Process: 408/2017-T

Date: January 17, 2018

Tax Type: IUC

Source: Original CAAD Decision

Summary

In Process 408/2017-T, a vehicle dealer challenged 332 IUC (Vehicle Circulation Tax) assessments before the CAAD arbitral tribunal. The dealer argued that despite initial vehicle registrations being in its name due to ISV procedural requirements, actual ownership had transferred to dealer networks or car rental companies prior to registration dates. The Claimant issued sales invoices before or simultaneously with registration, demonstrating vehicles were never acquired for its own use but were part of normal commercial inventory for resale. The central legal issue concerned the subjective incidence of IUC: whether tax liability follows formal registration ownership or actual economic ownership. The dealer contended that IUC assessments were improper since it was merely an intermediary between manufacturers and final purchasers, with vehicles already sold when registration occurred. The case highlights tensions between administrative registration procedures requiring dealers' names on initial documentation and the substantive tax principle that dealers holding vehicles exclusively for resale should not bear circulation tax liability. The arbitral tribunal process involved acceptance of the request, appointment of three arbitrators, respondent's answer with administrative file submission, waiver of oral hearing, and written arguments from both parties.

Full Decision

ARBITRAL DECISION

The Arbitrators José Poças Falcão (President), Álvaro Caneira and Marisa Almeida Araújo, appointed by the Ethics Council of the Center for Administrative Arbitration (CAAD) to form the Arbitral Tribunal, agree on the following:

ARBITRAL DECISION

REPORT

A… S.A., (hereinafter designated as "Claimant") with headquarters on Rua do…, …-… …, holding the single identification number for legal persons and registered at the Commercial Registry Office of … no. …, filed a request for arbitral ruling and constitution of an arbitral tribunal on 4 July 2017, pursuant to article 4 and no. 2 of article 10 of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter designated as "RJAT"), against the Tax and Customs Authority (hereinafter designated as "Respondent" or "TA").

The Claimant seeks, in the aforementioned request for arbitral ruling, that the Arbitral Tribunal declare annulled:

  1. The decision dismissing the gracious complaint filed; and
  2. The 332 acts of assessment of Vehicle Circulation Tax (IUC) underlying the claims being challenged, and in consequence the total amount improperly paid by the Claimant to that effect shall be restituted, plus compensatory interest, with all legal consequences.

The request for constitution of the Arbitral Tribunal was accepted by the President of CAAD and notified to the Respondent on 5 July 2017.

The Claimant did not proceed with the appointment of an arbitrator, and therefore, pursuant to article 6, no. 2, letter a) of the RJAT, the undersigned were appointed as arbitrators by the President of the Ethics Council of CAAD, with such appointments being accepted within the legally prescribed terms and deadlines.

The arbitral tribunal was constituted on 12 September 2017.

The Respondent, having been notified for this purpose on 13 September 2017, filed its Response on 13 October and sent a copy of the administrative file.

On 7 November 2017, the arbitral hearing provided for in article 18 of the RJAT was waived, and the Claimant and Respondent were invited to submit written arguments.

In the same order, the deadline for publication of the final decision was set for 16 February 2018.

On 28 and 29 November 2017, the Claimant and Respondent respectively submitted their written arguments, reaffirming in essence the positions already assumed in the initial petition and response.

Arguments of the Claimant

The Claimant supports its petition, in summary, in the following manner:

  1. The 332 Vehicle Circulation Tax (IUC) assessment acts were directed directly to the Claimant here — attached to the case file.

  2. The Claimant is a commercial company engaged in the trade of motor vehicles, representing various brands, namely B…, C…, D…, E…, F… and B… Commercial Vehicles.

  3. The vehicles subject to the contested assessments are part of the Claimant's normal activity of selling new vehicles, in some cases to its dealer networks to satisfy their final customers, in others to car rental companies.

  4. Indeed, the commercialization of the 332 vehicles in question is not an exception to the Claimant's normal activity, which acted as intermediary between the manufacturers of the brands it represents, and its dealer networks within the scope of concession contracts on one hand, or on the other, between the Claimant and car rental companies within the scope of supply agreements.

  5. The Claimant only proceeds with the registration of vehicles it orders, in execution of the aforementioned contracts and supply agreements, when the sales have already been completed and the transactions concluded, all in accordance with the delivery schedule stipulated and under the delivery conditions required by car rental companies in order to proceed with the delivery of already registered vehicles.

  6. None of the vehicles in question here was acquired by the Claimant for itself or with the intention to retain ownership or use of the vehicle after obtaining registration in Portugal.

  7. In all 332 cases, the Claimant proceeded to issue the sales invoice up to the date of registration assignment to the vehicle in Portugal.

  8. In the case of the Claimant's sales to dealers, the invoice is issued prior to the registration date (with the vehicles being identified on the invoice by chassis number, and subject to a subsequent Vehicle Tax (ISV) debit note, already with registration); and in the case of car rental companies, the invoice date coincides with the registration date.

  9. After registration assignment in Portugal, the Claimant proceeds to register ownership of the vehicles with the Motor Vehicle Registry Office, such initial registration being made in the name of the Claimant, as it is based on the Customs Vehicle Declaration (DAV) — as occurred with all the vehicles in question here.

  10. The fact that the Claimant proceeds with registration in its name results from the initial registration being based on the assessment of Vehicle Tax (ISV) as set out in the Motor Vehicle Registration Regulation.

  11. And the assessment of ISV is necessarily made in the name of the Claimant, as required by the TA itself (former DGAIEC) based on the respective Customs Vehicle Declaration (DAV) of vehicle presentation.

  12. Thus, the initial registration is effected based on the DAV of ISV assessment in the name of the Claimant, despite the fact that in reality the Claimant is no longer the owner of the vehicle as of a moment prior to the date of its registration.

  13. Consequently, the initial registration of ownership in favor of the Claimant was always effected at a moment when, strictly speaking, the Claimant no longer held ownership of the vehicles (since it had transferred it to the dealer or car rental company), which occurred with all the vehicles in question here.

  14. Once the invoice is issued to the final customer by the dealer — and at the latter's request — the Claimant proceeds to register ownership in favor of the final customer.

  15. The invoices issued by the Claimant for the sale of the vehicles in question identify them by their respective registration, with the case of dealers showing, in addition to the initial invoice with vehicle identification by chassis number, the subsequent Vehicle Tax assessment debit note, already indicating the registration corresponding to the respective chassis number.

  16. Notwithstanding the fact that such initial registration is necessarily effected in the name of the Claimant, all the vehicles in question here were, prior to the date of registration in Portugal, owned by dealers or car rental companies (despite such being omitted from the ownership registration).

  17. And in the case of dealers, the vehicles remained in their ownership until the moment of sale to the final customer, when the dealers request the Claimant to proceed with registration in favor of the final customer.

  18. As for car rental companies, they are also the ones that fill out and sign the model of transfer of ownership (as they are the true owners) which they send to the Claimant for registration, except in cases of financing where registration is requested in favor of the financing entity, which signs the request together with the car rental company, and in cases of registration cancellation — as occurs in the present case.

  19. In the case of dealers, although there are two successive transfers of vehicle ownership (the first prior to registration, from the Claimant to the dealer, and the second posterior to registration, from the dealer to the final customer), the registration does not reflect this material reality.

  20. For this reason (added to the existence of ownership registration in favor of the true owner), the Claimant did not assess or pay the tax — in the registration years in question, as occurred in previous years, nor was such assessment ever made available to it in accordance with law.

  21. The TA did not justify its action in that it ignored all explanations provided during the hearing, nor did it consider the documents attached — always proceeding from presumptions, not responding, in disregard of the principle of cooperation to which it was bound from the Claimant's perspective.

  22. In the case in question, the TA never clarified, according to the Claimant, even minimally on what assumption it based itself to substantiate the alleged ownership of the Claimant at the date of registration (nor the relevance of this fact): whether on the DAV, or on the registration request, or on the registration, which constitutes a defect in reasoning in violation of the provisions of articles 268 of the CRP and 77 of the LGT.

  23. In any case, both of these assumptions underlying the TA's action would be wrong, according to the Claimant, in the specific case.

  24. Whichever criterion — different from the legal criteria according to the Claimant — the TA based itself on, the Claimant alleges that it was never the owner of any of the vehicles in question, except prior to the date of registration (at a time when the tax-generating fact did not yet exist), and therefore ownership, as a condition of subjective incidence, did not exist in the sphere of the Claimant in any of the cases here under analysis.

  25. Concluding the Claimant, in this way, that the assessment acts suffer from a defect of violation of law — namely of article 3 of the IUC Code invoked by the TA — being sufficient reason for the contested assessments not to be able to subsist in the legal order, and therefore should be fully annulled.

  26. Second, even if the TA had based its action on law, and taken into account the initial registration in favor of the Claimant (which the TA never explained according to the Claimant), it also could never consider the Claimant as owner, since the initial registration in favor of the Claimant does not correspond to material reality.

  27. In sum, the Claimant maintains that there is an error of fact and law in the interpretation and application of the norms of subjective incidence of the IUC, and therefore the annulment of the 332 acts of assessment relating to the IUC, relating to 332 vehicles identified by registration number, should be determined, such amounts being owed to the Claimant, in addition to compensatory interest.

Arguments of the Respondent

The Respondent responded by arguing for the inadmissibility of the request for arbitral ruling and alleging, in summary, that:

  1. The Respondent considered that the aforementioned assessment acts should be maintained, there being no error in the interpretation of article 3 of the IUC Code.

  2. The Respondent understands that the Claimant's interpretation of the combination of legal norms, particularly the provisions of articles 3, 6, and 17 all of the IUC Code, as well as the procedures undertaken within the scope of importation and subsequent sale to dealers, is not responsible for the IUC, not being a taxpayer of the tax, defending that the Respondent's procedure, whether considering the registration request or initial registration, violates article 3, no. 1 of the IUC Code.

  3. The Respondent considers that the request for arbitral ruling should be judged inadmissible, thus maintaining the contested assessment acts.

  4. Within the scope of article 17 of the IUC Code, the introduction into consumption and assessment of tax on vehicles not possessing national registration is titled by the issuance of a Customs Vehicle Declaration ("DAV").

  5. Such issuance constitutes the tax-generating fact in accordance with and for the purposes set forth in article 5 of the Code of Vehicle Tax ("ISV").

  6. Pursuant to article 117, no. 44 of the Road Code, registration is requested from the IMTT by the entity that proceeds with the admission or introduction into consumption of the vehicle.

  7. On the other hand, article 24, no. 1 of the Motor Vehicle Registration Regulation (Decree-Law 55/75 of 12 February — hereinafter "RRA") establishes that "The initial registration of ownership of imported vehicles, admitted, assembled, constructed or reconstructed in Portugal is based on the respective request and proof of compliance with tax obligations relating to the vehicle."

  8. The Respondent argues that "the tax legislator, in articles 3 and 6 of the IUC Code, clearly established the premises regarding the tax-generating fact, as well as its due date, clearly establishing that such fact is constituted by ownership of the vehicle, as attested by registration or record in national territory".

  9. The Respondent understands that from the articulation between the scope of subjective incidence of the IUC and the constitutive fact of the corresponding tax obligation, clearly result from article 6 of the IUC Code the legal situations that generate the birth of the tax obligation, that is, registration or record in national territory.

  10. That is, the moment from which the tax obligation is constituted has a direct relationship with the issuance of the registration certificate, on which the facts subject to registration must appear (cf. the provisions of article 4/2 and article 6/3, both of the IUC Code, in article 10/1 of Decree-Law 54/75, of 12 February, and article 24 of the RRA).

  11. By virtue of the combination of the express norms and special attention to the provision of article 24 of the RRA, it follows that the initial registration of ownership of vehicles admitted (as is the case in the present proceedings), is based on the respective request and proof of compliance with tax obligations relating to the vehicle.

  12. That is, the issuance of a registration certificate implies the presentation of a DAV by the Claimant and the payment of the corresponding ISV tax, and automatically originates the registration of ownership of the vehicle, under article 24 of the RRA in the name of the entity that proceeded with its importation of the vehicle and requested registration, that is, the Claimant.

  13. Therefore, the first registration of each motor vehicle is made in the name of the importing entity, in this case the Claimant.

  14. This fact is clearly evident in the procedures undertaken by the Respondent and which underlie the IUC assessment acts, in which it is peremptory that the Claimant appears as owner of the motor vehicles in question here.

  15. Pursuant to article 24 of the RRA, the importer appears in the registration as the first owner of the vehicle and in that sense is, in accordance with what is established in articles 3 and 6 of the IUC Code, a subject taxpayer of the tax.

  16. It being, therefore, irrelevant that the Claimant has transferred, with the sale, the ownership of the motor vehicles to "third parties".

  17. Since the assignment to the Claimant of a registration certificate constitutes, pursuant to the provision of article 6 of the IUC Code, the tax-generating fact, and since the Claimant requested the issuance of a registration certificate, being the same registered in the name thereof, the premises of the tax-generating fact of the IUC and its due date are met, with the Claimant being a taxpayer of the tax.

  18. Therefore, according to the Respondent, having the Claimant requested, filled out the DAV, paid the ISV and requested the registration certificate, it inevitably fulfills the tax-generating fact (objective/subjective incidence), with payment being required thereof pursuant to article 3 of the IUC Code.

  19. It is the Claimant, according to the Respondent, that, as importer of the vehicles — which fills out the DAV, pays the ISV and requests the registration certificate — fulfills the tax-generating fact of the IUC and, concomitantly, the subjective incidence of the tax.

  20. Concluding that the understanding advocated by the Claimant is entirely out of line with legal norms, finding no minimum correspondence with the letter of the law.

  21. Since the tax legislator intentionally and expressly wanted the tax-generating fact to be considered, as attested by registration and record.

  22. Being that, in this way, the argumentative framework followed by the Claimant finds no minimum of correspondence with the ratio legis contained in article 6 of the IUC Code, nor with the mens legislatori.

  23. The argument on which the Claimant bases its claim rests on the assumption that, with the alienation of vehicles to its customers, it averts taxation under the IUC in light of article 3 of the IUC Code, invoking that, after such sales, they are registered in the motor vehicle registry office in the names of said customers, it being certain that regarding the two vehicles in question here their alienation was registered within the said legal period of 60 days.

  24. But, according to the Respondent, following the understanding advocated by the Claimant, the incidence of the tax would not occur upon registration or record, but in the name of the customer, completely disregarding the tax-generating fact established with the assignment of registration as provided in article 6 of the IUC Code.

  25. If the position defended by the Claimant were accepted (that article 3 of the IUC Code could never be interpreted in the sense of intending to tax only those who appear in the registration as owner, since the registration is merely an appearance of reality), the Respondent would have to proceed with the assessment of IUC with respect to that other person identified by the person appearing in the motor vehicle registration to whom it had previously assessed the IUC (or not, since it would be sufficient for the latter to remove its quality as taxpayer at the date of the tax fact).

  26. And, in turn, after assessing the IUC with respect to that other person, the latter could also claim and prove that in the meantime it had already concluded a contract of sale and purchase, financial lease, long-term rental, or other with another third party, but that the latter has also not registered.

  27. The Respondent would then have to reassess the IUC against that other (presumed) taxpayer and so on successively and indefinitely.

  28. Which, according to the Respondent, would put in question not only the limitation period for the tax but also, unequivocally, legal certainty and security (in that the institution of motor vehicle registration would cease to provide the security and certainty that constitute its main purposes), as well as the power-duty of the Respondent to assess taxes.

  29. It further adds that the Claimant's interpretation is wrong in that it is the very ratio of the scheme established in the IUC Code that constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the vehicle owner as shown in the motor vehicle registration.

  30. Furthermore, the invoices provided by the Claimant do not demonstrate, expressly and unequivocally in themselves, the supposed transfer of automobile ownership.

  31. Furthermore, none of the documents attached to the initial petition demonstrates full payment of the invoice amounts and the date on which such fact occurred.

  32. Therefore, the Claimant lacked, according to the Respondent, proof of such fact.

  33. Furthermore, the Respondent considering the dismissal decision of the Gracious Complaint to be understood that the Respondent did not fail to pronounce itself on the substance of the right to prior hearing exercised by the Claimant.

  34. The information underlying the decision is peremptory in stating that the right to hearing did not add new elements capable of putting into question the preliminary conclusions, conclusions that are based on the fundamental element: the property registrations resulting from information transmitted by the Registry and Notary Institute.

  35. Regarding the question of the alleged lack of reasoning (due to absence of relevant provisions of the IUC Code), it is a matter that, according to the Respondent, is dismissed considering that the Claimant did not fail to understand the legal framework on which the IUC assessments sub judice were based.

  36. The Respondent concludes that the understanding advocated by the Claimant to avert the subjective incidence and taxation of the IUC has no legal basis and violates the constitutional principles of legality and tax justice, of tax capacity, of equality, of legal certainty and security.

  37. The legal premises conferring the right to compensatory interest are not met, and even if that were not understood, it is undeniable that the Respondent merely complied with article 3/1 of the IUC Code, which imputes such quality to the persons in whose names the vehicles are registered, and therefore also by here necessarily the recognition of the right to payment of compensatory interest must fail.

Preliminary Matter

The Tribunal is competent and regularly constituted, pursuant to articles 2, no. 1, letter a), 5 and 6, all of the RJAT.

The parties have standing and procedural capacity, are legitimate and are represented, pursuant to articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22 March.

The petition is timely.

The joinder of petitions is admissible, which was requested pursuant to article 3, no. 1 of the RJAT and article 104 of the CPPT, considering that the assessment acts sub judice relate to the same tax, the same body is competent for the decision, and there is coincidence between the grounds of fact and law in question.

No nullities or preliminary questions affecting the entire proceeding are verified, and therefore it is now necessary to proceed with the merits of the petition.

3. Subject of the Arbitral Ruling

The following questions are presented to the Tribunal, in accordance with the terms described above:

  1. Should the decision dismissing the gracious complaint and the declaration of illegality of the 332 Vehicle Circulation Tax assessments be revoked, due to errors in the factual premises and consequent violation of article 3 of the IUC Code?

  2. Was there a violation of the right to hearing and participation?

  3. Is there an absence of reasoning for the assessment acts?

  4. Does the Claimant have the right to compensatory interest?

Statement of Facts (Proven Facts)

The following facts are considered proven, with relevance to the decision, based on the documentary evidence attached to the case file:

  1. The Claimant was notified of the 332 Vehicle Circulation Tax assessment acts relating to the year 2012 in question in the present case — as per notifications attached as Documents no. 2 attached with the initial petition.

  2. The Claimant filed a gracious complaint against the IUC assessment of the 332 assessments in question, in the total value of € 62,097.37, relating to 332 vehicles, all new, which was dismissed on 3 April 2017 — Documents no. 10 and 1 attached with the initial petition.

  3. The Claimant proceeded with payment of the IUC for each of the vehicles in question — as per Document no. 11 attached with the petition.

  4. The Claimant is a commercial company engaged in the trade of motor vehicles, representing various brands, namely B…, C…, D…, E…, F… and B… Commercial Vehicles, with the 332 vehicles in question having all been commercialized by the Claimant within the scope of its normal activity of selling new automobiles and in compliance with the aforementioned concession contracts or supply agreements — as per Documents no. 3 and 4 attached with the petition.

  5. The Claimant only proceeded with the registration of vehicles it ordered, in execution of the aforementioned contracts and supply agreements, when the sales had already been completed and the transactions concluded, in accordance with the delivery schedule stipulated and under the delivery conditions required by car rental companies in order to proceed with the delivery of already registered vehicles.

  6. None of the vehicles in question here, whose IUC assessment for the registration year is being contested, was acquired by the Claimant for itself or with the intention to retain ownership or use of the vehicle after obtaining registration in Portugal.

  7. In all 332 cases, the Claimant proceeded to issue the sales invoice up to the date of registration assignment to the vehicle in Portugal, as per invoices attached as annex to Document no. 10 of the petition.

  8. In the case of the Claimant's sales to dealers, the invoice is issued prior to the registration date (with the vehicles being identified on the invoice by chassis number, and subject to a subsequent Vehicle Tax assessment debit note, already with registration); and in the case of car rental companies, the invoice date coincides with the registration date — Documents no. 10 attached with the petition.

  9. The initial registration of ownership was made in favor of the Claimant.

The proven facts result from the tribunal's conviction based on examination of the documents attached to the case file and the absence of dispute regarding them.

There are no unproven facts with interest for the decision in the case, considering the possible legal solutions.

Statement of Law

On the Appreciation of the Legality of the Contested Assessment Acts

The question underlying the present request for arbitral ruling takes into account the Vehicle Circulation Tax assessments that the Claimant paid, relating to the year 2012, as per assessments attached to the case file, in a total of 332.

For this purpose, it will be necessary to determine the subjective incidence of the Vehicle Circulation Tax.

Regarding the Interpretation and Application of the Norm of Subjective Incidence of the IUC and the Date on Which the Tax is Due

Article 3, no. 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 names the same are registered."

The tax laws, pursuant to article 11 of the General Tax Law, are interpreted in accordance with general principles, saving only the exceptions and particularities dictated by the norm subject to interpretation.

The object of interpretation of article 3, no. 1 of the IUC Code lies in the expression "being considered as" (considerando-se), and it is imperative to determine whether the legislator, with this expression, wished to maintain, or not, the nature of a presumption. That is, whether the formulation used by the legislator can be attributed with a presumptive sense.

In the wake of what is referred to in decisions 43/2014-T and 207/2017-T "it is verified, by way of example, that in articles 243, no. 3 of the Civil Code and 45, no. 6, and 89-A, no. 4 of the General Tax Law, the expression "is considered" (considera-se) is also used, and yet we are before legal presumptions, so that, in accordance with the general rules of interpretation provided in article 9, no. 2 of the Civil Code, it is considered that the minimum of verbal correspondence is assured, for purposes of determining the legislative thought that is objectified in the norm in question — literal element."

Further teaches Jorge Lopes de Sousa (in CPPT, Annotated and Commented, Vol. I, 6th Edition, Área Editora, p. 589) that in matters of tax incidence, presumptions can be revealed by the expression "it is presumed" (presume-se) or by similar expression, mentioning various examples of such presumptions, referring to that contained in article 40, no. 1 of the IRS Code, in which the expression "it is presumed" (presume-se) is used and that contained in article 46, no. 2 of the same Code, in which the expression "is considered" (considera-se) is used, as an expression with an effect similar to that and, likewise, constituting a presumption; In the legal formulation set forth in no. 1 of article 3 of the IUC Code, in which a presumption has been established, revealed by the expression "being considered as" (considerando-se), of similar meaning and equivalent value to the expression "being presumed" (presumindo-se), in use since the creation of the tax in question.

That is, both expressions have been used by the legislator without it being possible to conclude that the latter did not wish to establish, in fact, a legal presumption, and it cannot be taken that the alteration of the expression could lead to a different interpretative sense.

On the other hand, as is extracted from the aforementioned decision 43/2014-T whose position is upheld "still within the scope of the elements of interpretation in accordance with article 9 of the Civil Code, it is important to consider the historical element. Thus, recalling Decree-Law no. 599/72, of 30 December and Decree-Law no. 116/94, of 3 May, regarding subjective incidence, the presumption was provided that the taxpayers of the IUC are the persons in whose names the vehicles were registered as of the date of assessment."

Thus, regarding this element of interpretation it does not appear that the Respondent has the right view.

On the other hand, considering the rational and teleological element, the IUC has as its premise the environmental and road cost of the effective use of the automobile, and therefore does not have as its recipients the importers of the vehicles, since the activity of the latter does not give rise to any environmental cost.

The IUC thus has underlying the principle of equivalence provided in article 1 of the IUC Code, with the aim of "burdening taxpayers in the measure of the environmental and road cost that they cause, in implementation of a general rule of tax equality".

Thus complying with the constitutional command provided in article 66, in which sustainable development requires that the State ensure "that fiscal policy is compatible with development with protection of the environment and quality of life" (letter h) of no. 2).

Promoting a principle of "polluter-pays", fulfilling the assumption of material equality among all citizens who give rise to environmental cost, embodying the IUC in this way the environmental concerns that fiscal policy imposes.

Now, considering that the tax legislator wished for nothing other than to admit a rebuttable presumption in article 3, no. 1 of the Code of Vehicle Circulation Tax would be to violate the principle of equivalence, causing to fall on the owner appearing in the registration and not on the actual owner the payment of the tax, even if that person were not (as they would not be) the one giving rise to the environmental and road cost that the tax burden wished to impose.

Thus, also in accordance with this element, article 3, no. 1 of the IUC Code should be interpreted in the sense that a true presumption is at issue.

From the literal element of article 3, no. 1, the legislator, contrary to what was done previously, used the expression "being considered as" (considerando-se) and not "being presumed" (presumindo-se), it could be questioned whether the nature of presumption is or is not at issue in the present norm under analysis, but the truth is that from a complete analysis of the legislation and the absence of any provision that confers on the registration any effect other than that referred to below, we are led to conclude that the legislator indeed wished to use both expressions with identical meaning.

Thus, in the wake of the decision rendered in process no. 634/2016-T of CAAD "the relevance and interest of the presumption in question, which historically has been revealed by means of the expression "being presumed" (presumindo-se) and which now serves the expression "being considered as" (considerando-se), resides in the truth and justice that, by this means, is conferred to tax relations and which embody fundamental tax values, allowing to tax the real and effective owner and not that person who, by circumstances of a diverse nature, sometimes passes, for a time, as a mere apparent and false owner. If the case were not so considered, not admitting and highlighting the presentation of evidentiary elements intended to demonstrate that the effective owner is, in fact, another person from the one appearing in the registration and who was initially, and in principle, supposed to be the true owner, those values would be objectively postponed."

Concluding thus that article 3, no. 1 of the Code of Vehicle Circulation Tax establishes a presumption, and that this is rebuttable pursuant to article 73 of the General Tax Law — "the presumptions established in the norms of tax incidence always admit proof to the contrary, and therefore are rebuttable".

This being established, it is important now to verify whether the Claimant fulfills the burden of rebutting the presumption that runs "against" it, by being the one appearing in the motor vehicle registration as the owner of the vehicle, of being considered the taxpayer of the IUC.

By virtue of this presumption, the Claimant would have to demonstrate that it is not, on the one hand, the effective owner and, on the other, from when it is not, pursuant to article 346 of the Civil Code.

Thus, in the present case, what the Claimant must prove, in order to rebut the presumption arising from both article 3 of the IUC Code and from the Motor Vehicle Registration itself, is that it Claimant was not the owner of the vehicles in question during the period to which the contested assessments relate. It proposes to prove, as results from the case file, that the ownership of the vehicles did not belong to it in the periods to which the assessments relate. Thus presenting the sales invoices of 332 vehicles contained in the documents attached to the Gracious Complaint and attached to the case file as document numbers 10, which are given as fully reproduced for all legal purposes.

It was indeed the Claimant that was required to rebut the presumption of not being a subject taxpayer of the tax at the time the tax-generating facts occurred, offering for this purpose concession and supply contracts and sales invoices.

In view of the invoices attached, of which the TA already had knowledge during the hearing, considering the practice that results from the type of commercial activity of the Claimant and of the dealers and car rental companies, as well as the tax relevance of the invoices, all within the knowledge of the Respondent, we understand that the sales invoices presented enjoy a presumption of truthfulness and, in this sense, of suitability and sufficient force to rebut the presumption resulting from the assessments, in accordance with the provision of article 75 of the General Tax Law.

In this sense, the invoices attached are suitable to overcome the presumption that the Claimant was, at the date of the IUC assessments, the owner of the motor vehicles.

It follows from this that at the date on which the IUC was due, those holding ownership of the motor vehicles were the legitimate owners and not the Claimant.

In all situations in which, as is the case in question, the subject taxpayer of the Vehicle Tax demonstrates that it transferred the vehicles in question to third parties before the deadline for registration, it should be concluded that it succeeded in rebutting the presumption established in article 3, no. 1 of the Code of Vehicle Circulation Tax.

For all this, in the specific case, the Claimant, as a Registered Operator, although it did, in the exercise of its commercial activity, import the vehicles in question, proceed with their introduction into consumption through the issuance of the Customs Vehicle Declaration, pay the Vehicle Tax and request, from the IMTT, the assignment of registration, is not a taxpayer of the Vehicle Circulation Tax, since it succeeded in demonstrating, through the attachment of the means of proof identified, that within the period of 60 days for registration it transferred the vehicles to third parties.

In this way, having the Claimant demonstrated that the vehicles in question were transferred within the period of 60 days for registration and, consequently, before the tax became due, one can only conclude that the subjective incidence of article 3, no. 1 of the IUC Code is not verified, with the Claimant not being the debtor of the tax.

All of which the Claimant demonstrated to the TA at the hearing itself, but which, nevertheless, ended up dismissing the gracious complaint even though the Respondent was duly clarified independently of any mention in the registration.

We now analyze the matter of registration below.

The Value of Registration

Pursuant to article 7 of the Land Registry Code, applicable ex vi article 29 of Decree-Law no. 54/75 (Motor Vehicle Registration), which "the definitive registration constitutes a presumption that the right exists and belongs to the person registered in the precise terms in which the registration defines".

With a view to appreciation, it is necessary to analyze the effects of the registration of the vehicle.

The registration of the right of ownership of the vehicle has merely a declarative effect and not a constitutive effect of the right, whereby it is configured as a presumption of the existence of the right, in the terms in which it is registered, which can be rebutted, that is, it admits proof to the contrary.

The definitive registration is nothing more than a rebuttable presumption, admitting therefore counterproof, as follows from the law and jurisprudence has signaled, and can be seen among others in the Decisions of the Supreme Court of Justice no. 03B4369 of 19-02-2004 and no. 07B4528 of 29-01-2008, available at: www.dgsi.pt;

At the level of the IUC Code, there is no legal provision that attributes to the vehicle registration any legal effect, including the condition of validity or effectiveness of the underlying transaction, that is, of the purchase and sale contract of which the vehicle is its mediate object.

If this is so, that is, there being no other effect to be attributed to the act of registration and considering that ownership is thus transferred by means of the execution of a purchase and sale contract, without any form being legally required for this, with the principle of freedom of form prevailing, pursuant to article 879, letter a) of the Civil Code, one of the effects of this contract is exactly the real effect of the transfer of the title of the right.

The acquirees of the vehicles become owners of those same vehicles via the execution of the corresponding purchase and sale contracts, with registration or without it.

Therefore, regardless of the mention that appears in the motor vehicle registration, it is certain that, as referred to above, the Claimant demonstrated that it was not the owner of any of the vehicles in question in the present case.

In light of the foregoing, it becomes clear that the legislative thought points in the direction that the provision of no. 1 of article 3 of the IUC Code establishes a presumption "juris tantum", and consequently rebuttable, allowing thus that the person who in the registration is inscribed as owner of the vehicle may present evidentiary elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, to whom ownership has been transferred, as was the case.

For all this, and in the wake of the decision rendered within the scope of the aforementioned process 624/2016-T "given the facts described above, it is important to emphasize that the already-mentioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, or those relating to the logical elements of interpretation, of a historical nature or of a rational order, all point in the direction that the expression "being considered as" (considerando-se) has a meaning equivalent to the expression "being presumed" (presumindo-se), and therefore it should be understood that the provision of no. 1 of article 3 of the IUC Code establishes a legal presumption that, in view of article 73 of the LGT, where it is established that "The presumptions established in the norms of tax incidence always admit proof to the contrary", will necessarily be rebuttable, which means that the taxpayers are, in principle, the persons in whose names such vehicles are registered. They will, therefore, be those persons, identified in those conditions to whom the TA must, necessarily, direct itself;"

For this reason, considering that the owner of the vehicles at the date of the tax-generating fact was not the Claimant, considering the sales made within the scope of the concession and car rental contracts and respective invoices, that is, the Claimant was not the taxpayer of the tax, the requirements of article 3, no. 1 of the IUC Code are not verified, which determines the annulment of the corresponding assessment acts.

Regarding the existence of other questions pertaining to the legality of the assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of defects, as provided in article 124 of the CPPT, that proceeding on the request for arbitral ruling based on defects that prevent the renewal of the contested assessments, becomes prejudiced because useless the knowledge of other defects, it does not seem necessary to address the other questions raised.

Reimbursement of the Total Amount Paid

Pursuant to the provision of letter b) of no. 1 of article 24 of the RJAT and in accordance with what is established therein, the arbitral decision on the merits of the claim that no appeal or challenge may be taken binds the tax administration from the end of the period provided for appeal or challenge, the latter being required, in the exact terms of the success of the arbitral decision in favor of the taxpayer and until the end of the period provided for the voluntary execution of the sentences of the tax courts "To restore the situation that would exist if the tax act subject to the arbitral decision had not been performed, adopting the acts and operations necessary for that effect".

These are legal commands that are in complete accord with the provision of article 100 of the LGT, applicable to the case ex vi the provision of letter a) of no. 1 of article 29 of the RJAT, in which it is established that "The tax administration is obligated, in case of full or partial success of complaints or administrative appeals or of a judicial process in favor of the taxpayer, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, with the payment of compensatory interest being due, in the terms and conditions provided by law";

The case contained in the present proceedings raises the manifest application of the aforementioned norms, given that as a consequence of the illegality of the assessment acts referred to in this proceeding, there must, by virtue of those norms, be a reimbursement of the amounts paid, in this case solely to the title of the tax paid, since there was no place for compensatory interest, as a way to achieve the restoration of the situation that would exist if the illegality had not been committed.

On the Right to Compensatory Interest:

The tax acts in question have their genesis in the presumption, derived from the registration, contained in article 3, no. 1 of the IUC Code.

At the moment they were performed, the TA did not incur any error of fact or law. The taxpayer could, however, rebut the presumption, particularly by means of a gracious complaint (See CPPT, article 64). And in the case in question, the taxpayer did so by this means.

Which means that with the dismissal of the gracious complaint, the TA incurred in error, being thus from the moment in which it rendered that decision that interest will be due.

We follow the sense of the decision in process 53/2017-T in the passage that is transcribed below:

"Along with the annulment of the assessments and consequent reimbursement of the amounts improperly paid, the claimant further requests that it be recognized the right to compensatory interest, pursuant to article 43 of the LGT.

Indeed, pursuant to the provision of no. 1 of the aforementioned article, compensatory interest is due "when it is determined, in a gracious complaint or judicial challenge, that there was error attributable to the services from which results payment of the tax debt in an amount greater than legally due." In addition to the means referred to in the provision being transcribed, we understand that, as follows from no. 5 of article 24 of the RJAT, the right to the aforementioned interest may be recognized in the arbitral proceeding and, thus, the petition is addressed.

The right to compensatory interest to which the provision of the LGT above referred alludes presupposes that tax has been paid in an amount greater than that due and that such is derived from error, of fact or law, attributable to the services of the TA.

In the present case, even if it is recognized that (…) the tax paid by the claimant is not due, because the claimant is not the taxpayer of the tax obligation, determining therefore the respective reimbursement, it is not apparent that, in its origin, is found the error attributable to the services that determines such right in favor of the taxpayer.

Indeed, in promoting the official assessment of the IUC considering the claimant as a taxpayer of this tax, the TA merely complied with the provision of no. 1 of article 3 of the IUC Code, which, as abundantly referred to above, imputes such quality to the persons in whose names the vehicles are registered.

By the other, also as already concluded, the aforementioned norm has the nature of a legal presumption, from which results, for the TA, the right to assess the tax and demand it from those persons, without need to prove the facts that lead to it, as expressly provided in no. 1 of article 350 of the Civil Code.

However, regarding the assessments that constitute the object of the present request for arbitral ruling, it is important to know whether the act of dismissal of the claim of the now Claimant, formulated in the gracious complaint opportunely filed, configures, or does not, error attributable to the Tax Administration for purposes of the demandability of compensatory interest under article 43, no. 1 of the LGT.

In this matter, attention is paid to the orientation resulting from the jurisprudence of the Supreme Administrative Court, which goes in the direction of recognizing that a decision of the Tax Administration that dismisses a request for annulment of a recognized illegality of assessment and consequent restitution of tributes improperly collected constitutes error attributable to the services.

According to the aforementioned jurisprudence — set forth in a learned decision of 28 October 2009 in Proceeding 601/09 — compensatory interest is due from the date of dismissal of the gracious complaint until the date of processing of the respective credit note, pursuant to article 61 of the CPPT".

For all this, we conclude that the TA did not incur any error of fact or law when the tax acts were performed, but with the waiver of the presumption, it maintained, nonetheless, the contested acts and, consequently, the demand for payment of the tax when, had it recognized the illegality, it should have determined the return of the amount paid by the Claimant.

Not having done so, it incurred, this time yes, in error, and such error determined that the Claimant continued deprived of the amount that it improperly paid.

Therefore, although the injury to the Claimant resulting from the improper payment to which it was obligated does not, in limine, result from error attributable to the services and does not confer the right to indemnification, the non-recognition by the TA, when deciding the request for official review, of the illegality in which it had incurred, was a source of injury to the Claimant, translated into the unavailability of the amount it had paid.

Adopting the orientation referred to, the Claimant is recognized as having the right to compensatory interest with reference to the assessments to which the present case refers and which, by this decision, constitute the object of annulment, but only from 3 April 2017, the date on which the gracious complaint request was decided.

On the Liability for Payment of Arbitral Costs:

Pursuant to article 527, no. 1 of the Civil Procedure Code, ex vi article 29, no. 1, e) of the Legal Framework for Tax Arbitration, it is established that the party that has given rise to the costs shall be condemned in costs or, if there is no judgment on the merits of the action, whoever obtained benefit from the proceeding.

However, no. 2 of the aforementioned article specifies the expression "has given rise to" understanding that it refers to the losing party, and in this sense and being the law clear and evident regarding liability for arbitral costs, we understand that the Respondent should be condemned to pay the arbitral costs.

DECISION

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

  1. To judge the request for revocation of the decision dismissing the gracious complaint and the declaration of illegality of the 332 Vehicle Circulation Tax assessments, regarding all vehicles whose registrations are identified in the case file, as procedurally sound, thereby annulling the corresponding assessment acts, and the consequent restitution of the amount of € 62,097.37.

  2. To judge the request for compensatory interest from the date of dismissal of the gracious complaint, 3 April 2017, until the date of processing of the respective credit note, in accordance with article 61 of the CPPT, as procedurally sound.

  3. To condemn the Respondent to pay the costs of the present proceeding.

Value of the Proceeding

In accordance with the provision of articles 306, no. 2 of the CPC and 97-A, no. 1 of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is set at € 62,097.37.

Arbitration Fee

The value of the arbitration fee is set at € 2,448.00, in accordance with Table I attached to the Regulation of Costs of Tax Arbitration Proceedings.

Let it be notified.

Lisbon, 17 January 2018

The Arbitrators

(José Poças Falcão)

(Álvaro Caneira)

(Marisa Almeida Araújo)

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when vehicles are registered to a dealer but intended for resale?
Under Portuguese IUC law, liability for vehicle circulation tax generally falls on the registered owner as of January 1 of the tax year or at the moment of registration. However, when a dealer registers vehicles solely for administrative purposes related to ISV assessment procedures, while having already transferred economic ownership through sales invoices to dealer networks or rental companies before registration, the question of subjective incidence becomes disputed. Dealers argue that vehicles held exclusively for commercial resale, never acquired for the dealer's own use, should not trigger IUC liability despite formal registration requirements.
Can a vehicle dealer challenge IUC assessments through tax arbitration at CAAD?
Yes, vehicle dealers can challenge IUC assessments through arbitration at CAAD (Centro de Arbitragem Administrativa) under the RJAT (Legal Framework for Arbitration in Tax Matters, Decree-Law 10/2011). The process involves filing a request for arbitral ruling, constitution of an arbitral tribunal with three arbitrators, submission of the tax authority's response with administrative files, optional hearing or written arguments, and a final decision within statutory deadlines. Dealers can challenge multiple related assessments in a single arbitration proceeding, as demonstrated in Process 408/2017-T involving 332 IUC assessments.
What is subjective incidence (incidência subjetiva) in the context of Portuguese IUC tax?
Subjective incidence (incidência subjetiva) in Portuguese IUC tax refers to the determination of who qualifies as the taxable person obligated to pay the vehicle circulation tax. The IUC Code establishes that the taxable person is typically the vehicle owner on January 1 of each tax year or at the moment of initial registration. However, disputes arise when formal registration ownership diverges from actual economic ownership, particularly for dealers who register vehicles in their name for ISV procedural compliance while having already sold them commercially. The subjective incidence analysis examines whether tax liability should follow legal form (registered owner) or economic substance (actual owner with possession and use rights).
How does the CAAD arbitral tribunal process work for contesting multiple IUC tax assessments?
The CAAD arbitral tribunal process for contesting IUC assessments begins with filing a request for arbitral ruling under RJAT provisions. The CAAD President accepts the request and notifies the Tax Authority, then appoints three arbitrators if parties don't designate their own. Following tribunal constitution, the Tax Authority files its response and submits the administrative file. Parties may waive the arbitral hearing in favor of written arguments. The tribunal establishes a deadline for the final decision (typically several months from constitution). Multiple related tax assessments can be challenged together in one proceeding, with the tribunal examining the legality of both the underlying assessments and any administrative decisions dismissing prior complaints.
Are compensatory interest (juros indemnizatórios) awarded when IUC assessments are annulled by arbitration?
Yes, compensatory interest (juros indemnizatórios) are typically awarded when IUC assessments are annulled by arbitration tribunals. Under Portuguese tax law, when taxpayers successfully challenge illegal tax assessments and obtain refunds of amounts improperly paid, they are entitled to compensatory interest from the date of payment until restitution. This compensates taxpayers for the financial loss of having funds unlawfully retained by the Tax Authority. In arbitration requests, claimants routinely seek both annulment of illegal assessments and restitution of amounts paid plus compensatory interest as part of the requested relief, with tribunals having authority to award such interest as a legal consequence of annulling improper tax assessments.