Process: 40/2015-T

Date: October 16, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitration case (Process 40/2015-T) addresses the subjective incidence of the Unique Vehicle Circulation Tax (IUC) for a car distributor who registers vehicles in its name solely to facilitate immediate resale to customers. The applicant, an automobile distributor, challenged IUC assessments totaling €2,723.62 for tax years 2009-2012, arguing it should not be liable for IUC on vehicles sold before the registration anniversary date, even when administrative delays caused ownership transfer registration to occur after that date. The core legal dispute centers on Article 3 of the IUC Code, which designates registered owners as taxpayers. The applicant contended this constitutes a rebuttable presumption under Article 73 of the General Tax Code, arguing that actual ownership on the anniversary date—not mere registration—should determine tax liability. The distributor provided invoices and registration certificates proving vehicles were sold before anniversary dates, asserting it was neither the legal nor beneficial owner when tax became due. The Tax Authority maintained that IUC liability follows registration records, emphasizing that tax became exigible upon registration issuance when the distributor was the recorded owner. The applicant invoked RJAT (Decree-Law 10/2011) to obtain judicial review through the CAAD arbitration system after dismissal of its administrative complaint. The case raises fundamental questions about whether the IUC Code's environmental and traffic cost rationale justifies taxing registered owners who are merely facilitating commercial distribution rather than actual vehicle users. The decision section was not included in the provided excerpt, leaving the tribunal's ruling on whether registration creates an irrebuttable presumption or whether evidence of pre-anniversary sale defeats IUC liability undisclosed.

Full Decision

Case No. 40/2015 – T

ARBITRAL DECISION

A – REPORT

  1. A..., SA, legal entity No. ..., with registered office at Rua Dr. ..., No. ..., ...-... Lisbon, filed a request for the constitution of an arbitral tribunal, pursuant to Articles 2, No. 1, a) and 10, Nos. 1 and 2 of the Legal Regime of Tax Arbitration, provided for in Decree-Law 10/2011, of 20 January, hereinafter referred to as "RJAT" and Articles 1 and 2 of Regulation No. 112-A/2011, of 22 March, with a view to the declaration of illegality of the official assessments of the Unique Vehicle Circulation Tax (IUC) and respective compensatory interest, relating to the years 2009, 2010, 2011 and 2012, in the total amount of 2,723.62 €, subsequent to the dismissal of an administrative complaint, as well as the recognition of the right to indemnification interest, with the Tax and Customs Authority (hereinafter referred to as "AT") being the respondent.

  2. The request for the constitution of a sole arbitrator tribunal having been admitted, and the applicant not having opted for the designation of an arbitrator, pursuant to the provisions of paragraph a) of No. 2 of Article 6 and paragraph b) of No. 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the Deontological Board designated the undersigned as arbitrator.

The parties were notified of such designation and did not express an intention to challenge the appointment of the arbitrator, in accordance with the combined provisions of Article 11, No. 1, paragraphs a) and b) of the RJAT and Articles 6 and 7 of the Deontological Code, and, in accordance with the provisions of paragraph c) of No. 1 of Article 11 of the RJAT, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 31-03-2015.

  1. Notified, the AT presented a response in which it raised no exceptions.

  2. The meeting provided for in Article 18 of the RJAT was waived, with the consent of the parties, as well as the presentation of written arguments.

  1. The applicant requests that the illegality and consequent annulment of the acts of assessment of the Unique Vehicle Circulation Tax of the official assessments of IUC and respective compensatory interest, in the amount of 2,723.62, which includes 195.00 € of compensatory interest, be declared, with the consequent refund of the amount paid, alleging in summary:

a) The applicant is the distributor in Portugal of the A1... automobile brand.

b) In the course of its activities it imports automobiles of the said brand and subsequently proceeds to sell them to its customers.

c) For purposes of selling automobiles in conditions of immediate circulation, the applicant requests from the competent services the assignment of the respective registration plates.

d) As is customary practice, the registration plate is requested on a date prior to or on the same date as the sale of the vehicles.

e) Whenever the applicant requests the assignment of a registration plate, it is obliged to register the vehicle as its own property.

f) The applicant imports the vehicles in question and proceeds to introduce them into consumption by filing the respective Vehicle Customs Declaration (DAV), subsequently requesting the issuance of the registration certificate on which the submission of the DAV depends.

g) Subsequently the applicant sells and registers the said vehicles in the name of its customers in the years subsequent to the year of registration.

h) In the years subsequent to the year of registration, the applicant sells and registers the automobiles in favor of its customers before the anniversary of the registration.

i) In some cases, due to reasons relating to delays in the process of registering the vehicle in the name of the customer, notwithstanding that the sale was carried out before the anniversary of the registration, the registration of the ownership of the automobiles in favor of the customers is effected after that date.

j) With respect to the motor vehicles to which the IUC in question relates, none of them were its property on the date of the anniversary of the registration.

k) Following the exercise of the right to be heard for which it was notified, the applicant claimed that it was not the owner of those vehicles, presenting invoices certifying the sale of the vehicles or certificates from the vehicle registration office attesting to this.

l) Following notification of the assessments, it filed an administrative complaint, to which it attached the said invoices and accounting extracts from the "clients" account.

m) The administrative complaint was dismissed.

n) The statements made by the tax administration contained in the administrative complaint decision to the effect that the tax is exigible on the date of the issuance of the registration and that the applicant on that date was recorded as owner appear to be incomprehensible.

o) What is at issue in the present proceedings is not to determine who is the taxpayer of the tax in the year of issuance of the registration, but rather in years subsequent to that issuance, that is, in the years of the anniversary of the registration.

p) Even with respect to the vehicle with registration plate ...-...-..., this was sold on 26-06-2010, still before the issuance of the registration – on 06-07-2010 – what is at issue here is the tax relating to subsequent years, namely the years 2011 and 2012.

q) Being the matter at hand the determination of who is the taxpayer of the IUC on the anniversaries of the registration and the subjective scope of taxation being determined on that same date, the circumstance that the applicant sold those vehicles on an earlier date is sufficient to conclude that it was not the taxpayer of the IUC owing in those years.

r) The legislator intended that the obligation of the tax would arise with the ownership of vehicles registered in Portugal and that the registration and vehicle registration served merely to attest to this; having thus not been its intention that the registration or the registration of vehicle ownership would fulfill the legal conditions necessary for the exigibility of the tax.

s) The determination of who is the taxpayer of the IUC must be made solely in light of the rules that provide for the subjective scope of taxation, which is Article 3 of the IUC Code.

t) On the other hand, the fact that the IUC of the years subsequent to registration must be paid by the end of the month in which the tax becomes exigible, which is the month of the anniversary of the registration, demonstrates that the subjective scope of taxation must be determined on that date.

u) Furthermore, the IUC Code intends to tax the owners of vehicles in so far as, as their users, they are those responsible for the environmental and traffic costs resulting from vehicle circulation.

v) Although No. 1 of Article 3 of the IUC Code provides that the taxpayers of the IUC are the owners, being considered as such those in whose name the vehicles are registered, this is a presumption that is considered rebuttable, already because Article 73 of the General Tax Code establishes that "the presumptions established in the rules of tax scope always admit proof to the contrary."

x) Resulting from the documents attached with the administrative complaint that the applicant was not the owner of the vehicles in question on the date of the anniversary of the registration, it can only be concluded that this is not the taxpayer of the tax.

  1. For its part, the respondent came in reply to allege, in summary:

a) Within the scope of Article 17 of the Code of Taxes on Vehicles (CISV), the introduction into consumption and assessment of tax on vehicles that do not have a national registration plate is effected by the issuance of a Vehicle Customs Declaration (DAV).

b) The issuance of this document constitutes the taxable event, in accordance with the provisions of Article 5 of the CISV.

c) From the articulation between the scope of the subjective scope of taxation of the IUC and the fact constituting the corresponding tax obligation results, unequivocally, from Article 6 of the IUC Code, the legal situations that generate the birth of the tax obligation, that is to say the assignment of a registration plate or registration in national territory.

d) That is to say, the moment from which the tax obligation is constituted has a direct relationship with the issuance of the registration certificate, in which the facts subject to registration must appear (compare with the provisions of No. 2 of Article 4 and No. 3 of Article 6, both of the IUC Code, in No. 1 of Article 10 of Decree-Law No. 54/75, of 12 February and in Article 24 of the Vehicle Registration Regulation).

e) Having arrived here, and by virtue of the conjunction of the expressed rules and, in particular attention, to the provisions of Article 24 of the RRA, it follows that the initial registration of ownership of admitted vehicles (as is the case in the present proceedings), is based on the respective request and proof of compliance with the tax obligations relating to the vehicle.

f) That is to say, the issuance of a registration certificate implies the presentation of a DAV by the applicant and the payment of the corresponding Vehicle Tax and originates, automatically, the registration of ownership of the vehicle under Article 24 of the RRA in the name of the entity that proceeded to its importation and the formulation of the request for registration, that is, the Applicant.

g) Therefore, it is imperative that, pursuant to Article 24 of the RRA, the importer appears in the register as the first owner of the vehicle and in that sense is, in accordance with the provisions of Article 3 and Article 6, both of the IUC Code, the taxpayer of the tax.

h) The applicant alleges that before the assignment of the registration it proceeds to the sale of the vehicles to its customers, and some (listed in Article 26 of the arbitration request) were registered in their favor within sixty days after the assignment of the registrations, and that others (listed in Article 28 of the arbitration request) were only registered after the sixty-day period, or even no registration was effected in the name of its customers, with the applicant not being the taxpayer of the IUC in the year of registration, in any case.

i) That is to say, the tax legislator did not create a fiction that the tax would be owed by the owner of the vehicle that was registered at the end of the 60 days referred to in No. 2 of Article 42 of the RRA, which would be paid within 30 days thereafter pursuant to Article 17 of the IUC Code.

j) And much less did it create a fiction that importers, notwithstanding that they proceed to the sale of vehicles before the issuance of the registration certificate, can thus be excluded from the subjective scope of taxation of the IUC.

k) Therefore, having the applicant requested and filled out the DAV, paid the Vehicle Tax and requested the registration certificate, it inevitably fulfills the taxable event (objective/subjective scope), with the obligation to pay it arising for it.

l) That is to say, regardless of whether the applicant proceeds to the sale of the vehicle to its customers before the assignment of the registration, such circumstance, in light of the taxable event set forth in Article 6 of the IUC Code, is manifestly irrelevant, in so far as the legislator expressly established that the taxable event of the tax is attested by the assignment of the registration.

m) The tax legislator intentionally and expressly wished that the taxable event be considered, as attested by the registration.

n) Now, the understanding that the applicant advances that it is not the taxpayer of the tax because it sold them to its customers before the registration and, as such, before the end of the 60-day period, finds no support in the letter of the law, that is to say, finds in the law the minimum of verbal correspondence.

o) The argument on which the applicant bases its claim is rooted in the assumption that with the sale of the vehicles to customers the taxation under the IUC is avoided, in light of Article 3 of the IUC Code.

p) That is to say, following the understanding advocated by the applicant, the scope of the tax would not occur with the registration, but in the name of the subsequent owner who acquired the vehicle and who signs the request for vehicle registration jointly with the applicant.

q) Therefore, and contrary to the arguments raised by the applicant, being given relevance only to the registration, the taxable event occurring with the issuance of the registration would be irremediably avoided, as well as the exigibility of the tax in the year in which it is issued.

r) Now, such an understanding is completely at odds with the legal rules and would constitute an exclusion from taxation that finds no support whatsoever in the letter of the law.

s) Since environmental concern is effectively one of the underlying ratios of the reform of vehicle taxation, this does not preclude another of the fundamental ratios of the IUC Code which was explained above: that the tax legislator intended to create an IUC based on the taxation of the owner of the vehicle as it appears in the vehicle registration or through the issuance of the registration referred to in Article 6 of the IUC Code.

t) In addition to all that has been stated above, it should also be noted that the interpretation conveyed by the applicant is contrary to fundamental law.

u) First, the exclusion of the subjective scope of taxation under the IUC, proposed by the applicant, contradicts the principle of legality and of typicality established in Article 8 of the General Tax Code and Article 103 of the Constitutional Republic Law, since such an understanding is not based on the law.

v) Therefore, not having the tax legislator expressly established in the law the exclusion of the subjective scope of taxation under the IUC in the cases that the applicant points out, it is unequivocal that such an understanding directly violates the principle of tax legality set forth in Article 8 of the General Tax Code and in Article 103 of the Constitutional Republic Law.

x) But more: such an understanding also collides with the principle of contributive capacity established in Article 4 of the General Tax Code and in Article 104 of the Constitutional Republic Law.

z) But if any shadow of doubt still remained, it is certain that to exclude the quality of owner of the vehicles in question, and consequently, the subjective scope of taxation of the IUC, the applicant would have to provide suitable proof of the facts constituting the right that it alleges in arbitral proceedings.

aa) The evidence presented by the applicant is not, by itself, sufficient to provide conclusive proof of the transfer of the vehicles in question.

bb) The invoices, by themselves, are not apt to prove the conclusion of a synallagmatic contract such as the purchase and sale, since that document does not reveal by itself an essential and unequivocal declaration of will (i.e., acceptance) on the part of the purported acquirer.

cc) In any circumstance, the applicant should be condemned to payment of the arbitration costs resulting from the present request for arbitral pronouncement, the same reasoning being applied with respect to the request for condemnation to payment of indemnification interest formulated by the Applicant.

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

The parties have legal personality and capacity and are legitimate (Articles 4 and 10, No. 2, of the same enactment and Article 1 of Regulation No. 112-A/2011, of 22 March).

The cumulation of claims is lawful (Article 3 of the RJAT).

The proceedings are timely and are not subject to any nullities.

B. DECISION

1. FINDINGS OF FACT

1.1. PROVED FACTS

The following facts are considered proved:

a) The applicant is the distributor in Portugal of the A1... automobile brand.

b) In the course of its activities, it imports automobiles of the said brand and subsequently proceeds to sell them to its customers.

c) It was notified of the IUC assessment notices that are the subject of the present proceedings, having paid the respective tax.

d) As an importer, for purposes of selling automobiles in conditions of immediate circulation, it requests from the competent services the assignment of the respective registration plates.

e) In the years subsequent to the year of registration, the applicant sells and registers the automobiles in favor of its customers before the anniversary of the registration.

f) None of the motor vehicles to which the IUC in question relates was its property on the date of the anniversary of the registration thereof, because the applicant sold them, having issued the respective invoices.

g) In accordance with the accounting extracts from the applicant's "clients account", all the said invoices are paid, presenting "zero balance."

h) On the date of the anniversary of the registration relating to the assessments challenged, the motor vehicles were registered in the Vehicle Registration Office in the name of the applicant.

i) The applicant administratively complained of the assessments that are the subject of the present proceedings, of whose dismissal it was notified on 22-12-2014.

j) The applicant filed, on 26-01-2015, the request for arbitral pronouncement that gave rise to the present proceedings.

1.2 The facts were established as proved on the basis of documents attached to the proceedings by the applicant, whose authenticity was not challenged by the respondent.

1.3 UNPROVED FACTS

There are no facts established as unproved with relevance to the assessment of the claim.

1.4 THE LAW

The fundamental question raised by the applicant lies in the understanding it sustains of its undue qualification, by the AT, as a taxpayer of the IUC.

For the respondent, what is determinative of that qualification is the fact that the applicant appears in the register as the owner of the vehicles which, moreover, results from Article 117 of the Traffic Code, when it stipulates that it is the entity that proceeds to the admission or introduction into consumption – the applicant – that requests from the IMTT the issuance of the registration.

In its understanding, what is decisive for this question is the obligation resulting from Article 24 of the Vehicle Registration Regulation that the "importer appears in the register as the first owner of the vehicle," from which would follow, in light of the provisions of Articles 3 and 6 of the IUC Code, inexorably, its quality as taxpayer of the tax.

With all due respect, there is, however, an incorrect framing on the part of the respondent. What is not at issue is the tax due as a result of the inscription, as the first owner, of the applicant by virtue of being the importer of the vehicles and the person requesting the assignment of the registration.

For that we refer to the picture presented by the applicant in Article 29 of its arguments, also contained in the administrative proceedings, from which that finding is evident. Indeed, the IUCs demanded relate, in all cases, to years subsequent to that of the assignment of the registration.

What is at issue, therefore, is the fact that on the date of the anniversary of the registration of the motor vehicles – and of the exigibility of the IUC – these are not registered in the name of the applicant.

The question to be resolved is reduced, then, to the interpretation to be given to No. 1 of Article 3 of the IUC Code in order to determine whether the rule of subjective scope of taxation contained therein establishes a legal presumption juris tantum – and, as such, susceptible to rebuttal (as the applicant argues) or, on the contrary, an express and intentional definition of the personal scope, in the sense that it is necessarily the taxpayer of the tax the one in whose name the motor vehicle is registered as owner.

No. 1 of Article 3 of the IUC Code provides: "the taxpayers of the tax are the owners of the vehicles, being considered as such the natural and legal persons, of public or private law, in whose name they are registered."

The respondent argues that the applicant's claim would be based on the assumption that with the sale of the vehicles to customers the taxation under the IUC would be avoided, in light of Article 3 of the IUC Code, which is not admissible insofar as such an understanding is completely at odds with the legal rules and would constitute an exclusion from taxation that finds no support whatsoever in the letter of the law.

It adds, in support of its thesis, that the legislator expressly established that the taxable event of the tax set forth in Article 6 of the IUC Code is attested by the issuance of the registration. It would follow that although the applicant alleges that on the date of the assignment of the registration it has already sold the vehicles, such fact is irrelevant for the purposes of the application of the provisions of Article 6 of the IUC Code.

In accordance with the provisions of Article 11 of the General Tax Code, "in the determination of the meaning of tax rules and in the qualification of the facts to which they apply, the general rules and principles of interpretation and application of laws are observed." As Diogo Leite Campos, Benjamim Rodrigues, J. Lopes de Sousa point out – General Tax Code, 4th ed., in annotation to such article, "... without departing from the letter of the law, which must be the principal reference and point of departure of the interpreter, its automatic application is excluded, assuming that in laws there is an operative rationality that the interpreter must endeavor to reconstruct."

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

For the AT, what is decisive for determining the taxpayer of the IUC is the registration of ownership of the motor vehicle, so that it will be considered as such, in an irreversible manner, the one in whose name it is registered.

The registration of ownership of vehicles is, in accordance with the provisions of Article 5, No. 1, a) and No. 2 of Decree-Law 54/75, of 12 February, mandatory, so that any right of ownership that affects the vehicle is subject to registration, with which it is intended to ensure the security of legal commerce, as well as the publicity of the legal situation thereof.

Such registration enjoys, pursuant to the provisions of Article 7 of the Real Property Registration Code (applicable to vehicle registration by virtue of Article 29 of the said Decree-Law 54/75), the "... presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it."

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

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

It happens, however, that Article 5, No. 1 of the Real Property Registration Code imposes that "the facts subject to registration only produce effect against third parties after the date of the respective registration." From which it appears to follow that this alone would suffice for the AT to invoke the absence of registration to immediately operate Article 3, No. 1 of the IUC Code, demanding payment of the tax from the one in whose name the vehicle is registered, as the taxpayer of the tax.

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

Having stated this in general terms, it must be determined whether, notwithstanding what has just been stated, No. 1 of Article 3 of the IUC Code contains a legal presumption or not.

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

It appears more or less evident that, both from a systematic and teleological point of view, the expression "being considered," adopted in No. 1 of Article 3 of the IUC Code contemplates a true presumption, to which the apparent literality of the expression does not object, nor does the tax system.

In this regard, Diogo Leite Campos, Benjamim Rodrigues, J. Lopes de Sousa point out – General Tax Code, 4th ed., in annotation to Article 73, page 651: "presumptions in the field of tax scope may be explicit, revealed by the use of the expression 'it is presumed' or similar, as happens, for example, in Nos. 1 to 5 of Article 6, in paragraph a) of No. 3 of Article 10, in Article 19 and 40, No. 1, of the Corporate Income Tax Code. However, presumptions may also be implicit in rules of scope, namely of objective scope, when certain values of movable or immovable property are considered as constituting taxable matter, in situations in which it is not impossible to determine the actual value ...", enumerating thereafter a set of examples.

We understand that this is precisely the case contemplated by Article 3, No. 1 of the IUC Code: an implicit presumption, in this case, a presumption of subjective scope. A presumption, moreover, which has always existed in the field of the vehicle circulation tax, although previously defined in explicit form.

Now, No. 2 of Article 350 of the Civil Code establishes that legal presumptions may be rebutted by means of proof to the contrary, except in cases expressly provided for in the law.

And, as regards the rebuttal of presumptions, we regard as correct the doctrine to which the Supreme Court of Justice resorted in the reasoning of Judgement No. 1/91 of 03-04-1991 (Official Gazette No. 114, of 18 May) - to classify as juris tantum a presumption established in a labor enactment - defended by Vaz Serra [Proofs (substantive law of evidence), Justice Ministry Bulletin 110-112, page 35], as well as by Mário de Brito (Annotated Civil Code, page 466) and Mota Pinto (General Theory of Civil Law, page 429): "... juris tantum presumptions constitute the rule, with juris et de jure presumptions being the exception. In doubt, the legal presumption is juris tantum, since it should not be considered, absent a reference in the law, that it was intended to prevent the production of proof to the contrary, imposing a formal truth to the detriment of the real proved."

For its part, within the field of tax law, Article 73 of the General Tax Code provides that "the presumptions established in the rules of tax scope always admit proof to the contrary." This means that all presumptions in the matter of tax scope, such as that which No. 1 of Article 3 of the IUC Code establishes, are juris tantum and, as such, rebuttable.

Moreover, with respect to the IUC, it would appear offensive to the unity of the legal system – and even, with due adjustments, in opposition to Nos. 2 and 3 of Article 11 of the General Tax Code - that an individual come to be considered as not an owner of a property for civil purposes and had necessarily to be for tax purposes.

On the other hand, in compliance with the principles - with establishment in our community legal order - of the polluter-pays and equivalence, the IUC Code entails environmental and energy concerns, intending that the costs resulting from the environmental damages caused by the use of motor vehicles be borne by the real owners (and not by the presumed owners).

To which is added the fact that the AT must guide its activity by the observance of the principles of legality, of inquisitorial procedure and discovery of the material truth, inherent to the constitutional dictum of contributive capacity.

Having said this, it must be determined whether the presumption established has been rebutted.

The respondent questions, as a guiding principle, that invoices documenting purchase and sale contracts are apt to prove the actual transfer of ownership of the vehicles, an understanding that we do not share.

It does not, however, challenge the truthfulness of the documents attached. It being certain that in tax matters the presumption of truthfulness of the elements contained in the taxpayer's accounts applies, as is the case with invoices.

It is known that Article 342, No. 1 of the Civil Code establishes as a general rule of evidence that "it is for the one who invokes a right to prove the facts constituting the right alleged."

Now, as follows from what has been stated above, we start here from a legal presumption (that which is established in Article 3, No. 1 of the IUC Code) which, as has been concluded, is rebuttable. The rebuttal of the legal presumption complies with the provisions of Article 347 of the same Civil Code, when it imposes that "full legal proof can only be contradicted by means of proof that shows that the fact which is its subject is not true."

For its part, in the matter of counter-proof, it results from Article 346 of the same code that if the opposing party succeeds in rendering doubtful the facts with respect to which proof is presented, "the matter is decided against the party burdened with the proof."

From the elements contained in the proceedings we are led to conclude that the motor vehicles were sold, following which the applicant issued the respective invoices which are paid.

We thus consider it established that there is no question that the transactions documented by the invoices attached by the applicant have been carried out, it being certain that the purchase and sale contract is consensual, requiring no special form.

Proved the transfer of ownership and since the AT has no standing to oppose the absence of registration, by not being considered a third party for such purposes, the annulment of the IUC assessments that are the subject of the present arbitral request is imperative.

Indemnification Interest

In addition to the refund of the tax improperly paid, the applicant requests that the right to payment of indemnification interest be declared.

Such right is established in Article 43 of the General Tax Code, which has as a prerequisite that it be determined, in administrative complaint or judicial challenge - or in tax arbitration – that there was error imputable to the services resulting in payment of the debt in an amount greater than that legally owing.

The recognition of the right to indemnification interest in the arbitral proceedings results from the provisions of Article 24, No. 5 of the RJAT.

In the case at hand, it appears to us that there is indeed error imputable to the AT in the assessments in question.

In fact, the applicant had already presented, both in the course of the hearing prior to the official assessments and in the administrative complaint, documentation sufficient for the rebuttal of the presumption that fell upon it.

Despite this being the case and the AT being required to guide itself, as stated above, by the principle of inquisitorial procedure, it ignored all the elements that were at its disposal and that should have prevented the execution of the assessments challenged.

Therefore, the applicant has the right to the requested payment of indemnification interest.

3. DECISION

Given the foregoing, it is decided:

a) to rule in favor of the annulment as a matter of violation of law of the tax acts that are the subject of the arbitral request corresponding to the IUC assessments relating to the years 2009, 2010, 2011 and 2012, as well as the request for payment of indemnification interest,

b) to condemn the Tax and Customs Authority to refund to the applicant the amount of tax paid, together with the respective indemnification interest;

c) to condemn the Tax and Customs Authority to payment of the costs of the proceedings.

CASE VALUE: In accordance with the provisions of Article 306, No. 2 of the Civil Procedure Code, Article 97-A, No. 1, a) of the Code of Tax Procedure and Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case value is fixed at 2,732.62 € (two thousand seven hundred and thirty-two euros and sixty-two cents).

COSTS: Pursuant to the provisions of Article 22, No. 4, of the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at 612.00€ (six hundred and twelve euros), in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings.

Let it be notified.

Lisbon, 16-10-2015

The Arbitrator,

António Alberto Franco

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when a vehicle is registered by a distributor before sale to the final customer?
Under Article 3 of the IUC Code, the registered owner on the vehicle registration anniversary date is prima facie liable for IUC payment. When a distributor registers vehicles before sale, they become the registered owner and are presumed to be the taxpayer. However, the applicant in Process 40/2015-T argued this is a rebuttable presumption under Article 73 of the General Tax Code. If the distributor can prove through invoices, registration transfers, and accounting records that the vehicle was sold before the anniversary date and they were not the actual owner when tax became due, they may challenge liability. The key issue is whether registration creates an irrebuttable presumption or whether evidence of actual ownership at the relevant taxable moment can override registration records.
Can a car importer and distributor be exempt from IUC on vehicles registered solely for the purpose of resale?
Car importers and distributors face significant IUC exposure on vehicles registered for resale purposes. While Article 3 of the IUC Code establishes liability based on registered ownership, Process 40/2015-T demonstrates that distributors may challenge assessments by proving they were not actual owners on registration anniversary dates. The IUC Code aims to tax vehicle owners as users responsible for environmental and traffic costs, suggesting that mere registration for commercial facilitation purposes may not align with the tax's underlying policy rationale. To avoid liability, distributors should ensure vehicle sales and registration transfers occur before anniversary dates, maintain comprehensive documentation proving sale dates (invoices, customer contracts, accounting extracts), and promptly transfer ownership registration despite administrative delays. The case illustrates that while exemption is not automatic, successful challenges require strong evidence rebutting the ownership presumption.
What is the legal basis for challenging IUC assessments through tax arbitration under RJAT (DL 10/2011)?
The legal basis for challenging IUC assessments through tax arbitration is established in Decree-Law 10/2011 of 20 January (RJAT - Legal Regime of Tax Arbitration) and Regulation No. 112-A/2011 of 22 March. Under Article 2(1)(a) and Articles 10(1) and (2) of RJAT, taxpayers may request constitution of an arbitral tribunal to challenge tax assessments after exhausting administrative remedies. The applicant in Process 40/2015-T invoked this regime after the Tax Authority dismissed its administrative complaint (reclamação graciosa). The CAAD (Centro de Arbitragem Administrativa) system provides an alternative to judicial courts for tax disputes, offering faster resolution. Article 6(2)(a) and Article 11(1)(b) of RJAT govern arbitrator designation procedures. The arbitral tribunal is empowered to declare illegality of tax assessments, order refunds, and recognize rights to compensatory interest under the same RJAT framework, providing comprehensive relief equivalent to judicial review.
Are compensatory interest charges on IUC assessments lawful when the taxpayer disputes subjective tax incidence?
Compensatory interest charges on IUC assessments are lawful under Portuguese tax law even when taxpayers dispute the underlying subjective tax incidence. Article 35 of the General Tax Code (LGT) establishes that compensatory interest accrues automatically when tax remains unpaid beyond legal deadlines, regardless of whether the taxpayer contests liability. In Process 40/2015-T, the total assessment of €2,723.62 included €195.00 in compensatory interest. The applicant challenged both the principal IUC assessments and compensatory interest, seeking their annulment together. Compensatory interest serves to compensate the State for late payment and accrues independently of the taxpayer's good faith or dispute of liability. However, if the arbitral tribunal or court determines the underlying tax assessment was illegal, the compensatory interest charged on that illegal assessment must also be annulled and refunded. Additionally, under Article 43 of the General Tax Code, taxpayers who successfully challenge illegal assessments are entitled to indemnity interest (juros indemnizatórios) on amounts paid, which the applicant specifically requested in this case.
What is the procedure for filing a gracious complaint (reclamação graciosa) before requesting CAAD arbitration on IUC disputes?
The procedure for filing a gracious complaint (reclamação graciosa) before requesting CAAD arbitration involves several mandatory steps. First, under Article 68 of the General Tax Code (LGT), taxpayers must exercise their right to be heard (audição prévia) when notified of proposed assessments, allowing them to present evidence and arguments against the preliminary assessment. After final assessment notification, taxpayers may file a reclamação graciosa with the Tax Authority within the statutory deadline (typically 120 days under Article 70 of the LGT). The complaint must include grounds for illegality, supporting documentation (invoices, contracts, registration certificates), and accounting records proving the taxpayer's position. In Process 40/2015-T, the applicant filed an administrative complaint attaching invoices and customer account extracts demonstrating vehicle sales before anniversary dates. Only after the Tax Authority dismisses the gracious complaint—or after expiry of the legal decision period without response (tacit dismissal)—may the taxpayer invoke RJAT arbitration. Article 10 of RJAT requires exhaustion of this administrative remedy before requesting tribunal constitution, ensuring the Tax Authority has opportunity to correct errors before arbitration proceedings commence.