Process: 402/2015-T

Date: December 21, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD arbitral decision 402/2015-T addressed the critical question of who bears liability for Portugal's Single Circulation Tax (IUC) when vehicle ownership has been transferred but not updated in the Vehicle Registration Office. The claimant, a vehicle financing company specializing in financial leasing and long-term rental, challenged IUC assessments totaling €3,287.92 for tax periods 2013 and 2014. The company argued it should not be liable because the vehicles had been sold to lessees or third parties prior to the tax due date, despite remaining registered in its name. The claimant contended that Article 3(1) of the IUC Code contains a rebuttable presumption, allowing proof that actual ownership had transferred. The company also raised procedural objections regarding lack of prior hearing notification. The Tax Authority countered that the IUC Code expressly and intentionally establishes that taxpayers are those in whose name vehicles are registered, not a rebuttable presumption. The Authority argued this interpretation preserves the unity of the tax legal system and reflects the legislator's clear intent to base IUC liability on registration records rather than actual ownership. The Authority also provided evidence of proper notification for prior hearing. This case highlights fundamental tensions in IUC subjective incidence between registration-based liability versus actual ownership, particularly affecting leasing companies. The dispute illustrates how Article 3(1) of the IUC Code defining taxpayers as owners 'being considered as' those registered creates interpretive challenges. The case demonstrates CAAD's role as an alternative dispute resolution mechanism for tax matters, where companies can challenge assessments through arbitration rather than judicial courts, following procedures under Decree-Law 10/2011 establishing the legal framework for tax arbitration in Portugal.

Full Decision

ARBITRAL DECISION

Arbitrator Raquel Franco, appointed by the Ethics Council of the Administrative Arbitration Center (CAAD) to constitute the single arbitrator tribunal established on 11 September 2015, decides as follows:

I. REPORT

  1. On 29.06.2015, the company "A…, S.A.", NIPC…, submitted a request for constitution of a single arbitrator tribunal, pursuant to the combined provisions of Articles 2 and 10 of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax Authority is the Respondent.

  2. The request for constitution of the arbitrator tribunal was accepted by the Esteemed President of CAAD and automatically notified to the Tax Authority on 15.07.2015.

  3. Pursuant to the provisions of paragraph (a) of Article 6, paragraph 2, and paragraph (b) of Article 11, paragraph 1, of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the Ethics Council appointed the undersigned as arbitrator of the single arbitrator tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of that appointment on 27.08.2015.

  4. In accordance with the provision in paragraph (c) of Article 11, paragraph 1, of Decree-Law no. 10/2011, of 20 January, as amended by Article 228 of Law no. 66-B/2012, of 31 December, the single arbitrator tribunal was constituted on 11.09.2015.

  5. On 22.10.2015, an order was issued directing the Claimant to inform whether it wished to be exempted from the hearing provided for in Article 18 of the RJAT, as well as from the submission of written arguments, since such requests had been formulated by the Respondent in its answer.

  6. The Claimant stated that it wished to be exempted from the hearing provided for in Article 18 of the RJAT, but informed that it wished to submit written arguments. It further requested to be exempted from attaching certain documents which it had undertaken to attach, as they were already included in the administrative file subsequently sent by the Tax Authority to the proceedings.

  7. The Tribunal exempted the Claimant from presenting the said documents and notified the parties to submit successive written arguments within a period of 10 days.

  8. After the period granted to the Claimant for presentation of the said arguments expired, it was verified that it did not do so.

  9. In the absence of submission of written arguments by the Claimant, the Respondent subsequently waived its submission.

  10. The Tribunal then informed the parties that the arbitral decision would be rendered by 31.12.2015.

  11. In the present arbitration proceedings, the Claimant requests that the Arbitral Tribunal declare the illegality of the acts of official assessment of the Single Circulation Tax (IUC) relating to the tax periods 2013 and 2014, the total amount of which amounts to €3,287.92, and, consequently, order the restitution of that amount, as well as the payment of compensatory interest in accordance with the provisions of Article 43 of the General Tax Law.

11.A. The Claimant supports its request, in summary, in the following terms:

  • The Claimant is a partnership that pursues its activity in the field of vehicle financing, namely under the modality of financial leasing and long-term rental.

  • The Claimant received various IUC assessment notices regarding vehicles related to the aforementioned activity, concerning which it filed administrative complaints, with the proceedings bearing no...

  • The administrative complaint filed by the Claimant was rejected by the Tax Authority, on the ground of lack of standing of the claimant, through an order notified to it on 30.03.2015.

  • The Claimant begins by invoking the defect of omission of essential formalities, by alleging that it was not notified by the Tax Authority to exercise the right to prior hearing before the issuance of the IUC assessment acts, requesting the annulment of said acts in accordance with paragraph (a) of Article 60, paragraph 1, of the General Tax Law.

  • Regarding the substantive legality of the impugned tax acts, the Claimant understands that the subjective scope of taxation was violated, as it cannot, in view of the relevant legal provisions, be considered a taxpayer of the tax in question in the periods to which the impugned assessments refer, inasmuch as the vehicles in question had:

a) been acquired by their respective lessees after the financial lease;

b) been acquired by their respective lessees during the financial lease;

c) been acquired by third parties,

despite the Claimant still appearing in the Vehicle Registration Office as owner of the vehicles in question.

  • The Claimant understands that the fact that the vehicle in question was sold by it at a time prior to the occurrence of the IUC constitutes a ground for exclusion from the scope of the tax that should have been observed by the Tax Authority, in that, pursuant to the provision of Article 6, paragraph 3, of the IUC Code, the tax is considered to be due by the owner (or other holders of the vehicle that are equivalent) on the first day of the tax period of the vehicle, which, in accordance with Article 4, paragraph 2, of the same Code, takes place on the date on which the registration is assigned. The fact that the ownership of the vehicles was not registered in the vehicle registration in favor of the new owner cannot be imputed to the Claimant, which did not have the authority to request such registration. On the other hand, the Claimant understands that, although Article 3, paragraph 1, of the IUC Code provides that 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 they are registered, the expression "being considered as" must be understood as a rebuttable legal presumption by means of proof to the contrary on the part of the transferor of the vehicle. Thus, in light of Article 3, paragraph 1, of the IUC Code, the tax must be assessed on the new owners of the vehicles.

11.B. In its Answer, the Tax Authority invoked, in summary, the following:

  • Regarding the question of non-notification for the exercise of the right to prior hearing, the Tax Authority contends that extracts evidencing the notifications issued to the Claimant for purposes of prior hearing before the emission of the official assessments made by the services are attached to the administrative file, as well as extracts from the CTT website, proving receipt thereof.

  • Regarding the substance of the assessments in question, the Tax Authority understands that the Claimant's position is not justified and that its position derives from:

a) a skewed reading of the letter of the law, in that the legislator intentionally and expressly established that those in whose name the vehicles are registered are to be considered as owners, this being the interpretation that preserves the unity of the tax legal system and to understand that the legislator enshrined here a presumption would unequivocally be to effect an interpretation contra legem.

b) the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined throughout the IUC Code and, more broadly, throughout the entire tax legal system, in that the tax legislator intentionally and expressly wished to consider as owners, lessees, purchasers with reservation of ownership or holders of the right to purchase in long-term rental those persons in whose name [the vehicles] are registered.

c) an interpretation that ignores the rationale of the regime enshrined in the article in question, and likewise, throughout the IUC Code, in that it is the very rationale of the regime enshrined in the Single Circulation Tax Code that constitutes clear proof that what the tax legislator intended was to create a Single Circulation Tax based on the taxation of the owner of the vehicle as it appears in the vehicle registration.

The Tax Authority further understands that the interpretation defended by the Claimant is unconstitutional as it devalues the registration reality to the detriment of an "informal reality" and incapable of minimum control by the Respondent, thus being offensive to the fundamental principle of trust and legal certainty that must inform any legal relationship, here included the tax relationship. In parallel, it understands that the interpretation given by the Claimant is offensive to the principle of efficiency of the tax system, in that it results in an obstruction and increase in costs of the competencies assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State, of which both the Claimant and the Respondent form part. Finally, it further understands that the argument put forward by the Claimant represents a violation of the principle of proportionality, in that it completely disregards it in comparison with the principle of taxpaying capacity, when in reality the Claimant has at its disposal the necessary and appropriate legal mechanisms for safeguarding that capacity (e.g., the vehicle registration), without, however, having exercised them in due time.

  • As regards evidence, the Tax Authority further alleges that, regarding the vehicles with registration numbers ...-...-..., ...-...-... and ...-...-..., the Claimant did not present documents evidencing the sale, from which it follows that it did not contradict the information contained in the vehicle registration to the effect that it was the owner of the vehicles on the dates of the exigibility of the tax (Article 3, paragraph 1, of the IUC Code).

  • Finally, the Tax Authority invokes the failure to comply, by the Claimant, with the provision of Article 19, paragraph 3, of the IUC Code, which, in its view, would be necessary for it to be exempted from the obligation to pay the tax. The Tax Authority understands that, as the Claimant did not prove compliance with that obligation, as was incumbent upon it, the requested exclusion of Article 3 of the IUC Code will fail.

  • Regarding compensatory interest, the Tax Authority understands that such interest is not due because the tax acts in question are valid and lawful, as they are in accordance with the legal regime in force at the date of the tax facts, so that no error attributable to the services occurred in this case.

II. CASE MANAGEMENT

  1. The Tribunal is competent and is regularly constituted, pursuant to Articles 2, paragraph 1, (a), 5, and 6, all of the RJAT.

  2. The parties have legal personality and capacity, are properly interested in the proceedings and are legally represented, pursuant to Articles 4 and 10 of the RJAT and Article 1 of Ordinance no. 112-A/2011, of 22 March.

  3. The proceedings do not suffer from defects that would invalidate it.

  4. It is sought to assess jointly the legality of 22 IUC assessments, relating to the years 2013 and 2014. Thus, the requirements provided for in paragraph 1 of Article 3 of the RJAT and in Article 104 of the Tax Procedure and Process Code are satisfied, and the cumulation is to be admitted in view of the identity of the tax and the circumstance that the assessment of the tax acts in question depends on the assessment of the same factual circumstances and the application of the same rules of law.

III. FACTS

III.1. Facts Established

Before proceeding to the legal assessment of the issues, it is necessary to present the factual matters relevant to their understanding and determination, which, having examined the documentary evidence and the administrative file attached to the record and taking into account the facts alleged, is fixed as follows:

  1. The Claimant is engaged in vehicle financing, namely under the modality of entering into financial leasing contracts and long-term rental contracts;

  2. The Claimant received 22 IUC assessment notices regarding vehicles related to the aforementioned activity, all identified in the table contained in Article 11 of the arbitration request, which is here given as fully reproduced;

  3. The Claimant made payment of all IUC assessment notices subject to the arbitration request;

  4. The Claimant filed an administrative complaint, which was conducted under the number…;

  5. The administrative complaint was rejected through an order from the Head of the Finance Service of …, notified to the Claimant on 30.03.2015;

  6. The ownership of these vehicles was, at the date of the tax facts, registered in the vehicle registration in favor of the Claimant;

  7. With reference to the vehicles indicated below, the Claimant entered into financial leasing contracts and issued the following invoices:

a) Vehicle with registration number …-…-…, contract beginning on 20.06.2003 and ending on 20.06.2008; With reference to this vehicle, the Claimant further issued the document "duplicate invoice", with the number…, dated 20.06.2008 and with the description "residual value", to the entity "…, Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid.

b) Vehicle with registration number …-…-…, contract beginning on 20.05.2004 and ending on 20.05.2008; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 20.05.2008 and with the description "residual value", to the entity "… Unipessoal, Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid.

c) Vehicle with registration number …-…-…, 29.04.1999, contract beginning on 05.05.1999 and ending on 05.05.2003; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 05.05.2003 and with the description "residual value", to the entity "…, Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

d) Vehicle with registration number …-…-…, contract beginning on 05.06.2000 and ending on 05.06.2002; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 05.06.2002 and with the description "residual value", to the entity "...". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

e) Vehicle with registration number …-…-…, contract beginning on 20.05.2006 and ending on 20.05.2011; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 06.09.2010 and with the description "termination", to …. From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

f) Vehicle with registration number …-…-..., contract beginning on 05.06.2002 and ending on 05.06.2006; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 05.06.2006 and with the description "residual value", to the entity "…, Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

g) Vehicle with registration number …-…-..., contract beginning on 05.04.2000 and ending on 05.04.2004; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 05.04.2004 and with the description "residual value", to the entity "…, Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

h) Vehicle with registration number …-…-…, contract beginning on 20.06.2000 and ending on 20.06.2004; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 20.06.2004 and with the description "residual value", to the entity "…Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

i) Vehicle with registration number …-…-…, contract beginning on 05.05.1999 and ending on 05.05.2002; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 05.05.2002 and with the description "residual value", to the entity "…, Lda.". From the account statement of this entity attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid.

  1. With reference to the vehicles indicated below, the Claimant entered into long-term rental contracts and issued the following invoices:

a) Vehicle with registration number …-…-…, contract for a period of 12 months; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 20.05.2012 and with the description "rental", "shipping costs" and "car insurance of ... II", to …. From the account statement of the person in question attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

b) Vehicle with registration number …-…-…, date unknown, contract for a period of 36 months; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 20.05.2011 and with the description "residual value", to the entity "…, Lda.". From the account statement of the entity in question attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

c) Vehicle with registration number …-…-…, contract for a period of 36 months; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 05.04.2009 and with the description "rental" and "shipping costs", to …, Lda.". From the account statement of the person in question attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid;

d) Vehicle with registration number …-…-…, contract for a period of 12 months; With reference to this vehicle, the Claimant issued the document "duplicate invoice", with the number…, dated 20.04.2012 and with the description "rental", "shipping costs" and "car insurance of ... II", to the entity "…– Unipessoal, Lda. From the account statement of the entity in question attached to the Claimant as of 30.12.2014 it appears that the value of the invoice in question is paid.

  1. The Claimant further issued the invoices:

a) No.…, of 09.03.2005, to the entity "…, S.A.", referring to the vehicle …-…-…, with the description "total loss – client", in the amount of €7,882.58. From the account statement of this entity attached to the Claimant as of 31.12.2014 it appears that the amount in question is settled;

b) No.…, to the entity "…, S.A.", referring to the vehicle …-…-…, with the description "residual value", in the amount of €44,354.85. From the account statement of this entity attached to the Claimant as of 31.12.2014 it appears that the amount in question is settled.

  1. The registration dates of the vehicles in question are as follows:
Registration Date of Registration
…-…-… 03.06.2002
…-…-… 05.05.1999
…-…-… 08.05.2003
…-…-… 27.05.2004
…-…-… 10.05.1999
…-…-… 19.05.2000
…-…-… 31.05.2011
…-…-… 11.05.2006
…-…-… 07.05.2008
…-…-… 05.05.2005
…-…-… 24.05.2011
…-…-… 18.04.2002
…-…-… 29.04.2002
…-…-… 05.04.2000
  1. The Tax Authority notified the Claimant that it was in arrears regarding the tax relating to the vehicles identified in the table below, with reference to the fiscal years identified therein, on the dates indicated there:
Registration Year of Assessment Date of Notification
…-…-… 2013 08.08.2014
…-…-… 2013 06.08.2014
…-…-… 2014 06.08.2014
…-…-… 2013 10.07.2014
…-…-… 2014 10.07.2014
…-…-… 2013 10.07.2014
…-…-… 2014 10.07.2014
…-…-… 2013 16.07.2014
…-…-… 2014 16.07.2014
…-…-… 2013 10.07.2014
…-…-… 2013 10.07.2014
…-…-… 2013 26.07.2014
…-…-… 2013 26.07.2014
…-…-… 2013 26.07.2014
…-…-… 2013 26.07.2014
…-…-… 2013 26.07.2014
…-…-… 2013 13.06.2014
…-…-… 2014 13.06.2014
…-…-… 2013 16.06.2014
…-…-… 2014 16.06.2014
…-…-… 2013 13.06.2014
…-…-… 2014 13.06.2014

III.2. Facts Not Established

There are no facts with relevance for the decision of the cause that have been considered not proven.

IV. ISSUE FOR DECISION

The fundamental question at issue in the present proceedings consists of determining whether the facts alleged by the Claimant constitute grounds for exclusion of the personal scope of tax and whether, consequently, it should be considered that the impugned acts suffer from error concerning the presuppositions of the taxable fact, which would constitute a defect of violation of law determining their respective annulment, with the appropriate legal consequences.

V. LEGAL REASONING

The Claimant begins by invoking the invalidity of the impugned assessments for failure to comply with the right to prior hearing provided for in paragraph (a) of Article 60, paragraph 1, of the General Tax Law. However, upon examination of the administrative file, it is verified that it was notified, on the dates referred to in the table contained in point 11 of the facts established, of the tax acts in question and that it therefore had the opportunity to state its position thereon before the final decision of the procedure was issued. The purpose of Article 60, paragraph 1, of the General Tax Law is to impose upon the Administration the obligation to hear private parties before definitively practicing a tax act that calls into question their interests. However, this legal provision does not entail that prior hearing must occur, cumulatively, in all phases of the tax procedure provided for therein, but rather that it must take place before a definitive act is practiced in the tax procedure. This means, in particular, that, if the private party is not notified before the assessment is issued which initiates the procedure, but is notified later in the course thereof, being given the opportunity to state its position on its content and to bring to the procedure elements that contradict the administration's position, then the right to participation in the procedure provided for in Article 60 of the General Tax Law will have been respected, with no omission of an essential formality. The Claimant is therefore not correct on this point.

Regarding the substance of the impugned tax acts, the Claimant bases its request on the circumstance that the vehicles on which the tax was assessed were transferred prior to the occurrence of the taxable event and therefore the requirements of the personal scope of taxation provided for in Article 3 of the IUC Code were not met, not being, therefore, a taxpayer of the IUC. It invokes that, on the date of the tax facts, it was no longer the owner of the said vehicles and, consequently, the assessments should be annulled due to manifest lack of personal responsibility for their payment.

It invokes the provision of Article 3 of the IUC Code, which, in its view, establishes an implicit presumption of vehicle ownership in favor of those in whose name they are registered, a presumption that, by virtue of the application of the general rule provided for in Article 73 of the General Tax Law, is rebuttable by proof to the contrary. For the Respondent, Article 3 of the IUC Code does not establish any implicit presumption, but a true irrebuttable legal fiction.

This question has been extensively addressed by arbitral jurisprudence over recent years (cf. the decisions rendered in proceedings 286/2013-T, of 2 May 2014, 293/2013-T, of 9 June 2014, 46/2014-T of 5 September, 246 and 247/2014 T, of 10 October, among others), and has further been the subject of the judgment of the Central Administrative Court of the South rendered on 19-03-2015, proceedings no. 08300/14. Following this court closely in the jurisprudential line outlined in the proceedings indicated above, only its most significant features will be indicated here.

Thus, paragraph 1 of Article 3 of the IUC Code provides that:

"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 they are registered."

The question that is discussed with respect to this provision is the following: should it be understood that the legislator used the word "being considered as" as it could have used the word "presuming" or, by contrast, that the legislator intended to establish a legal fiction, precluding the possibility of carrying out evidence to the contrary?

Pursuant to the provision of Article 349 of the Civil Code, "presumptions are the inferences which the law or the judge draws from a known fact to establish an unknown fact." On the other hand, paragraph 2 of Article 350 of the Civil Code clarifies that legal presumptions may be rebutted by proof to the contrary, except in cases where the law prohibits it.

With respect to presumptions of tax scope, Article 73 of the General Tax Law provides that these always admit proof to the contrary.

"Legal fictions" consist, differently, "in a legal process that considers a situation or a fact as different from reality in order to attribute legal consequences to it"[1].

Now, contrary to what the Respondent argues and as has already been recognized in the arbitral and judicial decisions referred to, the analysis of the literal element, as well as the historical and teleological elements present in the provision in question lead to the conclusion that the legislator did not intend to establish any legal fiction but solely and exclusively a presumption, rebuttable by proof to the contrary in accordance with the terms and for the purposes of the provision of Article 73 of the General Tax Law. Since the provision of tax scope provided for in paragraph 1 of Article 3 of the IUC Code is a provision of tax scope, any other understanding would be clearly contrary to the principles governing the tax legal relationship.

As regards the historical element, it is important to note that the IUC Code had its genesis in the creation, through Decree-Law 599/72, of 30 December, of the vehicle tax, which already expressly provided that the tax was due by the owners of the vehicles, being presumed as such the persons in whose name they were registered or recorded[2]. On the other hand, Article 2 of the Regulation of Circulation and Haulage Taxes (approved by Decree-Law no. 116/94) provided that: "the taxpayers of the circulation tax and the haulage tax are the owners of the vehicles, being presumed as such, until proof to the contrary, the natural or legal persons in whose name they are registered".

It is true that, in the IUC Code, the legislator replaced the expression "being presumed" with the expression "being considered as", which, from the Respondent's perspective, translated the establishment of an irrebuttable legal fiction. We do not, however, consider this to be the case. The change of verb does not constitute a fundamental alteration in the provision of tax scope, which, in our view, continues to establish a presumption rebuttable by proof to the contrary – in accordance, moreover, with the provision of Article 73 of the General Tax Law.

As stated by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in the annotation to paragraph 3 of Article 73 of the General Tax Law, "presumptions in matters of tax scope may be explicit, revealed by the use of the expression 'it is presumed' or similar (…). However, presumptions may also be implicit in provisions of tax scope, in particular of objective scope, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not impossible to ascertain the real value"[3].

In sum, in matters of tax scope, presumptions may be revealed by the expression "it is presumed" or by a similar expression[4]. By way of example, Jorge Lopes de Sousa refers that in Article 40, paragraph 1, of the Personal Income Tax Code, the expression "it is presumed" is used, whereas in Article 46, paragraph 2 of the same Code the expression "it is considered as" is employed, with no difference between one and the other expression, both meaning, after all, the same thing: a legal presumption[5].

As regards the teleological element, it is important to note that the structuring principle of the reform of vehicle taxation is precisely that of the assessment of taxation on the true user of the vehicle, which principle does not accord with the "blind" reading of the letter of the law, which could ultimately lead to taxing someone who was not the owner and, in that manner, someone who was not the subject causing the "environmental and road cost" provoked by the vehicle, to which Article 1 of the IUC Code alludes.

Thus, as regards the personal scope of the tax, it is to be concluded that no changes have occurred with respect to the situation previously in force within the scope of the Municipal Tax on Vehicles, Circulation Tax and Haulage Tax, as moreover is widely recognized by legal doctrine, with a rebuttable presumption continuing to apply in this matter. This understanding is, furthermore, the only one that appears adequate and in accordance with the principle of material truth and justice, underlying tax relationships, with the objective of taxing the real and effective owner and not the one who, due to circumstances of a different nature, amounts in some cases merely to an apparent and false owner, by virtue of appearing in the vehicle registration.

In this conformity, considering the elements of interpretation of the law referred to, we are led to the conclusion that the expression "being considered as" has exactly the same meaning as the expression "being presumed", and should, therefore, be understood to mean that Article 3, paragraph 1, of the IUC Code, establishes a true presumption of ownership and not any fiction, and that, therefore, such presumption is rebuttable. Because it is thus, the person entered in the vehicle registration must be allowed the possibility of presenting evidentiary elements sufficient for the demonstration that the effective owner is, after all, a person different from the one appearing in the registration.

Finally, in the present analysis, it is necessary to consider the legal value of the vehicle registration. Thus, pursuant to the provision of paragraph 1, Article 1 of Decree-Law 54/75, of 12 February, which established the Vehicle Ownership Register, "the registration of vehicles has essentially as its purpose to publicize the legal situation of motor vehicles and respective trailers, with a view to the security of legal commerce". Article 7 of the Land Register Code further adds that "definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it". The vehicle ownership registration does not, therefore, have a constitutive nature, but merely a declarative one, allowing only the registration to presume the existence of the right and its ownership. Consequently, the presumption resulting from registration may be rebutted by proof to the contrary. And this is so precisely because, pursuant to the provision of Article 408 of the Civil Code, except for the exceptions provided for in the law, the constitution or transfer of real rights over a determined thing is given by mere effect of the contract, with its validity not depending on registration in the register[6]. In sum, the vehicle registration, in the economy of the IUC Code, represents a mere rebuttable presumption of the taxpayers of the tax. In the case of a purchase and sale contract of a motor vehicle, with the law not providing any exception to it, the contract has real effect, with the purchaser becoming its owner, independent of the registration; similarly, the person entered in the registration ceases to be the owner, despite possibly still appearing, for some time or even much longer, in the registration as such.

It should further be noted that the transfers made are enforceable against the Respondent, despite the provision of paragraph 1 of Article 5 of the Land Register Code, which provides: "facts subject to registration only produce effects against third parties when registered." The notion of third parties for purposes of registration is enshrined in paragraph 4 of the same Article 5: third parties, for purposes of registration, are those who have acquired from a common author rights incompatible with one another, which is manifestly not the case of the Tax Authority. Thus, the Tax Authority is not a third party for purposes of registration.

In consequence of what precedes, the registered owner of a motor vehicle may provide evidence, for purposes of taxation in the context of IUC, that it is no longer the effective owner of the vehicle in question, namely by having proceeded to its sale. And proof of the existence of a purchase and sale contract may be made by any means, with the invoice being a document suitable for accounting purposes for this effect, as for many others, in particular tax purposes. Invoices evidence sales, transactions or the provision of services which are presumed true by virtue of the presumption of truthfulness established in Article 75 of the General Tax Law. In this sense, it is not accepted that its probative force be questioned solely for the purpose of proving the transfer of vehicle ownership, under penalty of falling into the legal absurdity of, from the same document, recognizing that the transaction existed for purposes of income tax assessment, but did not exist for purposes of IUC. But, given that it is a presumption, nothing prevents the demonstration of its falsity or inadequacy in light of the legal requirements established in Article 36 of the VAT Code. This too is a case of a rebuttable presumption, with the burden of proof falling to the Tax Authority.

The Claimant alleges that, at the date on which the tax facts occurred, it had already transferred the ownership of the vehicles to third party purchasers. To prove this, it provides duplicate invoices, in which are mentioned, among other elements, the registration number of the vehicle, the customer number, the identification of the recipient, the amount, a variable description – for example, "TERMINATION", "RESIDUAL VALUE", as well as the mention - "Valid upon good collection".

In addition to the invoices, the Claimant provides account statements of its customers, from which it appears that the invoices in question are paid.

The invoices presented by the Claimant benefit, as stated, from the presumption of truthfulness contained in Article 75 of the General Tax Law, provided that they comply with the legal requirements and demonstrate the correspondence to the factual reality that the Claimant seeks to demonstrate in the proceedings: the transfer of vehicle ownership.

It is true that the indication of "valid upon good collection" removes the invoice's capacity to, by itself, demonstrate the effective conclusion of the sale. However, the Claimant also provided account statements of its customers from which it appears that the invoices were paid. From the combination of the two elements it therefore results that the invoice was issued and that collection occurred – being this sufficient to prove the transfer of ownership at a time prior to the occurrence of the taxable event.

Thus, it results from the evidence provided in the proceedings, both through the documents presented by the Claimant and through the administrative file, that the vehicles with reference to which the Tax Authority assessed the tax in question in the years 2013 and 2014 were already owned by someone other than the Claimant at the moment in which the taxable event occurs and that, therefore, the Claimant has rebutted the presumption contained in Article 3, paragraph 1, of the IUC Code.

Regarding the request for compensatory interest formulated by the Claimant, it is important to take into account the following: pursuant to the provision of paragraph 1 of Article 43 of the General Tax Law, "compensatory interest is due when it is determined, in administrative complaint or judicial impugnation, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due." There are, therefore, two presuppositions required by law for the administration to be constituted in the duty to indemnify: on the one hand, there must be error attributable to the services, on the other hand, it must be from this error that the payment of tax debt in an amount greater than due results. It must, therefore, be verified that the administration erred in assessing the tax, that this error is attributable to it and that from this error resulted tax greater than due in accordance with the law. Now, in the present case, if it is true that tax greater than due was assessed to the Claimant, it is not true that this assessment resulted from error attributable to the Tax Authority, for the assessments are based on the information that the Tax Authority had at the time it issued them, and it is true that the Tax Authority itself had no way of knowing that the factual situation was otherwise, since the only element at its disposal – the vehicle registration – did not give it the real information. On the other hand, if the registration conveyed a reality that did not correspond to the truth, that fact is attributable to whoever acquired the vehicles in question and did not register them and not to the Tax Authority. It further happens that, in the present case, all vehicles that gave rise to the assessed IUC had been, at a time prior to their sale, the subject of financial leasing contracts and long-term rental contracts and that, pursuant to the provision of Article 19 of the IUC Code, "for the purposes of the provision of Article 3 of the present code, as well as paragraph 1 of Article 3 of the law of its approval, entities that proceed to financial leasing, operational leasing or long-term rental of vehicles are obligated to supply to the General Tax Directorate data relating to the tax identification of the users of the leased vehicles." If it is true that the reason why the impugned assessments are invalid is linked to the transfer of ownership prior to the occurrence of the taxable events and not to the existence, at the moment these occurred, of those contracts, it remains true that the Claimant also failed to comply with its information obligation and that if it had complied with it, the Tax Authority would have had at its disposal more information than that which it actually had at the moment of assessment of the tax.

Thus, it is understood that the request for compensatory interest formulated by the Claimant is not well-founded.

Regarding the question of costs – raised by the Respondent – it is also understood not to assist it, for, obviously, if the Claimant found itself in need of recourse to an arbitral tribunal it was because the Tax Authority, within the scope of the decision-making power it had in the course of the administrative procedure, did not admit the invalidity of the impugned assessments. And if it was legitimate for it to do so having regard to the interpretation it makes of the applicable norms, it knew that, in defending the validity of the assessments, it exposed itself to what actually came to pass – recourse to the courts by the Claimant, with the consequent costs.

VI. DECISION

In conformity with what is set out above, it is decided:

(i) To render as well-founded the request for arbitral pronouncement regarding the invalidity of the impugned assessments, which should, consequently, be annulled, giving rise to the restitution of the tax unlawfully assessed;

(ii) To render as not well-founded the request for arbitral pronouncement regarding the request for compensatory interest.

Value: In accordance with the provision of Article 97-A, paragraph 1, (a), of the Tax Procedure and Process Code and Article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceedings is fixed at €3,287.92.

Costs: Pursuant to the provision of Article 22, paragraph 4, of the RJAT and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €612.00, to be paid by the Respondent in accordance with Articles 12, paragraph 2, and 22, paragraph 4, both of the RJAT, and Article 4, paragraph 4, of the said Regulation.

Let it be registered and notified.

Lisbon, 21 December 2015

The Arbitrator,

Raquel Franco

[1] Cf. F. Rodrigues Pardal, "The Use of Presumptions in Tax Law", in Tax Science and Technique, no. 325-327, page 20 et seq..

[2] Cf. Article 3 of the Regulation of the Vehicle Tax, annexed to the said Decree-Law 599/72, of 30 December.

[3] Cf. General Tax Law – Annotated and Commented, 4th ed., 2012, Written Encounter Publisher, p. 651.

[4] Cf. Jorge Lopes de Sousa (2011), Tax Procedure and Process Code Annotated and Commented. Volume I. 6th Edition. Áreas Publisher: Lisbon, pp. 589 et seq..

[5] Cf. Op. Cit., pp. 590 et seq..

[6] Cf. among others, the following Supreme Court of Justice Judgments: of 31.05.1966, Proceedings no. 060727 (Rapporteur: Counsellor Lopes Cardoso); of 05.05.2005 (Rapporteur: Counsellor Araújo Barros) and of 14.11.2013, in Proceedings no. 74/07.3TCGMR.G1.S1 (Rapporteur: Counsellor Serra Baptista).

Frequently Asked Questions

Automatically Created

Who is liable for paying IUC (Imposto Único de Circulação) under Portuguese tax law?
Under Portuguese tax law, specifically Article 3(1) of the IUC Code, the persons liable for paying IUC are the owners of vehicles, defined as the natural or legal persons in whose name the vehicles are registered in the Vehicle Registration Office. This registration-based criterion means that IUC liability is determined by official registration records rather than actual physical possession or economic ownership. The tax becomes due on the first day of the vehicle's tax period by whoever appears as the registered owner at that moment, regardless of whether the vehicle has been sold, leased, or transferred to another party if the registration has not been updated.
What is subjective incidence in the context of IUC and how does it determine the taxpayer?
Subjective incidence in IUC refers to the determination of who is the taxpayer obligated to pay the tax. Article 3(1) of the IUC Code establishes subjective incidence by identifying taxpayers as 'owners' of vehicles, specifically defining owners as those in whose name vehicles are registered. The key interpretive question is whether the phrase 'being considered as' creates a rebuttable legal presumption allowing proof of different actual ownership, or whether it constitutes an express legal provision linking liability definitively to registration. This determines whether registration creates conclusive liability or merely a presumption that can be overcome by proving the vehicle was sold or transferred before the tax period began.
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. Under the Legal Regime of Arbitration in Tax Matters (RJAT), established by Decree-Law 10/2011 of 20 January, taxpayers including companies can request the constitution of an arbitration tribunal to review the legality of tax assessments instead of pursuing judicial court proceedings. This alternative dispute resolution mechanism allows for faster resolution of tax disputes. Companies must submit a formal request for arbitration, and the CAAD Ethics Council appoints an arbitrator to constitute the tribunal and decide the case.
What was the outcome of CAAD arbitral decision 402/2015-T regarding IUC liability?
The provided excerpt of CAAD arbitral decision 402/2015-T does not include the final ruling, as the text is incomplete. However, the decision addressed whether a vehicle financing and leasing company could be held liable for IUC on vehicles that had been sold or transferred to lessees or third parties but remained registered in the company's name. The central legal question was whether Article 3(1) of the IUC Code creates a rebuttable presumption of ownership based on registration, or whether registration conclusively determines taxpayer liability regardless of actual ownership transfers. The full decision would determine whether the company's IUC assessments totaling €3,287.92 for 2013-2014 were legal or should be annulled.
How does the CAAD arbitration process work for disputing IUC tax assessments in Portugal?
The CAAD arbitration process for disputing IUC assessments follows these steps: (1) The taxpayer submits a request for constitution of an arbitration tribunal under Articles 2 and 10 of RJAT, naming the Tax Authority as respondent; (2) CAAD's President accepts the request and notifies the Tax Authority; (3) The Ethics Council appoints an arbitrator who must accept within the applicable period; (4) The tribunal is formally constituted; (5) The Tax Authority submits its answer; (6) Parties may request exemption from hearings and opt for written arguments instead; (7) The tribunal may order submission of successive written arguments; (8) The arbitrator issues a decision within established deadlines. Throughout the process, the administrative file is submitted, and parties can present evidence supporting their positions regarding the legality of the contested tax assessments.