Process: 425/2017-T

Date: December 18, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD Process 425/2017-T addresses IUC subjective incidence when a vehicle has been sold but registration remains unchanged. A company challenged IUC assessments for 2011-2015 for a vehicle registered in its name but allegedly sold in 2005 via purchase contract. The Tax Authority argued Article 3(1) of the IUC Code makes the registered owner the taxpayer, regardless of actual ownership. The arbitral tribunal followed established CAAD case law, ruling that Article 3(1) establishes a rebuttable legal presumption, not an absolute rule. While the IUC Code states taxpayers are vehicle owners 'considered as such' based on registration, this presumption can be overcome with proof the vehicle was transferred before tax became due. The company presented a 2005 sales invoice and payment receipt as evidence. The decision confirms that former owners can challenge IUC liquidations through arbitration by proving ownership transfer, even without formal registration changes. This ruling reinforces taxpayer protection, allowing rebuttal of the registration-based ownership presumption with contractual documentation. The case demonstrates CAAD's role in resolving IUC disputes where administrative and hierarchical appeals fail, providing an alternative forum for contesting tax assessments based on outdated vehicle registration databases.

Full Decision

ARBITRAL DECISION

I. Report

  1. A…, Ltd., legal entity no. …, with registered office at [Street] …, …-… …, requested the establishment of an arbitral tribunal in tax matters, raising a request for arbitral ruling against the acts of assessment of the Single Vehicle Circulation Tax (IUC), together with compensatory interest, relating to the taxation periods of 2011, 2012, 2013, 2014 and 2015 and to the motor vehicle with registration number …-…-…, in the total amount of € 5,351.03.

  2. As the basis for the request, filed on 11-07-2017, the Applicant alleges, in summary, that the vehicle in question was no longer in its possession during the aforementioned taxation periods, by virtue of having already been transferred to a third party, by a purchase and sale contract concluded at a time prior to the date the tax to which the disputed assessments relate became due.

  3. In response to the request, the Tax and Customs Authority (AT) rendered a ruling to the effect that the present request for arbitral ruling was without merit, with the disputed tax acts remaining in the legal system and, accordingly, for the discharge of the respondent entity.

  4. The request for establishment of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 19-07-2017.

  5. Pursuant to the provision in subsection a) of article 6, number 2, and subsection b) of article 11, number 1, of Decree-Law no. 10/2011 of 20/01, as amended by article 228 of Law no. 66-B/2012 of 31/12, the Ethics Council appointed the undersigned as arbitrator of the single arbitral tribunal, who communicated acceptance of the assignment within the applicable time period and notified the parties of that appointment on 01-09-2017.

  6. Duly notified of that appointment, the parties did not express the intention to refuse the appointment of the arbitrator, in accordance with the combined terms of article 11, number 1, subsections a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.

  7. Thus, in accordance with the provision in subsection c) of article 11, number 1 of the RJAT, as amended by article 228 of Law no. 66-B/2012 of 31/12, the single arbitral tribunal was established on 19-09-2017.

  8. The properly constituted arbitral tribunal is materially competent, in view of the provision in articles 2, number 1, subsection a), of the RJAT.

  9. The parties have legal personality and capacity and have standing (articles 4 and 10, number 2 of the RJAT, and article 1 of Administrative Order no. 112-A/2011 of 22/03).

  10. Given the knowledge derived from the procedural documents filed by the parties, which is considered sufficient for the decision, the Tribunal decided to dispense with the hearing to which article 18 of the RJAT refers.

II. Facts

  1. With relevance for the assessment of the request for arbitral ruling, the following factual elements are highlighted, which, on the basis of the documentary elements attached to the case file, are considered proven:

11.1. The Applicant was the recipient of official assessments of IUC and compensatory interest, effected by the Tax and Customs Authority pursuant to the provision in article 18 of the IUC Code, relating to the taxation periods of 2011, 2012, 2013, 2014 and 2015 and to the motor vehicle with registration number …-…-….

11.2. The Applicant submitted an administrative appeal against the aforementioned assessments, on the grounds that it was no longer the owner of the said vehicle on the dates the tax in question became due, proving such fact by means of a sales invoice issued on 17-02-2005 and receipt of the corresponding amount dated 9 March following.

11.3. The said appeal having been expressly dismissed, the Applicant, on 12-01-2017, filed a hierarchical appeal of the decision.

11.4. The hierarchical appeal was dismissed by order of the Director of Finance of Leiria dated 10-04-2017, notified to the Applicant on 13 of the same month.

11.5. The dismissal decision is reasoned as follows: "The said tax is due until cancellation of the registration by virtue of scrapping effected in accordance with law, in accordance with article 4, number 3 of the IUC Code, cancellation of which is the responsibility of the IMT, IP.

The AT only assesses the tax in accordance with the elements that constitute the IUC database, the updating of which is effected by the sending of files by the aforementioned entities. From consultation of the IRN, IP and the IMR, IP, it is found that this vehicle remains registered in the name of the appellant and the registration has not been cancelled.

Under IUC the ownership of vehicles is taxed, irrespective of their respective use or enjoyment."

  1. There are no facts relevant to the merits decision that have not been proven.

III. Cumulation of Claims

  1. The present request for arbitral ruling relates to various IUC assessments. However, given the identity of the tax facts, of the tribunal competent to decide and of the factual and legal grounds invoked, the tribunal considers that nothing prevents, in view of the provision in articles 3 of the RJAT and 104 of the CPPT, the cumulation of claims.

IV. Law

  1. In the request for arbitral ruling the Applicant submits for consideration of this tribunal the legality of the acts of assessment of IUC and compensatory interest associated with them, relating to the periods from 2011 to 2015 and to the vehicle with registration number …-…-…, invoking the fact that, on the date to which the tax facts giving rise to them relate, the vehicle to which they relate had already been transferred to a third party, and that consequently it does not have the status of taxpayer (passive subject) of the assessed tax.

  2. It is therefore necessary to determine whether the Applicant should or should not be considered a taxpayer of IUC with respect to the vehicles and period to which the tax relates, considering that the same, although it continued then to be registered in its name, had already been transferred by a purchase and sale contract.

  3. With respect to this matter, article 3 of the IUC Code provides, in its number 1, in the version in force at the date of the facts to which the disputed assessments relate, that: "1 - Taxpayers (passive subjects) 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."

  4. According to the understanding of the Respondent, the said provision does not contain any legal presumption, considering that "the tax legislator ... expressly and intentionally established that these (the IUC taxpayers) are the owners (or in the situations provided for in number 2, the persons therein mentioned), being considered as such the persons in whose name they are registered"

  5. For its part, the Applicant contends that that provision establishes a legal presumption, rebuttable by proof to the contrary on the part of the transferor, considering that for that purpose the present request appears suitable.

  6. This matter has been the subject of numerous decisions within the scope of arbitral tribunals operating under CAAD, generally to the effect of allowing the respective claims, on the grounds that the provision in question contains a legal presumption that admits proof to the contrary [i].

  7. Adhering without reservation to the position stated above, it is dispensed with as unnecessary and tedious the reproduction of the respective reasoning, since nothing new is advanced on that matter in the present case.

On the Merits of the Claim

  1. Concluding, in line with the approach that has invariably been followed by arbitral case law, that the provision concerning the subjective scope of IUC establishes a rebuttable presumption, it is important to analyze the documentation offered by the Applicant in order to determine whether it constitutes or not sufficient proof for its rebuttal.

  2. As stated above, in the matter of facts, in the situation to which the present claim relates, what is at issue is the taxation of a motor vehicle which, on the date the tax became due, would already be the property of a third party, as a consequence of and due to a purchase and sale contract concluded with the Applicant.

  3. With respect to the situation referred to, there is presented as evidence a copy of the invoices that evidenced the transfer, accompanied by a copy of the corresponding receipt of the sale amount.

On the Rebuttal of the Presumption

  1. Presumptions concerning tax applicability always admit proof to the contrary, as expressly provided in article 73 of the General Tax Law, and can be rebutted through the contradictory procedure specifically provided for in article 64 of CPPT or, alternatively, by means of an administrative appeal or by judicial challenge of the tax acts that are based on them.

  2. In the present case, the Applicant did not use that specific procedure, whereby the present request for arbitral ruling is a proper means for rebutting the presumption concerning the subjective scope of IUC that supports the tax assessments whose annulment is the subject of the claim, since it is a matter that falls within the scope of material jurisdiction of this arbitral tribunal (articles 2 and 4 of RJAT).

  3. The Applicant being registered in the Motor Vehicle Register as owner of the vehicle in the taxation periods to which the disputed assessments relate, and the vehicle in question having, on the date the tax became due, already passed to the ownership of a third party by a purchase and sale contract, it remains to evaluate the evidence presented in order to determine whether it is sufficient to rebut the presumption established in article 3, number 1 of the same Code.

  4. For the rebuttal of the said presumption, derived from the registration in the motor vehicle register, the applicant offers a copy of the sales invoice issued on 17-02-2005, therefore at a date prior to the date the tax relating to the taxation periods to which the assessments relate became due.

On the Rebuttal of the Presumption Based on Commercial Invoices

  1. Pronouncing itself on the documentary evidence presented, the Respondent alleges that the invoices, in general, do not constitute suitable documents to establish the proof sought to the effect that the Applicant is not the owner of the vehicle in the taxation periods to which the assessments in question relate.

  2. In that regard, the Respondent contends that "Invoices are not apt to establish the conclusion of a bilateral contract such as a purchase and sale, since such documents do not reveal by themselves an essential and unequivocal manifestation of will (i.e., acceptance) on the part of the purported purchasers."

  3. Moreover, according to the Respondent, "the rules of motor vehicle registration have not yet reached the point where mere invoices unilaterally issued by the Applicant can replace the motor vehicle registration request, namely a document approved by official form... The unequivocal manifestation of will of the purported purchasers could be evidenced by the attachment of a copy of the said official form for motor vehicle property registration, since it is a document signed by the intervening parties."

  4. It is therefore necessary to determine whether the invoices that evidence commercial transactions constitute evidence for the rebuttal of the presumption contained in article 3 of the IUC Code and, if so admitted, whether the copy of the invoice and receipt presented by the Applicant constitute sufficient proof for that purpose.

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

  6. Being contracts that involve the transfer of ownership of movable property, by means of payment of a price, they have as essential effects, amongst others, that of delivering the thing (Civil Code, articles 874 and 879).

  7. However, where the issue is contracts of purchase and sale that have as their object motor vehicles, in which registration is mandatory, their proper performance presupposes the issuance of a statement of sale necessary for registration in the register of the corresponding acquisition in favor of the purchaser, as has been understood by the case law of the superior courts.[ii] Such statement, relevant for registration purposes, may constitute proof of the transaction, but does not constitute the sole or exclusive means of proof of the transaction.

  8. For registration purposes, it is also not required any special formalism, it being sufficient to present to the competent entity a request signed by the purchaser and confirmed by the seller, who, by means of a statement of sale, confirms that the ownership of the vehicle was acquired by that person by a verbal contract of purchase and sale (see Motor Vehicle Registration Regulation, article 25, number 1, subsection a).[iii]

  9. Notwithstanding these being the rules deriving from the provisions of civil law relating to the informality of the transfer of movable property and, where applicable, of the respective registration, it cannot fail to be borne in mind also that, in the situation under analysis, we are dealing with commercial transactions effected by a company in the course of its business activity.

  10. In that context, the selling company is bound to the observance of specific accounting and fiscal rules, in which invoicing assumes special relevance.

  11. Firstly, by virtue of fiscal rules, the entity transferring the goods is obliged to issue an invoice with respect to each transfer of goods, whatever the status of the respective purchaser, whether it be a company subject to VAT or an end consumer (VAT Code, article 29, number 1, subsection b).

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

  13. It is on the basis of that document issued by the supplier of the goods that the purchaser, when it is an economic operator, will be entitled to deduct the VAT to which it is entitled (VAT Code, article 19, number 2) - unless the tax borne on the acquisition of the vehicle, by reason of its characteristics, is not deductible - and record in accounting the expense of the transaction (Corporate Income Tax Code, articles 23, number 6 and 123, number 2).

  14. For its part, it is also on the basis of the invoices issued that the supplier of the goods should record in accounting the respective income, as follows from the provision in subsection b) of number 2 of article 123 of the Corporate Income Tax Code.

  15. Provided that they are issued in the legal form and constitute supporting documents of the accounting entries in organized accounting in accordance with commercial and fiscal legislation, the data contained therein are covered by the presumption of truthfulness to which article 75, number 1, of the General Tax Law refers.

  16. Considering, therefore, the importance attributed by tax legislation to invoices issued in accordance with the law by commercial companies in the course of their business activity, and the presumption of truthfulness of the transactions evidenced by them, it cannot fail to be considered that they may constitute, by themselves, sufficient proof of the transfers invoked by the Applicant.

  17. In the present case it is found that the invoice that evidences the invoked transaction identifies the selling company, the purchaser, and, by the respective registration number, the vehicle transferred and the price of the sale, as well as the date on which they were issued. Complementing the issued invoice with the receipt of the amount agreed for the sale, it is established that the price of the transaction was duly paid.

  18. In these terms it is considered that the invoice and corresponding receipt presented by the Applicant constitute sufficient proof of the alleged facts for purposes of the rebuttal of the presumption in question.

  19. Thus, considering rebutted the presumption of ownership derived from motor vehicle registration contained in article 3, number 1 of the IUC Code, there should be proceeded to the annulment of the assessments which are the object of the present claim, on the grounds of illegality and error in the conditions on which they are based.

Request for Indemnification Interest

  1. Together with the annulment of the assessments and consequent refund of the amounts wrongfully paid, the Applicant further requests that there be recognized the right to indemnification interest under article 43 of the General Tax Law.

  2. Indeed, pursuant to the terms of the provision of number 1 of the said article, indemnification interest is owed "when it is determined, in an administrative appeal or judicial challenge, that there was error attributable to the services resulting in payment of the tax debt in an amount greater than legally due." Apart from the means referred to in the provision transcribed, we understand that, as follows from number 5 of article 24 of RJAT, the right to the aforementioned interest can be recognized in the arbitral proceedings and thus we rule on the claim.

  3. The right to indemnification interest to which the provision of the General Tax Law referred to above refers presupposes that there has been paid tax in an amount greater than that due and that this derive from error of fact or of law attributable to the services of the AT.

  4. In the present case, although it is recognized that the tax paid by the Applicant is not due, because it is not the taxpayer of the tax obligation, determining, as a consequence, the respective refund, it cannot be seen that at its origin there is the error attributable to the services that determines such right in favor of the taxpayer.

  5. In this way, in promoting the official assessment of IUC considering the Applicant as taxpayer of this tax, the AT limited itself to giving effect to the provision of article 3, number 1 of the IUC Code, which, as abundantly stated above, imputes such status to the persons in whose name the vehicles are registered.

  6. As also has already been concluded, the said provision has the nature of a legal presumption, from which derives for the AT the right and duty to assess the tax and demand it from those persons without need to prove the facts that lead to it, as expressly provided in number 1 of article 350 of the Civil Code.

  7. However, with respect to the assessments that constitute the object of the present request for arbitral ruling, it is important to determine whether the act of dismissal of the now Applicant's claim formulated in the administrative appeal timely filed constitutes or not error attributable to the Tax Administration for purposes of the requirement of indemnification interest under article 43, number 1, of the General Tax Law.

  8. In this matter consideration is had to the guidance arising from the case law of the Supreme Administrative Court, which goes to the effect of recognizing that a decision of the Tax Administration that dismisses a claim for annulment of an admittedly illegal assessment and consequent refund of tax wrongfully collected constitutes error attributable to the services.

  9. According to the mentioned case law - contained in a learned judgment of 28-10-2009 in case 601/09 - indemnification interest is owed from the date of the dismissal of the appeal until the date of the processing of the respective credit note, in accordance with article 61 of CPPT.

V. Decision

In these terms, and with the reasons stated, the Arbitral Tribunal decides:

a) To find well-founded the request for arbitral ruling insofar as concerns the illegality of the IUC assessments and compensatory interest relating to the periods and vehicle identified in the present request for arbitral ruling, determining its annulment and consequent refund of the amounts wrongfully collected;

b) To find well-founded the request for recognition of the right to indemnification interest calculated from the date of the dismissal of the administrative appeal until the date of the actual refund of the taxes and compensatory interest wrongfully collected.

c) To condemn the Respondent to payment of costs.

Case value: € 5,351.03.

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

Lisbon, 18 December 2017

The Arbitrator, Álvaro Caneira

[i] By way of example, see Cases 14/2013-T, 26/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, 217/2013-T, 256/2013-T, 289/2013-T, 294/2013-T, 21/2014-T, 42/2014-T, 43/2014-T, 50/2014-T, 52/2014-T, 67/2014-T, 68/2014-T, 77/2014-T, 108/2014-T, 115/2014-T, 117/2014-T, 118/2014-T, 120/2014-T, 121/2014-T, 128/2014-T, 140/2014-T, 141/2014-T, 152/2014-T, 154/2014-T, 173/2014-T, 174/2014-T, 175/2014-T, 182/2014-T, 191/2014-T, 214/2014-T, 219/2014-T, 221/2014-T, 222/2014-T, 227/2014-T, 228/2014-T, 229/2014-T, 230/2014-T, 233/2014-T, 246/2014-T, 247/2014-T, 250/2014-T, 262/2014-T, 302/2014-T, 333/2014-T, 414/2014-T, 646/2014-T, all available at www.caad.org.pt.

[ii] See Higher Court of Justice (STJ), Judgments of 23.3.2006 and 12.10.2006, Cases 06B722 and 06B2620.

[iii] It should be noted that, within the scope of the special procedure for registration of ownership of vehicles acquired by verbal purchase and sale contract, approved by Decree-Law no. 177/2014 of 15 December, the invoice constitutes, amongst others, a document that evidences the actual purchase and sale of the vehicle, provided that it contains the vehicle's registration number as well as the name of the seller and purchaser.

Frequently Asked Questions

Automatically Created

Who is liable for IUC vehicle tax after a car has been sold to a third party?
According to CAAD case law and this decision, IUC liability falls on the registered owner, but this creates a rebuttable legal presumption under Article 3(1) of the IUC Code. A former owner who sold the vehicle can prove they are not the actual owner through purchase contracts, invoices, and payment receipts, thereby shifting liability despite unchanged vehicle registration.
Can a former vehicle owner challenge IUC tax assessments if the car was already transferred?
Yes, former vehicle owners can challenge IUC assessments through CAAD arbitration even if the vehicle remains registered in their name. The tribunal recognizes that Article 3(1) of the IUC Code establishes a rebuttable presumption, allowing taxpayers to present evidence (such as sale contracts and invoices) proving ownership transfer occurred before the tax became due.
What does subjective incidence mean in the context of Portuguese IUC tax?
Subjective incidence (incidência subjectiva) in Portuguese IUC tax refers to the determination of who is the taxpayer or passive subject of the tax obligation. Article 3 of the IUC Code defines this as vehicle owners, presumptively identified by registration records, though this presumption can be rebutted with proof of actual ownership transfer.
How does CAAD arbitration work for disputing IUC tax liquidation acts in Portugal?
CAAD arbitration for IUC disputes requires first exhausting administrative remedies (administrative appeal, then hierarchical appeal to the Director of Finance). After dismissal, taxpayers can request arbitral tribunal establishment within legally defined periods. The tribunal examines whether tax assessments are legal, considering evidence beyond registration databases, and can annul liquidations if the taxpayer successfully proves they are not the proper passive subject.
What evidence is required to prove vehicle ownership transfer for IUC tax exemption?
To prove vehicle ownership transfer and rebut the IUC registration presumption, taxpayers must present contractual documentation including purchase and sale contracts with specific dates, sales invoices showing the transaction, and payment receipts confirming consideration was exchanged. This evidence must demonstrate the transfer occurred before the relevant taxation period, establishing the seller was no longer the owner when tax became due.