Process: 428/2015-T

Date: January 11, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitration case (Process 428/2015-T) addresses the subjective incidence of IUC (Imposto Único de Circulação - Single Road Tax) when a vehicle is sold without updating the vehicle registry. The claimant sold a vehicle in July 2009 to a French resident but failed to transfer the registration. Subsequently, the Tax Authority assessed IUC for 2009-2012 on the claimant as the registered owner. The claimant argued that material reality should prevail over formal reality - since they actually sold the vehicle and no longer possessed it, they should not be liable for IUC. The claimant only discovered the tax debts in July 2014 through online consultation and filed an administrative complaint, which was dismissed as untimely. The Tax Authority maintained that under Article 3(1) of the IUC Code, interpreted with Decree-Law 54/75 and the Motor Vehicle Registration Code, the registered owner is the taxable person for IUC purposes. The registration creates a legal presumption of ownership that determines tax liability. The central legal question concerns whether the actual sale of a vehicle (material reality) exempts the seller from IUC liability when the vehicle registration remains unchanged (formal reality). Portuguese tax law establishes that registration is the determining factor for IUC subjective incidence. The registered owner remains liable for IUC until the registration is properly transferred at the Conservatória do Registo Automóvel. This case illustrates the critical importance of completing all legal formalities when selling vehicles, as failure to transfer registration maintains the seller's tax obligations regardless of actual ownership transfer.

Full Decision

ARBITRAL DECISION

I – REPORT

1.1. A..., taxpayer no. ..., with tax domicile at Praça ..., ... – ... Esq., Braga (hereinafter referred to as the "claimant"), having been notified of the "dismissal ruling that concerned the hierarchical appeal [no. ...2014...]", and not accepting it, filed, on 10/7/2015, a request for the constitution of an arbitral tribunal and for an arbitral pronouncement, in accordance with the provisions of article 10, no. 1, para. a), of Decree-Law no. 10/2011, of 20/1 (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "LRTATM"), in which the Tax and Customs Authority (TCA) is requested, in view of the declaration of "illegality of the acts of assessment of the IUC on the vehicle ...-... -..., for the years 2009, 2010, 2011 and 2012 and the self-assessment for the year 2013."

1.2. On 18/9/2015, the present Sole Arbitral Tribunal was constituted.

1.3. Pursuant to art. 17, no. 1, of the LRTATM, the TCA was summoned, as the respondent party, to submit a reply. The TCA submitted its reply on 27/10/2015, having argued for the total lack of merit of the claimant's request and raised an exception, on the grounds of the powers of pronouncement of the Tribunal under art. 71 of the CPTA. Notified, by ruling dated 9/11/2015, to pronounce within the established time limit, the now claimant chose not to pronounce on that exception.

1.4. By ruling of 4/1/2016, the Tribunal considered, pursuant to art. 16, paras. c) and e), and 19, both of the LRTATM, that the meeting referred to in art. 18 of the LRTATM was unnecessary, as well as the production of testimonial evidence, and that the case was ready for decision. Furthermore, the date of 11/1/2016 was set for the pronouncement of the arbitral decision.

1.5. The Arbitral Tribunal was regularly constituted.

II – ALLEGATIONS OF THE PARTIES

2.1. The now claimant comes to allege, in its initial petition, that: a) "the claimant herein filed the administrative complaint to the Head of ... Tax Office, arguing from the outset that it is not the passive subject of the IUC on the vehicle ...-... -..., as of July 2009"; b) "in July 2009 it sold the questioned vehicle to a certain J..., resident in France, at which time it ceased to exercise enjoyment and possession of that vehicle, which no longer returned to the possession of the claimant"; c) "this [is] the material truth regarding ownership of the vehicle ...-... -..., which the claimant wished to demonstrate, through the means of proof that it intended to produce and which that tax administration service simply refused to allow"; d) "in the face of this material truth, it must necessarily be concluded that all official taxations of IUC on the questioned vehicle, which fall or may fall on the claimant herein, translate into the commission of a serious injustice, which urgently needs to be remedied"; e) "it resulted in the commission of a serious injustice, the official taxation on the claimant herein, of the IUC for the years 2009, 2010, 2011 and 2012 concerning the vehicle and the self-assessment of that tax for 2013, made by the claimant"; f) "it translates into the commission of a serious injustice, any other IUC taxation that may fall on the claimant, concerning the vehicle...-... -..."; g) "In the questioned administrative complaint, the claimant argued that it had no knowledge of the assessments, on the date they were issued, nor did it have knowledge of the notifications that may have been sent to it for the exercise of the right to prior hearing"; h) "that in such notifications, the legal procedure was not adopted, which would make it presumable that the taxpayer, the claimant herein, received proper treatment. (Ref. to art. 38, no. 3, of the TCPT)"; i) "The claimant became aware on 20 July 2014, by computer consultation of the Tax Services website, of the existence of tax debts and only thereby became aware of the debts of IUC taxes on the ...-... -..., relating to the years 2009, 2010, 2011 and 2012, officially assessed"; j) "In complaining against such tax assessments, which the claimant became aware of through that consultation, the claimant intended to exercise the respective right of contradiction, which the tax administration services also refused, as they considered the administrative complaint filed as untimely, when they could have converted it in the appropriate form, namely in a revision procedure (Ref. to the provision of art. 52 of the TCPT, in conjunction with the provision of art. 78 of the GTL)"; l) "when the claimant alleges and intends to prove that it is not the passive subject of the IUC inasmuch as it had sold the vehicle on which it fell in July 2009 to J..., resident in Paris, it was implicit the error in the assessment, by the fact that the tax was not assessed to the passive subject thereof"; m) "Despite dismissing the complaint as untimely, the fact is that the tax administration services pronounced on the merits of the question, by considering the claimant herein, the passive subject of the IUC on the vehicle ...-... -..., for being the registered owner"; n) "With this argument, those tax administration services intend to prevail a formal reality, that of the presumption of ownership resulting from registration (Ref. to the provision of art. 3, no. 1, of the CIUC, interpreted in accordance with the provision of art. 1, no. 1, of Decree-Law no. 54/75, of 12 February, and art. 7 of the Motor Vehicle Registration Code, applicable to motor vehicle registration by virtue of the provision of art. 29 of the aforementioned Decree-Law no. 54/75). Against a material reality, that even though ownership of the vehicle is registered in the name of the claimant herein, this is not owner of the said vehicle, as it sold it on 17 July 2009, as stated in the deed of sale attached to the administrative complaint files, where the claimant herein appears as seller and the said J..., as buyer, who received from it, on the said date, the vehicle, the documents thereof and the deed of sale signed by the seller"; o) "Upon receiving the vehicle...-... -..., the documents thereof and the deed of sale signed by the seller, the said J... acquired the status of owner of the vehicle, by a perfectly valid contract, since registration does not constitute a condition of validity of the contract thus entered into. It thus follows that the official assessments of the IUC on the vehicle...-... -..., which fell or may fall on the claimant herein, as well as the self-assessment concerning the IUC for the year 2013, prove to be illegal and therefore null, and all administrative acts carried out following and by virtue of each of the said assessments should be declared null."

2.2. The claimant requests that: a) "the illegality of the official assessments of IUC on the vehicle...-... -..., relating to the years 2009, 2010, 2011 and 2012, which fell on the claimant, as well as of the self-assessment of the same tax relating to the year 2013 and of all assessments of the IUC on the same vehicle that may fall on the claimant be declared"; b) "the illegality of all administrative acts carried out following and by virtue of the illegality of each of the said official assessments be declared".

2.3. For its part, the TCA comes to allege, in its reply: a) "[by exception, by understanding that] the act of summary dismissal did not come to appreciate the legality of the assessment acts referring to the years 2009 to 2012 by virtue of the untimeliness of the request presented by the Claimant preventing such appreciation"; b) that "the request now presented by the Claimant lacks legal support for annulment of the assessments referring to the years 2009 to 2012 since art. 71 of the CPTA does not confer on the Tribunal powers to pronounce on the merits of the administrative complaint procedure but only to, should it find the Claimant's claim to be well-founded, annul the act of summary dismissal challenged and impose on the TCA the practice of the act materially due, which in the case of these proceedings is that of admission of the procedure for subsequent appreciation of the question of merits underlying it"; c) "the merits of the procedure involves an appreciation of the factual matter, which involves the formulation of valuations peculiar to the exercise of tax administration, and the appreciation of the concrete case does not allow the identification of only one solution as legally possible, hence the tribunal cannot determine the content of the act to be practiced by the TCA, in accordance with no. 2 of art. 71 of the CPTA"; d) that, "in the scope of the present request for arbitral pronouncement, the Tribunal has no powers to substitute the TCA in the appreciation of the merits of the administrative complaint procedure, contrary to the claim deduced by the Claimant"; e) "[by contestation, by understanding that, as to the alleged lack of notification of the assessments and of notification for the exercise of the right to prior hearing,] by means of the notification, carried out on 2013-06-14, the Claimant was notified to, if wishing, exercise, within 25 days, the right of prior hearing, being warned that at the end of that period without making the self-assessment of the tax or exercising the said right, official assessment would be effected, in accordance with art. 18 of the CIUC [; and that] the notification of the official assessments occurred on 2013-10-16, by means of registered mail, in accordance with no. 3 of art. 38 of the TCPT, with the postal registration no. RY...PT. From the proven facts it appears that all the alleged by the Claimant in this respect has no foundation [the Respondent having complied] scrupulously with the duties incumbent upon it in this matter, whereby consequently all the argumentation both of fact and of law brought forward by the Claimant entirely lacks foundation."; f) "[by contestation, by understanding that, as to the legality of the act of summary dismissal of the administrative complaint procedure relating to the assessments referring to the years 2009 to 2012,] the TCA [...] made a correct interpretation of the law by concluding for the untimeliness of the administrative complaint procedure relating to the assessments referring to the years 2009 to 2012 presented by A. on 31/07/2014, after the expiry of the 120-day period provided for in no. 1 of art. 70 and para. a) of no. 1 of article 102 of the TCPT. [...]. Now, as appears from the collection notes, the deadline for payment occurred on 2013-11-06. Terms by which the services concluded for the untimeliness of the procedure as to the assessments referring to the years 2009 to 2012, without judgment on the merits, cfr. as stated at fls. 3 of the decision of the administrative complaint procedure"; g) "[by contestation, by understanding, as to the duty of revision of tax acts in favor of the taxpayer,] that it is not verified that the services incurred in the practice of error imputable to its action, since the controversial assessments were issued following the information supplied by the registration, there being no proof that the Claimant could not be the owner of the vehicle, as moreover it continues not to prove [whereby it is concluded] that correct application of the law occurred in the matter at hand, resulting from the interpretation of art. 78 of the GTL that the conversion into a request for official revision appeared impossible for the requirement of timeliness not being satisfied"; h) "[by contestation, as to the assessment referring to the year 2013, by understanding that] the understanding advocated by the Claimant not only incurs a biased reading of the letter of the law, but also the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined in the entire CIUC and, more broadly, in the entire tax-legal system and also results from an interpretation that ignores the ratio of the regime enshrined in the article in question, and likewise, in the entire CIUC"; i) that "the proof presented by the Claimant is not sufficient to demonstrate having effected the transfer of ownership [because] none of the documents presented constitutes a contract of sale [since] the Claimant attached only a copy of the said official form for motor vehicle ownership registration signed by it [whereby it is concluded] that the Claimant does not rebut the presumption that falls upon it as to the ownership of the vehicle on which the IUC assessments impugned fall, and that, consequently, the impugned assessments do not suffer from any illegality"; j) that, "if the interpretation conveyed by the Claimant were to be accepted, then the same proves to be contrary to the Constitution, in that such interpretation results in violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality"; l) that, "[should the Tribunal] come to conclude for the well-foundedness of the request for arbitral pronouncement deduced by the Claimant", there is no liability of the Respondent for the payment of arbitral costs because "the IUC is not assessed in accordance with information generated by the Respondent itself" and because, not [having the Claimant] acted with the diligence required of it, led inexorably the Respondent to limit itself to giving effect to the legal obligations to which it is bound and, in parallel, to follow the registration information that was supplied to it by the competent authority. [...]. Therefore, it was not the Respondent who gave rise to the deduction of the request for arbitral pronouncement, but the Claimant itself [whereby it should] be condemned to payment of the arbitral costs arising from the present request for arbitral pronouncement, in accordance with article 527/1 of the CPC ex vi article 29/1-e) of the LRTATM."

2.4. Concludes, finally, the TCA that "the present request for arbitral pronouncement should be judged as lacking merit, maintaining in the legal order the tax assessment acts impugned and absolving, accordingly, the Respondent of the request. Should this not be the case, the time limit granted to the TCA to appreciate the merits of the administrative complaint procedure referring to the assessment acts for the years 2009 to 2012 should never be less than four months, considering the legal time limit for decision provided for in art. 57 of the GTL."

III – PROVEN, UNPROVEN FACTS AND RESPECTIVE GROUNDS

3.1. The following facts are considered proven:

i) By means of the notification, carried out on 14/6/2013, the now Claimant was notified to, if wishing, exercise, within 25 days, the right of prior hearing, being warned that at the end of that period without making the self-assessment of the tax or exercising the said right, official assessment would be effected, in accordance with the provision of art. 18 of the CIUC. That notification was carried out in accordance with no. 3 of art. 38 of the TCPT, with the postal registration no. RY...PT. As to the notification of the official assessments, this occurred on 16/10/2013, by means of registered mail, in accordance with no. 3 of art. 38 of the TCPT, with the postal registration no. RY...PT.

ii) On 31/7/2014, the Claimant filed an administrative complaint of the official assessment of the IUC for 2009 to 2012 and self-assessment for the year 2013, concerning the motor vehicle with registration...-... -.... The said administrative complaint was dismissed, with the grounds contained in the final ruling of 3/11/2014 (see PA attached), and notified to the complainant on 5/11/2014 (date of signature of the AR), by way of office 2577.

iii) From the dismissal of the administrative complaint, the complainant, now Claimant, filed a hierarchical appeal on 1/12/2014. The mentioned hierarchical appeal (no. ...2014...) was dismissed by ruling issued on 24/3/2015 by the Director of Services for Vehicle Tax, Vehicle Transfer Tax, IUC and Special Contributions, by subdelegation of powers. That ruling was notified to the now Claimant on 13/4/2015 (date of signature of the AR), by way of office....

iv) It is expressly stated in the said (and now impugned) ruling of dismissal of the administrative complaint (see PA attached), that "the time limit for filing an administrative complaint of the official assessments is, pursuant to no. 1 of art. 70 and para. a) of no. 1 of article 102 of the Tax Code of Procedure and Process (TCPT) of 120 days, counting from the end of the time limit for voluntary payment. Thus, the deadline for submitting administrative complaints of the official assessments aforementioned, relating to the years 2009, 2010, 2011 and 2012 was expired, and it should be concluded for their untimeliness, without judgment on the merits." (Underlined by us.) It follows, in the said ruling, the evaluation of the merits of the self-assessment of the IUC for the year 2013 because, as to the same, "and in accordance with no. 1 of art. 131 of the TCPT, [...] the complaint is timely."

v) Indeed, the deadline for voluntary payment of the said assessments for the years 2009 to 2012 was 6/11/2013, and the complaint was filed on 31/7/2014. In these terms, the TCA did not proceed to the judgment of the merits thereof, given the untimeliness of its complaint.

3.2. As regards the IUC assessment for the year 2013, the (alleged) sale of the motor vehicle with registration...-... -... in July 2009 is considered unproven, for not having been presented a document (contract of sale, duly signed by both parties, or invoice evidencing the receipt of the price) that proves the invoked transfer of ownership.

3.3. The facts considered pertinent and proven (v. 3.1) are based on the analysis of the positions exposed by the parties and the documentary evidence attached to the proceedings. The fact considered unproven is based on the absence of documentary evidence demonstrating the allegation made.

IV – PRELIMINARY MATTER: EXCEPTION RELATING TO ASSESSMENTS FOR THE YEARS 2009 TO 2012

Given that the exception aforementioned was raised by the TCA, it is warranted to, preliminarily, assess the same.

In this respect, as it is enlightening for the case in question and as agreement with it is expressed, the following excerpt shall be cited, taken from the "Commentary on the legal regime of arbitration" by Mr. Counselor Jorge Lopes de Sousa (in: Villa-Lobos, Nuno; Vieira, Mónica Brito (Coords.) – Guide to Tax Arbitration. Coimbra, Almedina, 2013, p. 125): "The legislative concern to remove from the competencies of the arbitral tribunals that function in the CAAD the appreciation of the legality of administrative acts that do not involve the appreciation of the legality of assessment acts, in addition to resulting, from the outset, from the generic direction of creating an alternative means to the process of judicial challenge [...], results clearly from para. a) of no. 4 of article 124 of Law no. 3-B/2010, of 28 April, in which are indicated among the possible objects of the tax arbitral process «the administrative acts that involve the appreciation of the legality of assessment acts», for this specification can only be justified by a legislative intention in the sense of excluding from the possible objects of the arbitral process the appreciation of the legality of acts that do not involve the appreciation of the legality of assessment acts. [...] the decisions of dismissal of administrative complaints in themselves cannot be appreciated, namely those that did not know of the merits of the assessment act that is the object of the complaint, for what is permitted through the challenge of the decision of the administrative complaint is to appreciate the legality of the underlying assessment act [...] and not the administrative complaint decision itself that did not know of the merits of the passive subject's claim." (Underlined by us.)

Indeed – and contrary to what the Claimant refers to in point 15 of its petition –, it is verified, by reading the PA attached to the proceedings, that the dismissal ruling in question abstained, on grounds of untimeliness of the complaint, from making an appreciation of merits regarding the IUC assessments for the years 2009 to 2012. Reason by which it does not prove possible, for the reasons above stated, to challenge the said ruling (in that part). However, the same does not apply – also in light of the correct interpretation of the provision in art. 2, no. 1, para. a), of the LRTATM – in the case of the self-assessment of the IUC for the year 2013, since, as to this, the mentioned ruling pronounced on the merits.

In sum: it is verified, from the above, an exception of lack of jurisdiction, for not forming part of the scope of jurisdiction of the arbitral tribunals the challenge of the decision of dismissal of administrative complaint that did not know of the merits of the IUC assessment acts for the years 2009 to 2012. In these terms, the value of the present case becomes €55.43 (€54.76 + €0.67) (= value of the self-assessment of the IUC for the year 2013, in accordance with fls. 16 and 21 of the RG3 attached to the proceedings), there being, however, no alteration of the value of the costs of the process.

V – ON THE LAW

In the present case, the essential questions that arise, as to the self-assessment of the IUC for the year 2013, are to know if: 1) article 3 of the CIUC contains a presumption; 2) as alleged by the TCA, "the understanding advocated by the Claimant not only incurs a biased reading of the letter of the law, but also the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined in the entire CIUC and, more broadly, in the entire tax-legal system and also results from an interpretation that ignores the ratio of the regime enshrined in the article in question, and likewise, in the entire CIUC", and if, as also affirmed, it is an "interpretation [...] contrary to the Constitution"; 3) the rebuttal of the mentioned presumption was effected in the present case; 4) there was, as alleged by the Claimant, lack of notification of the assessments and of notification for the exercise of the right to prior hearing. Finally, the matter relating to responsibility for payment of arbitral costs shall be dealt with.

Let us see, then.

  1. to 3) The two first legal questions converge in the direction of the interpretation of art. 3 of the CIUC, whereby it proves necessary: a) to know whether the rule of subjective incidence, contained in the said art. 3, establishes or does not establish a presumption; b) to know whether, in considering that that rule establishes a presumption, such violates the "unity of the regime", disregards the systematic element and teleological, or results in an interpretation "contrary to the Constitution"; c) to know – admitting that the presumption exists (and that the same is iuris tantum) – whether the rebuttal of the same was effected.

a) Art. 3, nos 1 and 2, of the CIUC, has the following wording, which is here reproduced:

"Article 3 – Subjective Incidence

1 - The 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 the same are registered.

2 - Financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights arising from the lease contract are assimilated to owners".

The interpretation of the cited legal text is, naturally, essential for the resolution of the case under analysis. To that extent, it proves necessary to resort to art. 11, no. 1, of the GTL, and, by referral thereof, to art. 9 of the Civil Code (CC).

Now, pursuant to the said art. 9 of the CC, interpretation starts from the letter of the law and aims, through it, to reconstruct the "legislative thinking". That is to say (regardless of the objectivism-subjectivism debate) that literal analysis is the basis of the interpretive task and the systematic, historical or teleological elements are guides for the orientation of the said task.

The literal apprehension of the legal text in question does not generate - even though the separation thereof from the ascertainment, even if minimal, of the respective meaning is highly debatable - the notion that the expression "considering as such" means something different from "presuming as such". In fact, we would scarcely find authors who, in a task of pre-understanding of the said legal text, would "instinctively" reject the identity between the two expressions.

Confirming the indistinction (both literal and in meaning) of the words "considering" and "presuming" (presumption), see, for example, the following articles of the Civil Code: 314, 369, no. 2, 374, no. 1, 376, no. 2, and 1629. And, with special interest, the case of the expression "is considered", contained in art. 21, no. 2, of the CIRC. As point out Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, with respect to that article of the CIRC: "in addition to this norm evidencing that what is at issue in the taxation of capital gains is to ascertain the real value (that of the market), the limitation to the ascertainment of real value derived from the rules for determining the taxable value provided for in the CIS cannot but be considered as a presumption in the matter of incidence, whose rebuttal is permitted by article 73 of the GTL" (General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

b) These are only some examples that allow the conclusion that it is precisely for reasons related to the "unity of the legal system" (the systematic element) that it cannot be affirmed that only when the verb "presume" is used is there a presumption, since the use of other terms or expressions (literally similar) can also serve as the basis for presumptions. And, among these, the expressions "is considered as" or "considering as" assume, as seen, prominence.

If literal analysis is only the basis of the task, it naturally proves imprescindible the evaluation of the text in light of the other elements (or sub-elements of the so-called logical element). Indeed, the TCA also alleges, that the interpretation of the claimant "does not heed the systematic element, violating the unity of the regime enshrined in the entire CIUC and, more broadly, in the entire tax-legal system", and "that in light of a teleological interpretation of the regime enshrined in the entire CIUC, the interpretation advocated by the Claimant [...] is manifestly wrong".

It is warranted, therefore, to ascertain whether the interpretation that considers the existence of a presumption in art. 3 of the CIUC collides with the teleological element, i.e., with the purposes (or with the sociological relevance) of what was intended with the rule in question. Now, such purposes are clearly identified at the beginning of the CIUC: "The single circulation tax obeys the principle of equivalence, seeking to burden taxpayers in the measure of the environmental and road cost that these provoke, in implementation of a general rule of tax equality" (v. art. 1 of the CIUC).

What can be inferred from this article 1? It can be inferred that the close link of the IUC to the principle of equivalence (or principle of benefit) does not allow the exclusive association of the "taxpayers" referred to therein to the figure of owners but rather to the figure of users (or of economic owners). As well noted in the DA of case no. 73/2013-T: "in fact, the ratio legis of the tax [IUC] rather points in the direction of being taxed the users of the vehicles, the «economic owner» in the words of Diogo Leite de Campos, the effective owners or financial lessees, for these are the ones that have the polluting potential causing environmental costs to the community."

Indeed, if the said ratio legis were otherwise, how could it be understood, for example, the obligation (on the part of entities that proceed to lease vehicles) - and for purposes of the provision in art. 3 of the CIUC and art. 3, no. 1, of Law no. 22-A/2007, of 29/6 - of supply to the DGI of data concerning the tax identification of the users of the said vehicles (v. art. 19)? Is it that where one reads "users", one should rather read, disregarding the systematic element, "owners with registration in their name"...?

In light of the above stated, it is concluded that there is no interpretation "contrary to the Constitution", contrary to what alleged by the Respondent in points 115 to 123 of its reply.

c) From the above stated is also drawn the conclusion that limiting the passive subjects of this tax only to the owners of the vehicles in whose name the same are registered – ignoring situations in which these no longer coincide with the real owners or the real users of the same – constitutes restriction that, in light of the purposes of the IUC, finds no basis of support. And, even if the TCA alleges that the IUC "is owed by the persons who appear in the registration as owners of the vehicles", it is necessary to bear in mind that such registration, in light of what was stated previously, generates only a rebuttable presumption, i.e., a presumption that can be set aside by the presentation of proof to the contrary. In this sense, see, for example, the Ruling of the TCAS of 19/3/2015, case 8300/14: "The [...] art. 3, no. 1, of the CIUC, establishes a legal presumption that the holder of the motor vehicle registration is its owner, and such presumption is rebuttable".

It would, moreover, be unjustified the imposition of a kind of irrebuttable presumption, since, without an apparent reason, one would be imposing a (admittedly debatable) formal truth at the expense of what really could and would have been proven; and, on the other hand, to set aside the duty of the TCA to comply with the principle of the inquisitorial established in art. 58 of the GTL, i.e., the duty to carry out the necessary steps for a correct determination of the actual factual reality on which its decision must be based (which means, in the present case, the determination of the current and effective owner of the vehicle).

Furthermore, if the seller were not permitted to rebut the presumption contained in art. 3 of the CIUC, one would be benefiting, without a plausible reason, the acquirers who, in possession of forms of acquisition contracts correctly filled out and signed, and enjoying the advantages associated with their status as owners, would attempt to exempt themselves, by way of a "registration formalism", from the payment of tolls or fines.

To this effect, it is also important to note that the registration of vehicles does not have constitutive effect, functioning, as said before, as a rebuttable presumption that the holder of the registration is, effectively, the owner of the vehicle. In this sense, see, e.g., the Ruling of the STJ of 19/2/2004, case 03B4639: "The registration does not have constitutive effect, since it is intended to give publicity to the registered act, functioning (only) as a mere presumption, rebuttable, (presumption «juris tantum») of the existence of the right (arts. 1, no. 1 and 7, of the CRP84 and 350, no. 2, of the C.Civil) as well as of the respective ownership, all in terms contained therein."

In the same sense, stated, to this effect, the DA issued in case no. 14/2013-T, in terms that are endorsed: "the essential function of the motor vehicle registration is to give publicity to the legal situation of vehicles not having the registration constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all in terms contained therein. The presumption that the right registered belongs to the person in whose name it is entered can be rebutted by proof to the contrary. Not fulfilling the TCA the requirements of the notion of third party for purposes of registration [circumstance that could prevent the full effectiveness of contracts of sale concluded], cannot avail itself of the absence of updating of the registration of the right of ownership to put into question the full effectiveness of the contract of sale and to demand from the seller (former owner) the payment of the IUC owed by the buyer (new owner) provided that the presumption of the respective ownership is rebutted through sufficient proof of the sale."

Thus, and in light of the stated, it is warranted, now, to verify whether the rebuttal of the presumption (by means of "sufficient proof" of the sale) was effected. The answer must be in the negative. Indeed, the documents presented by the now Claimant are not clearly demonstrative that this was not, at the date of the tax, the owner of the vehicles. The Claimant presented, in these proceedings, a copy of the application-declaration for property registration signed only by itself, a copy of a friendly declaration of motor vehicle accident and, furthermore, a communication from the motor insurance company; but, instead, did not present a contract of sale of the vehicle in question, duly signed by both parties, or invoice evidencing the receipt of the price – i.e., documents that would allow the rebuttal of the presumption of accuracy of the registration. Thus, the allegation of the Claimant, as to the self-assessment of 2013, that the alleged buyer "J... acquired the status of owner of [the vehicle with registration]..., by a perfectly valid contract" is considered unproven. Not having that alleged "valid contract" been attached to the proceedings (nor a copy of invoice supporting the sale of the vehicle presented), but instead a deed of sale signed only by the seller, it is concluded that the conditions are not met to consider that the said presumption was, in this case, rebutted.

With respect to the means of proof with sufficient force to rebut the presumption of art. 3 of the CIUC, see, for example, the DA issued in case no. 27/2013-T, of 10/9/2013: "the documents presented, particularly the copies of the invoices that support, from the outset, the sales [...] [of] the vehicles aforementioned, [...] embody means of proof with sufficient and adequate force to rebut the presumption founded on registration, as enshrined in no. 1 of art. 3 of the CIUC, documents, those, that enjoy, moreover, the presumption of accuracy provided for in no. 1 of art. 75 of the GTL."

In the same sense, see, e.g., the DA issued in case no. 230/2014-T, dated 22/7/2014: "the documentary elements, constituted by copies of the respective invoices of sale – which were not challenged by the TCA –, enjoy the probative force provided for in article 376 of the Civil Code and the presumption of accuracy that is conferred by art. 75, no. 1, of the GTL, having, thus, adequacy and sufficient force to rebut the presumption that supported the assessments effected." Or the DA issued in case no. 789/2014-T, dated 30/7/2015: "what the Claimant has to prove, to set aside its qualification as owner, is not that it alienated a vehicle, at a given moment, but rather that it was not the owner of the vehicle at the moment of the tax facts, which are distinct legal facts. We are in the domain of proof by full presumption, which cannot be set aside by mere probability judgments."

As well noted by the TCA, in its reply, "the unequivocal declaration of will of the presumed acquirer could be evidenced by the attachment of a copy signed by the said official form for motor vehicle ownership registration, since it is a document signed by the intervening parties. However, the Claimant attached only a copy of the said official form for motor vehicle ownership registration signed by itself. [Furthermore, the now] Claimant did not attach documentary proof of the receipt of the price". Indeed, the invoked unilateral declarations cannot be considered sufficient proof to rebut the presumption of art. 3 of the CIUC, whereby, for all the reasons above stated, the Claimant's claim is not justified.

  1. Contrary to what alleged by the Claimant, there was no, in the present case, lack of notification of the assessments and of notification for the exercise of the right to prior hearing.

As noted in point i) of the proven facts, the now Claimant was notified on 14/6/2013 to, if wishing, exercise, within 25 days, the right of prior hearing, being warned that at the end of that period without making the self-assessment of the tax or exercising the said right, official assessment would be effected, in accordance with the provision of art. 18 of the CIUC. That notification was carried out in accordance with no. 3 of art. 38 of the TCPT, with the postal registration no. RY...PT. As to the notification of the official assessments, this occurred on 16/10/2013, by means of registered mail, in accordance with no. 3 of art. 38 of the TCPT, with the postal registration no. RY...PT.

Responsibility for Payment of Arbitral Costs

In this respect, it is necessary to bear in mind that, as stated, for example, in the DA issued in case no. 241/2014-T, of 6/10/2014, "the law is exhaustive in the imputation of responsibility for payment of costs to the party that is condemned, in light of the provision in nos 1 and 2 of art. 527 of the Code of Civil Procedure, applicable by virtue of art. 29, no. 1, para. e), of the LRTATM." (In the same sense, see, for example, the DA issued in case no. 231/2014-T, of 4/11/2014, or the DA issued in case no. 171/2014-T, of 17/11/2014.)

Now, in the present case, the request of the now Claimant not having been successful as to the self-assessment of IUC for the year 2013, the same, as the condemned party, shall be responsible for the payment of the arbitral costs.

VI – DECISION

In light of the above stated, it is decided:

  • The exception of lack of jurisdiction is judged well-founded and the respondent is absolved of the instance (v. articles 96 and 278 of the Code of Civil Procedure, ex vi article 29, no. 1, paras. a) and e), of the LRTATM), in the part relating to the IUC assessments for the years 2009 to 2012.

  • The request for arbitral pronouncement is judged as lacking merit in the part relating to the self-assessment of IUC for the year 2013.

The value of the case is fixed at €55.43 (fifty-five euros and forty-three cents), in accordance with the provision in art. 32 of the CPTA and art. 97-A of the TCPT, applicable by virtue of the provision in art. 29, no. 1, paras. a) and b), of the LRTATM, and art. 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs to the charge of the claimant, in the amount of €306.00 (three hundred and six euros), in accordance with Table I of the RCPAT, in compliance with the provision in articles 12, no. 2, and 22, no. 4, both of the LRTATM, and the provision in art. 4, no. 4, of the cited Regulation.

Notify.

Lisbon, 11 January 2016.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, in accordance with the provision in art. 131, no. 5, of the CPC, applicable by referral of art. 29, no. 1, para. e), of the LRTATM.

The wording of the present decision is governed by Portuguese spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle is sold but the registration is not transferred?
Under Portuguese law, the taxable person for IUC when a vehicle is sold but registration is not transferred remains the registered owner. Article 3(1) of the IUC Code establishes that the registered owner in the vehicle registry (Conservatória do Registo Automóvel) is the taxable person for IUC purposes. The registration creates a legal presumption of ownership that prevails over material reality. Even if the seller actually transferred possession and signed a sale deed, they remain liable for IUC until the registration is officially transferred. This formal approach ensures legal certainty and facilitates tax administration, as the Tax Authority relies on official registry records to identify taxpayers.
Can a taxpayer challenge IUC assessments through tax arbitration at CAAD?
Yes, taxpayers can challenge IUC assessments through tax arbitration at CAAD (Centro de Arbitragem Administrativa) under Article 10(1)(a) of the Legal Regime for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011). Tax arbitration provides an alternative dispute resolution mechanism for tax matters, including challenges to IUC assessments. However, the taxpayer must first exhaust administrative remedies or challenge decisions dismissing administrative complaints. In this case, the claimant challenged the dismissal ruling of their hierarchical appeal regarding IUC assessments for multiple years. The arbitration tribunal has jurisdiction to review the legality of IUC assessment acts and related administrative decisions.
Does selling a vehicle without updating the vehicle registry exempt the seller from IUC liability?
No, selling a vehicle without updating the vehicle registry does not exempt the seller from IUC liability under Portuguese tax law. The IUC Code establishes that the taxable person is the registered owner according to the vehicle registry maintained by the Conservatória do Registo Automóvel. Registration creates a legal presumption that prevails over actual ownership or possession. Even with a valid sale contract and transfer of possession, the seller remains legally liable for IUC until the registration is officially transferred. This means the seller must pay IUC for all periods while they remain the registered owner, regardless of who actually possesses or uses the vehicle. Completing the registration transfer is essential to terminate IUC liability.
What is the role of the Conservatória do Registo Automóvel in determining IUC subjective incidence?
The Conservatória do Registo Automóvel (Vehicle Registry Office) plays a determinative role in establishing IUC subjective incidence. Portuguese tax law adopts a formal approach where the official vehicle registration maintained by the Conservatória determines who is the taxable person for IUC purposes. Article 3(1) of the IUC Code, interpreted with Decree-Law 54/75 and the Motor Vehicle Registration Code, establishes that the registered owner is the taxable person. The Conservatória's records create a legal presumption of ownership that the Tax Authority relies upon for IUC assessment. This registry-based system provides legal certainty and administrative efficiency, as tax authorities can definitively identify taxpayers through official records rather than investigating actual possession or material ownership arrangements.
How does Portuguese tax law define the IUC taxable person under the Código do IUC?
Portuguese tax law defines the IUC taxable person under Article 3(1) of the Código do IUC (IUC Code) as the owner of the vehicle according to the vehicle registry. This provision is interpreted in conjunction with Article 1(1) of Decree-Law 54/75 of 12 February and Article 7 of the Motor Vehicle Registration Code. The law adopts a formal criterion based on registration rather than material ownership. The registered owner is presumed to be the owner for tax purposes, regardless of actual possession, use, or informal sale arrangements. This presumption can only be overcome by officially transferring the registration at the Conservatória do Registo Automóvel. The IUC Code prioritizes legal certainty and administrative practicability by tying tax liability to official registry records rather than factual ownership situations.