Process: 40/2014-T

Date: January 19, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

Process 40/2014-T addresses a critical IUC (Unique Vehicle Circulation Tax) dispute concerning subjective tax incidence and procedural deadlines. The Claimant challenged IUC assessments for 2009-2012, arguing they had already sold the vehicles and should not be liable for tax periods after the transfers. However, the case encountered a preliminary procedural obstacle: caducidade (expiration of the right of action). The Claimant was notified of the IUC assessments on 10 July 2013 but only filed the arbitration request on 20 January 2014—significantly exceeding the 90-day deadline established under Portuguese tax procedure law. The Tax Authority argued that Article 3(1) of the Vehicle Circulation Tax Code creates a legislative determination, not a rebuttable presumption, making the person registered in the motor vehicle register the IUC liable party. The vehicles remained registered in the Claimant's name until December 2012 and June 2013 respectively, without proof of formal transfer registration. The Respondent emphasized that tax administration relies on public motor vehicle registration data, not private contracts, for determining tax liability. The arbitrator ordered both parties to address the caducidade issue, with the Respondent requesting dismissal due to untimeliness. The Claimant defended the late filing by claiming unawareness of CAAD's existence until media coverage informed them. This decision illustrates the strict application of procedural deadlines in tax arbitration and confirms that IUC liability follows vehicle registration records, requiring former owners to complete proper registration transfers to avoid continued tax obligations.

Full Decision

Arbitral Decision

The Arbitrator Francisco de Carvalho Furtado, appointed by the Ethics Council of the Administrative Arbitration Center (CAAD), to form the Arbitral Tribunal constituted on 24 March 2014, decides as follows:

A) Report

  1. On 20 January 2014, A, taxpayer no. …, hereinafter identified as the Claimant, filed a request for arbitral ruling, pursuant to the provisions of Articles 2, no. 1, subsection a) and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as LRATM), in conjunction with subsection a) of Article 99 and subsection d) of no. 1 of Article 102 of the Code of Tax Procedure and Process (CTPP), applicable by virtue of Article 10, no. 1, subsection a) of Decree-Law no. 10/2011, of 20 January.

  2. In said request for arbitral ruling, the Claimant intends that the Arbitral Tribunal declare the unlawfulness of the tax assessment acts for Unique Vehicle Circulation Tax for the years 2009, 2010, 2011 and 2012, attached as Annexes to the Initial Petition.

  3. The request for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD and was notified to the Tax and Customs Authority (hereinafter identified as the Respondent).

  4. The Claimant did not proceed to the appointment of an arbitrator, which is why, under the provisions of Article 6, no. 1, of the LRATM, the undersigned was appointed by the President of the Ethics Council of CAAD to serve on the present Single Arbitral Tribunal, having the appointment been accepted in accordance with the legally provided terms. The Tribunal was constituted, pursuant to the provisions of Article 11 of the LRATM, on 24 March 2014.

  5. On 24 April 2014, the Respondent filed its Response.

  6. By means of a petition filed on 10 June, the Claimant, following the arbitral order of 4 June 2014, declared its waiver of the meeting referred to in Article 18 of the LRATM.

  7. Since neither the Claimant nor the Respondent waived the right to plead, the Parties were, by order of 10 July 2014, notified to, if they wished, submit their pleadings.

  8. On 23 September 2014, an order was issued requesting the Parties to pronounce themselves on the possible extinguishment of the right of action and untimeliness of the specific defense raised.

  9. The Respondent pronounced itself in the sense that said exception was substantiated, requesting, consequently, the dismissal of the arbitral proceedings.

  10. The Claimant, in turn, responded that having been notified of the assessment acts on 31 May 2013, it filed the request for arbitral ruling in January 2014 because it only became aware, through the media, of the existence of the Administrative Arbitration Center.

The Claimant supports its claim, in summary, as follows:

a) It paid amounts relating to Vehicle Circulation Tax assessed by reference to dates on which it was no longer the owner of the vehicles.

In its Response, the Respondent invoked, in summary, the following:

a) The vehicle with registration plate ...-...-... was registered at the Motor Vehicle Registration Office in the name of the Claimant until 17 December 2012;

b) The vehicle with registration plate ...-...-... was registered at the Motor Vehicle Registration Office in the name of the Claimant until 26 June 2013;

c) The Claimant has not provided proof of the transfer of the vehicles;

d) The legislator intended that persons in whose names the vehicles are registered be considered as owners (see Article 3, no. 1, of the Vehicle Circulation Tax Code);

e) Likewise, the moment from which the tax obligation is constituted has a direct relationship with the issuance of the registration certificate, which contains the facts subject to registration;

f) The legislator established in Article 3, no. 1, of the Vehicle Circulation Tax Code who are the passive subjects of this tax not using the term "presumed to be," but "considered to be";

g) Thus, it would be imperative to conclude that the legislator expressly and intentionally established upon whom the tax burden subjectively falls;

h) To consider that the legislator established a presumption would unequivocally constitute an interpretation contra legem;

i) It is not a presumption, but a legislative policy choice;

j) Likewise, it is necessary to consider the fact that Article 6, no. 1, of the Vehicle Circulation Tax Code provides that the taxable event is ownership as evidenced by the registration or registration in national territory;

k) From the articulation between subjective incidence and the taxable event, it follows that only legal situations subject to registration generate the birth of the tax obligation;

l) There is a direct relationship between the moment from which the tax obligation is constituted and the issuance of the registration certificate;

m) The tax administration assesses the tax on the basis of information contained in the Motor Vehicle Register, which contains all the elements necessary for the determination of the passive subject without the need for access to contracts of a private nature that confer such rights;

n) Taking into account the current configuration of the legal system, tax assessment should not be promoted on the basis of elements not contained in public registers and documents;

o) The rationale of the regime points to the legislature's intention to create a Unique Vehicle Circulation Tax based on the taxation of the vehicle owner as reflected in the motor vehicle register;

p) Indeed, the Vehicle Circulation Tax Code implemented a reform of the regime for the taxation of vehicles in Portugal, making the owner shown in the property register the passive subject of the tax, regardless of the circulation of vehicles on public roads;

q) Such rationale results from the statement of reasons regarding Bill no. 118/X;

r) Any other interpretation of Article 3 of the Vehicle Circulation Tax Code offends the fundamental principle of confidence and legal certainty that should inform any legal relationship;

s) Likewise, such interpretation of the Claimant is also offensive to the principle of efficiency of the tax system insofar as it results in an obstruction and increase in the costs of the competencies assigned to the Respondent;

t) Finally, the Claimant's interpretation violates the principle of proportionality in that it completely disregards it when confronted with the principle of taxpaying capacity, when in reality the Claimant has at its disposal the necessary and adequate legal mechanisms for the protection of its taxpaying capacity, without, however, having exercised them in due time;

u) Even if the Arbitral Tribunal decides on the unlawfulness of the assessments in question, the arbitration costs should be borne by the Claimant.

B) Matter of Fact

B.1 – Proven Facts

The following facts are considered proven as relevant to the decision, based on the documentary evidence attached to the file:

a) The Claimant was, on 10 July 2013, notified of the following Vehicle Circulation Tax assessment acts 2010...03; 2011 ...03; 2009 ...03; 2011 ...03; 2012 ...03 and 2010 ...03 (see documents attached to the initial petition);

b) The Claimant filed the present request for arbitral ruling on 20 January 2014.

C) Hearing on Preliminary Objections

The Tribunal is competent and duly constituted, pursuant to Articles 2, no. 1, subsection a), 5 and 6, all of the LRATM. The parties have legal personality and capacity, are legitimate and are represented, pursuant to Articles 4 and 10 of the LRATM and Article 1 of Ordinance no. 112-A/2011, of 22 March.

However, there exists, as pointed out in the order of 23 September 2014, a preliminary issue, which must be addressed ex officio as it may bar the examination of the merits of the claim.

As results from the facts found to be proven, the Claimant became aware of the assessment acts whose declaration of unlawfulness it seeks on 10 July 2013. It further states that it only filed the request for arbitral ruling on 20 January 2014 because it became aware, through the media, of the existence of CAAD.

In light of the foregoing, considering the 30-day voluntary payment period provided for in Article 85, no. 2, of the Code of Tax Procedure and Process, it is verified that the deadline for voluntary payment of each of the assessment acts in question would be 11 August 2013. Pursuant to the provisions of Article 10, no. 1, subsection a) of the LRATM, combined with Article 102, no. 1, subsection a) of the CTPP, the request for constitution of the Arbitral Tribunal must be filed within 90 days from the deadline for voluntary payment of the tax. Applying said legal provision to the present case, it is verified that the request for arbitral ruling should have been filed by 9 November 2013. It appears from the file that the request for constitution of the Arbitral Tribunal was only filed on 20 January 2014.

Nonetheless, and without prejudice to what has been stated, it is important to note that procedural law permits procedural acts to be performed outside the legally established periods provided that the existence of just cause is demonstrated (see Article 139, no. 4, of the Code of Civil Procedure). Although the Claimant did not raise or directly invoke it, since the taxpayer was not represented by a lawyer, the Arbitral Tribunal considers that mere reference to lack of knowledge implies an analysis of the situation to verify the existence of just cause. From Article 140, no. 1, of the Code of Civil Procedure, it follows that just cause is considered to be an event not attributable to the party or to its representatives or agents that prevents the timely performance of the act. The question that arises is whether lack of knowledge of the existence of the arbitral proceeding constitutes a fact not attributable to the party that prevents the timely performance of the act. We believe not, given that ignorance of the law does not constitute an event that is either unforeseeable or not attributable to the Party.

In light of the foregoing, it is imperative to conclude that the right of action has become extinguished, which, as it constitutes a negative procedural presupposition that embodies a peremptory exception, must be addressed ex officio by the Tribunal (see Article 333 of the Civil Code).

Accordingly, given the peremptory exception of extinguishment of the right of action, the examination of the merits of the claim is barred, and the Respondent should be dismissed from the arbitral proceedings.

Decision

In light of the foregoing, this Arbitral Tribunal decides to dismiss the Respondent and condemn the Claimant to the payment of costs.

The value of the action is fixed at € 330.54 (three hundred and thirty euros and fifty-four cents), pursuant to the provisions of Article 97-A, no. 1, subsection a) of the CTPP, applicable by virtue of Article 29, no. 1, subsection a) of the LRATM.

The arbitration fee is fixed at € 306.00, pursuant to Table I of the Regulation of Costs of Tax Arbitration Proceedings, to be paid by the Claimant as set forth above, pursuant to Articles 12, no. 2, 22, no. 4, of the LRATM and 4 of the aforementioned Regulation.

Let it be notified.

Lisbon, 19 January 2015

The Arbitrator

Francisco de Carvalho Furtado

Frequently Asked Questions

Automatically Created

Who is liable for IUC when a vehicle has already been sold to a new owner?
Under Portuguese IUC legislation (Article 3(1) of the Vehicle Circulation Tax Code), the person registered in the motor vehicle register is considered the liable taxpayer for IUC, regardless of whether they have actually sold the vehicle to a new owner. This is not a rebuttable presumption but a legislative determination. The Tax Authority assesses IUC based exclusively on motor vehicle registration data. Therefore, if the vehicle registration has not been formally updated to reflect the new owner, the former owner registered in the system remains legally liable for IUC payments. To transfer liability, the seller must ensure the vehicle registration is properly transferred to the buyer's name at the Motor Vehicle Registration Office.
What is the deadline to file an arbitration request against IUC assessments at CAAD?
The deadline to file an arbitration request at CAAD (Administrative Arbitration Center) against IUC assessments is 90 days from the date of notification of the tax assessment act. This deadline is established under the Code of Tax Procedure and Process (CTPP) in conjunction with the Legal Regime for Arbitration in Tax Matters (LRATM). In Process 40/2014-T, the Claimant was notified on 10 July 2013 but only filed on 20 January 2014, exceeding this 90-day period. This strict deadline applies to all tax arbitration requests and begins counting from the notification date, not from when the taxpayer learns about CAAD's existence.
Can the right of action expire (caducidade) if the taxpayer files late at CAAD?
Yes, the right of action can expire (caducidade) if the taxpayer files the arbitration request after the 90-day deadline. Caducidade is a peremptory procedural bar that the arbitral tribunal must consider ex officio (on its own motion), even if not raised by the parties. In Process 40/2014-T, the arbitrator specifically issued an order on 23 September 2014 requiring both parties to address the caducidade issue because the request was filed more than six months after notification. The Respondent requested dismissal on these grounds. The Claimant's argument that they were unaware of CAAD's existence is generally insufficient to overcome caducidade, as ignorance of procedural remedies does not extend legal deadlines under Portuguese tax procedure law.
How does subjective incidence affect IUC liability for former vehicle owners?
Subjective incidence in IUC determines who is legally obligated to pay the tax. Article 3(1) of the Vehicle Circulation Tax Code establishes that subjective incidence falls on the person registered as the vehicle owner in the motor vehicle register, creating a direct legislative determination of tax liability. This means former owners remain liable for IUC for all tax periods during which the vehicle registration remains in their name, even after actual transfer of possession or economic ownership. The Tax Authority argued this rule serves legal certainty, administrative efficiency, and relies on objective public registration data rather than private contractual arrangements. Former owners can only escape liability by ensuring proper registration transfer is completed. This interpretation was defended as consistent with the legislative intent behind IUC reform and the principle that registration determines taxpayer identification.
What happens when IUC is charged for years after the vehicle ownership was transferred?
When IUC is charged for years after vehicle ownership has been transferred but registration remains unchanged, the registered owner remains legally liable for payment. In Process 40/2014-T, the Claimant was assessed IUC for 2009-2012, but the vehicles remained registered in their name until December 2012 and June 2013 respectively. The Tax Authority maintained that assessments were lawful because they corresponded to periods when registration still reflected the Claimant as owner. Without proof of formal registration transfer completion, the former owner cannot successfully challenge IUC assessments merely by claiming actual sale occurred. The former owner's remedies include: (1) completing the registration transfer immediately to stop future assessments; (2) seeking reimbursement from the buyer if contractually agreed; or (3) using legal mechanisms to compel buyers to complete registration transfers. The tax system prioritizes reliance on official registration records over private ownership claims.