that the invoices provided were insufficient proof, particularly because they appeared on another company's letterhead. The Applicant countered by providing commercial invoices, accounting records, and tax statements proving the sales occurred before the tax due dates, explaining the letterhead issue as a promotional partnership arrangement. The tribunal ruled in favor of the Applicant, holding that properly issued commercial invoices carry a presumption of veracity under Article 75 of the General Tax Law (LGT). The court emphasized that while purchase and sale contracts for movable property require no special formalism under civil law, commercial entities must comply with VAT and accounting regulations requiring invoice issuance. These invoices, when issued according to legal requirements and supported by accounting entries, constitute sufficient evidence to rebut the registry presumption of ownership. The tribunal found that the Applicant successfully proved ownership transfer before the tax became due, thereby rebutting the presumption derived from vehicle registration. The decision establishes that registry presumption is not absolute and can be overcome through proper commercial documentation, protecting taxpayers from liability for vehicles they no longer own despite administrative delays in registry updates.

Full Decision

  1. Considering the Respondent, in general terms, that "invoices do not have sufficient probative value to rebut the legal presumption contained in the registry," it maintains that in the situation evidenced in the present case the copies of invoices presented by the Applicant are not capable of "demonstrating the alleged transfer of the vehicles in question."

  2. In that regard, the Respondent submits that "... all the documents, without any understandable reason, appear on letterhead of another company other than the Applicant, and which, as far as we know, is not even a party to this Case ...," therefrom concluding that "the Applicant is not a party to the possibly concluded transactions, there being no documentary proof attached of the receipt of the price ..."

  3. Based on the aforementioned reasoning, the Respondent concludes that "the Applicant is not a party to the possibly concluded transactions, there being no legal document attached that demonstrates the cancellation and/or write-off of the salvage, thus failing to demonstrate the alleged transfer of the vehicles in question here."

  4. From the position of the Respondent regarding the evidence produced, it is thus extracted that this, in any case, would be insufficient to set aside the tax incidence defined on the basis of ownership, as appears in the registry, which, in coherence with the substantive position assumed by it, would only be set aside based on timely updating of the registry itself.

  5. This not being the tribunal's understanding, it is important to evaluate the evidence produced by the Applicant in order to determine whether it is sufficient to rebut the presumption derived from motor vehicle registration which, in the matter of subjective incidence, is accepted for purposes of the IUC.

  6. For this purpose, it is important to bear in mind that, in the situation under analysis, we are dealing with purchase and sale contracts which, relating to movable property and not being subject to any special formalism (Civil Code, article 219), operate the corresponding transfer of real rights (Civil Code, article 408, section 1).

  7. In the case of contracts involving the transfer of ownership of movable property through payment of a price, these have, as essential effects, among others, that of delivery of the thing (Civil Code, articles 874 and 879).

  8. However, in the case of a purchase and sale contract which has as its object a motor vehicle, where registration is mandatory, its timely performance presupposes the issuance of a deed of sale necessary for registration in the registry of the corresponding acquisition in favor of the buyer, as has been understood by the jurisprudence of the higher courts.[6] Such a deed, relevant for registration purposes, may constitute proof of the transaction, but is not the sole or exclusive means of proof of the transaction.

  9. For registration purposes, no special formalism is required, it being sufficient to submit to the competent entity a request subscribed by the buyer and confirmed by the seller, which, through a deed of sale, confirms that ownership of the vehicle was acquired by him through a verbal purchase and sale contract (see Motor Vehicle Registration Regulation, article 25, section 1, paragraph a).

  10. Notwithstanding that these are the rules arising from the provisions of civil law, relating to the informality of transfer of movable property and, where appropriate, of its respective registration, it must also be borne in mind that, in the situation under analysis, we are dealing with commercial transactions, carried out by a business entity within the scope of the activity that constitutes its corporate purpose.

  11. Within this scope, the company is bound to comply with specific accounting and tax rules, in which invoicing assumes special relevance.

  12. First and foremost, by force of tax rules, the entity transferring the goods is obliged to issue an invoice with respect to each transfer of goods, whatever the quality of the respective buyer (VAT Code, article 29, section 1, paragraph b).

  13. Also in accordance with the provisions of tax rules, the invoice must comply with a certain form, detailed regulated in articles 36 of the VAT Code and article 5 of Decree-Law no. 198/90, of 19/06.

  14. It is on the basis of this document issued by the supplier of the goods that the buyer, when it is an economic operator - as is the case in the great majority of situations referred to in the present case - will deduct the VAT to which it is entitled (VAT Code, article 19, section 2) and account for the cost of the operation (CIT Code, articles 23, section 6 and 123, section 2).

  15. For its part, it is also on the basis of invoicing issued that the supplier of the goods must account for its respective revenues, as provided in paragraph b) of section 2 of article 123 of the CIT Code.

  16. So long as they are issued in legal form and constitute supporting elements of accounting entries in accounts organized in accordance with commercial and tax legislation, the data contained in them are covered by the presumption of veracity referred to in article 75, section 1, of the LGT.[7]

  17. Indeed, the aforementioned presumption encompasses not only accounting books and records, but also their respective supporting documents, as is, moreover, the consistent understanding of the tax administration itself[8] and the established jurisprudence of the higher courts.[9]

  18. The presumption of veracity of commercial invoices issued according to legal terms may, however, be set aside whenever the operations to which they refer do not correspond to reality, it being sufficient for this that the Tax Administration gather and demonstrate well-founded indications of that fact (LGT, article 75, section 2, paragraph a).[10]

  19. In the present case, the Respondent raised doubts about the fact that the invoices presented by the Applicant as evidence of the transactions to which they relate appear "on letterhead of another company," from which, in its opinion, it follows that the Applicant "is not a party to the possibly concluded transactions."

  20. Notified to respond to the allegation that the invoices in question bear the identification mark of another company, the Applicant clarified that such circumstance is due to the existence of a partnership agreed with that company - which it proves by submitting a copy of the contract between them - within the scope of which the aforementioned mention serves solely promotional purposes.

  21. At the same time, the Applicant requested the tribunal to grant a period of time to attach to the file supplementary documentation to that already timely presented, namely copies of accounting statements regarding sales to customers and of "salvage" to insurers, as well as the respective tax gains and losses statements.

  22. The doubt raised by the Respondent having been thus clarified and considering the relevance attributed by tax legislation to invoices issued, according to legal terms, by commercial companies within their business activity, as well as the presumption of veracity of the operations they evidence, it cannot but be considered that they themselves constitute, alone, sufficient proof of the transfers invoked by the Applicant.

  23. Moreover, in the present case, additional elements of an accounting and tax nature are also provided which, setting aside the doubt raised by the Respondent, strengthen the proof of the transfers referred to by the Applicant.

  24. It is thus considered, documentarily proven, the transfer of the right of ownership of the vehicles in question in all cases on a date prior to the date of exigibility of the tax to which the disputed assessments refer.

  25. In these terms, it is considered that the presumption of ownership derived from motor vehicle registration, accepted in section 1 of article 3 of the CIUC, is rebutted, with respect to the vehicles and periods to which the aforementioned assessments relate, duly identified in the file.

Request for Compensatory Interest

  1. In addition to the annulment of the assessments, and consequent reimbursement of the amounts unduly paid, the Applicant further requests that it be recognized the right to compensatory interest, under article 43 of the LGT.

  2. Indeed, under the provisions of section 1 of the aforementioned article, compensatory interest is due "when it is determined, in an informal complaint or judicial challenge, that there was an error attributable to the services which resulted in payment of the tax debt in an amount greater than that legally due." Beyond the means referred to in the rule which is transcribed, we understand that, as follows from section 5 of article 24 of the RJAT, the right to the aforementioned interest may be recognized in the arbitral process and, thus, the request is examined.

  3. The right to compensatory interest referred to in the aforementioned LGT rule presupposes that tax has been paid in an amount greater than that due and that this derives from an error, of fact or of law, attributable to the services of the AT.

  4. In the present case, even though it is recognized that the tax paid by the Applicant is not due, because it is not the taxpayer obligor of the tax obligation, resulting in the annulment of the assessments and respective refund of the tax paid, it is not perceived that, at its origin, there is error attributable to the services which gives rise to such a right in favor of the taxpayer.

  5. Indeed, in promoting the ex officio assessment of the IUC considering the Applicant as the taxpayer obligor of this tax, the AT merely complied with the rule in section 1 of article 3 of the CIUC, which, as amply stated above, attributes such status to the persons in whose name the vehicles are registered.

  6. Moreover, as has already been concluded, the aforementioned rule has the nature of a legal presumption, from which arises, for the AT, the right to assess and demand the tax from those persons, without the need to prove the fact that leads to it, as expressly provided by section 1 of article 350 of the Civil Code.

  7. The Applicant did not raise with the Tax Administration any procedure intended to rebut that presumption.

  8. From the foregoing, it can thus be concluded that there is no error attributable to the AT, whereby the Applicant has no right to the compensatory interest which it petitions with reference to the amounts unduly paid relating to the assessments whose annulment is now decided.

DECISION

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

a) To uphold the request for arbitral award, with respect to the rebuttal of the presumption of subjective incidence of the IUC, regarding the assessments identified in Tables I and II of the request, determining their annulment and consequent reimbursement of the amounts unduly paid.

b) To dismiss the request with respect to the recognition of the right to compensatory interest in favor of the applicant.

c) To condemn the Respondent to the payment of costs.

Value of the case: € 2,174.11

Costs: Under article 22, section 4, of the RJAT, and in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 612.00, to be borne by the Respondent (AT).

Lisbon, 23 March 2016

The Arbitrator, Álvaro Caneira

[1] See Francisco Rodrigues Pardal, "The Use of Presumptions in Tax Law," in Tax Science and Technique No. 325-327, page 20.

[2] In this respect, see, among others, Administrative Supreme Court judgments of 21.4.2010, 3.11.2010, 2.5.2012 and 6.6.2012, Cases 924/09, 499/10, 895/11 and 903/11, respectively.

[3] See article 3, section 1 of the Regulation of the Municipal Tax on Vehicles, approved by Decree-Law no. 143/78, of 12 June.

[4] See Jorge de Sousa, CPPT, 6th Edition, Áreas Editora, Lisbon, 2011, page 586 and Administrative Supreme Court judgments of 29.2.2012 and 2.5.2012, Cases 441/11 and 381/12.

[5] By way of mere illustration, see Cases 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.

[6] See Supreme Court of Justice judgments of 23.3.2006 and 12.10.2006, Cases 06B722 and 06B2620.

[7] It is also noted that, in the context of the special procedure for 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 that indicates the actual purchase and sale of the vehicle, provided that it contains the registration number of the vehicle as well as the name of the seller and buyer.

[8] See Opinion of the Center for Tax Studies, homologated by order of the Director-General of Taxes, of 2 January 1992, published in Tax Science and Technique No. 365.

[9] See Administrative Supreme Court judgment of 27.10.2004, Case 0810/04, Court of Appeal of Lisbon judgment of 4.6.2013, Case 6478/13 and Court of Appeal of Oporto judgment of 15.11.2013, Case 00201/06.8BEPNF, among others.

[10] See Administrative Supreme Court judgments of 24.4.2002, Case 102/02, of 23.10.2002, Case 1152/02, of 9.10.2002, Case 871/02, of 20.11.2002, Case 1428/02, of 14.1.2004, Case 1480/03, among many others.

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle has been sold but remains registered in the seller's name?
According to this CAAD decision, the actual owner (buyer) is the taxable person for IUC, not necessarily the registered owner. While vehicle registration creates a legal presumption of ownership under Article 3(1) of the IUC Code, this presumption can be rebutted. If the seller proves through commercial invoices, accounting records, and other documentation that ownership was transferred before the tax due date, the seller is not liable for IUC. The tribunal rejected the Tax Authority's position that only registry updates can overcome the presumption, establishing that proper commercial documentation suffices.
Can a company challenge IUC tax assessments through CAAD arbitration proceedings?
Yes, companies can challenge IUC tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration proceedings. This case demonstrates successful use of CAAD arbitration to contest multiple IUC assessments. The Applicant company submitted arbitration proceedings challenging IUC assessments on vehicles it had sold, providing evidence including commercial invoices, accounting statements of sales and salvage operations, and tax gain/loss declarations. The tribunal evaluated this evidence and ruled in the company's favor, confirming CAAD's jurisdiction over IUC disputes and the availability of this alternative dispute resolution mechanism for tax matters.
Does transferring vehicle ownership by sale exempt the registered owner from IUC liability?
Yes, transferring vehicle ownership by sale exempts the registered owner from IUC liability if the seller can prove the transfer occurred before the tax became due. The tribunal held that properly issued commercial invoices, supported by accounting records and tax statements, constitute sufficient evidence to rebut the registry presumption. Under civil law, purchase and sale contracts for movable property require no special formalism and transfer ownership upon agreement. Commercial invoices issued according to VAT Code requirements carry a presumption of veracity under Article 75 of the General Tax Law, making them adequate proof of ownership transfer that relieves the seller of IUC obligations.
How does insurance total loss affect IUC subjective tax incidence on the registered vehicle owner?
While the excerpt does not provide extensive detail on insurance total loss scenarios, it references 'salvage to insurers' among the Applicant's documentation. This suggests that when vehicles become total losses and are transferred to insurance companies as salvage, this transfer terminates the registered owner's IUC liability. Like standard sales, such transfers must be documented through proper commercial invoices and accounting records. If the registered owner proves the vehicle was transferred to an insurer as salvage before the IUC due date, they can rebut the registry presumption and avoid tax liability, even without immediately updating the vehicle registry.
What is the CAAD arbitration procedure for contesting multiple IUC tax assessments and claiming a refund?
The CAAD arbitration procedure for contesting IUC assessments involves submitting comprehensive evidence to prove ownership was transferred before the tax became due. The taxpayer must provide: (1) commercial invoices issued according to VAT Code requirements showing the sale transactions; (2) accounting records demonstrating proper bookkeeping of the operations; (3) tax statements including gain/loss declarations; and (4) any additional documentation supporting the transfers. The tribunal evaluates whether this evidence, protected by the presumption of veracity under Article 75 of the General Tax Law, successfully rebuts the registry presumption. If proven, the IUC assessments are annulled and any amounts paid may be refunded.