Process: 431/2014-T

Date: February 18, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral decision addresses the liability for Unique Motor Vehicle Tax (IUC) when a vehicle has been sold but the ownership transfer was not registered. The Claimant contested IUC assessments for tax years 2010-2012 totaling €2,461.00, plus penalties of €576.10 and compensatory interest of €224.62, arguing they had sold the vehicle as scrap and were no longer the owner when the taxable events occurred. The Tax Authority raised two preliminary exceptions: first, that the arbitration request filed on June 16, 2014 exceeded the 90-day deadline from the February 24, 2014 payment date (expiring May 25, 2014), resulting in lapse of the right to challenge (caducidade); second, that the arbitral tribunal lacked material jurisdiction over penalty assessments under Article 2(1) of RJAT and Articles 53 and 80(1) of RGIT. On the merits, the central legal question concerned the interpretation of Article 3 of the Motor Vehicle Tax Code (CIUC), which establishes that tax subjects are vehicle owners, considered as those in whose names vehicles are registered. The Claimant argued this constituted a rebuttable presumption of ownership that could be overcome by proving the actual sale, citing the real effect of sale contracts and the declarative (non-constitutive) nature of vehicle registration. The Tax Authority contended that Article 3 CIUC creates a legal fiction rather than a presumption, making the registered owner absolutely liable for IUC regardless of actual ownership, and that the invoice provided was insufficient proof of sale as a unilaterally issued document. The procedural issues of timeliness and jurisdiction over penalties were critical preliminary matters requiring resolution before addressing the substantive IUC liability question.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, LDA., a company with registered office at …, holder of the single registration and identification number for legal persons …, hereinafter simply referred to as the Claimant, filed a request for constitution of an arbitral tribunal in tax matters and a request for arbitral decision, pursuant to the provisions of article 2, paragraph 1, paragraph a) and article 10, paragraph 1, paragraph a), both of Decree-Law No. 10/2011, of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter abbreviated as RJAT), requesting the declaration of illegality and the consequent annulment of the assessment acts of the Unique Motor Vehicle Tax (IUC) relating to the motor vehicle with registration number ...-...-..., relating to the tax years 2010, 2011 and 2012, in the total amount of €2,461.00, as well as the penalties applied, in the amount of €576.10 and corresponding compensatory interest in the total amount of €224.62.

To support its request, it alleges, in summary:

a) On the date of the occurrence of the taxable event in question in the present proceedings, the Claimant was not the owner of the motor vehicle subject to the tax, which had already been sold;

b) The vehicle was sold in scrap condition and did not circulate on public roads after the date of its alienation;

c) The buyer of the vehicle did not register the transfer of ownership;

d) Under article 3 of the CIUC (Code of Motor Vehicle Tax), the tax subjects are the owners of the vehicles;

e) Paragraph 1 of article 3 of the CIUC contains a rebuttable presumption;

f) The purchase and sale contract has real effect;

g) Motor vehicle property registration is not constitutive in nature, aiming only to give publicity to the legal situation of registrable assets;

h) Thus, the IUC tax subject is the owner, even if not listed in the motor vehicle register, provided sufficient proof is made to rebut the legal presumption arising from the register.

i) In the case of the assessments in question, the Claimant is not the IUC tax subject.

The Claimant attached 7 documents and listed two witnesses.

In the request for arbitral decision, the Claimant chose not to appoint an arbitrator, and therefore, pursuant to article 6, paragraph 1 of the RJAT, the signatory was appointed by the Deontological Board of the Administrative Arbitration Centre, with the appointment having been accepted in accordance with the legally provided terms.

The arbitral tribunal was constituted on August 25, 2014.

Notified in accordance with article 17 of the RJAT, the Respondent submitted an answer, defending itself by way of exception and by way of objection, alleging, in summary, the following:

By way of exception:

a) The payment deadline for the three assessments in question was February 24, 2014;

b) Under article 10, paragraph 1, paragraph a) of the RJAT, the Claimant had a period of 90 days, counted from the voluntary payment deadline of the assessments, to submit the request for arbitral decision;

c) Thus, the period for submitting the request for constitution of the arbitral tribunal with a view to assessing the legality of the assessments in question ended on May 25, 2014;

d) The request for constitution of the arbitral tribunal was only made on June 16, 2014;

e) Since the request was submitted beyond the legally prescribed period, the tax acts in question have become settled in the legal order and cannot, for that reason, be subject to appraisal by the arbitral tribunal;

f) The decision applying penalties cannot be subject to judicial challenge, which results from articles 53 and 80, paragraph 1 of the RGIT (General Regime of Tax Infringements);

g) Nor can it be subject to appraisal by the arbitral tribunal, which results from the provisions of article 2, paragraph 1 of the RJAT.

By way of objection:

a) The legislator expressly and intentionally established that the IUC tax subjects are the owners, considering as such the persons in whose names the vehicles are registered;

b) Article 3 of the CIUC does not establish any presumption of ownership, but rather a true fiction of ownership – the legislator does not say that they are presumed to be owners, but rather that they are considered to be owners;

c) The failure to register property changes in the register has the consequence that the obligation to pay the IUC falls on the registered owner, and the Tax Authority cannot assess the tax based on elements not appearing in the register;

d) The IUC is due by the persons who appear in the register as owners of the vehicles;

e) The invoice attached by the Claimant as proof of the conclusion of the purchase and sale contract is not suitable to provide such proof, as it is a unilaterally issued document;

f) The document attached by the Claimant under number 5 is equally not suitable to prove what is stated therein;

g) The failure to fulfil the obligation to update the register and cancel the vehicle registration makes the Claimant liable for the arbitral costs.

The Respondent attached a copy of the administrative file and did not list any witnesses.

In response to the exceptions raised by the Tax Authority, and specifically with regard to the alleged lateness of the request for arbitral decision, the Claimant alleged that it was notified of the challenged assessments by electronic mail, but only managed to access the electronic mailbox on March 20, 2014, because only then did its legal representative have access to the respective password, and should not, however, be prejudiced in its defence period.

To prove the alleged fact, it requested the addition of a new witness to the list.

The Tax Authority responded, arguing against the request.

The meeting referred to in article 18 of the RJAT, as well as the production of the witness evidence requested and oral arguments, were dispensed with, without opposition from the parties, given that the file contains all the documentary elements necessary and sufficient to rule on the law.

The parties did not submit written arguments, despite being notified to do so.

II. ISSUES TO BE DECIDED

Having regard to the positions assumed by the parties, as set out in the arguments raised, it is necessary to:

a. Decide on the exception of error in the form of proceedings and lack of material jurisdiction of the arbitral tribunal with respect to the challenge to the notification for submission of a defence or advance payment of the penalty;

b. Decide on the exception of lapse of time raised by the Tax Authority;

c. Establish who is the IUC tax subject when, on the date of the occurrence of the taxable event, the motor vehicle has already been alienated;

d. Establish the legal value of motor vehicle registration in the context of IUC, particularly for the purposes of the subjective scope of the tax;

e. Determine whether the failure to update the motor vehicle register allows the persons in whose names the vehicle is registered to be considered as IUC tax subjects;

f. Establish whether the invoice attached by the Claimant is or is not suitable to prove the alleged alienation of the vehicle.

III. FACTUAL MATTERS

a. Proven facts

With relevance to the decision to be rendered in the present proceedings, the following facts were found to be proven:

  1. The Claimant was notified of the IUC assessments for the tax years 2010, 2011 and 2012, relating to the vehicle with registration number ...-...-..., in the total amount of €2,461.00, in accordance with the terms contained in the assessments attached to the request for arbitral decision under number 1;

  2. The payment deadline for the IUC was February 24, 2014;

  3. The Claimant was notified to submit a defence or proceed to advance payment of the penalties applied, in the total amount of €576.10, in the terms contained in the documents attached to the initial petition under numbers 2 to 4;

  4. The Claimant only accessed its electronic mailbox on March 20, 2014, because only on that date did its legal representative have access to the respective password;

  5. The request for constitution of an arbitral tribunal in tax matters and for arbitral decision was submitted on June 16, 2014;

  6. The vehicle referred to in 1 above does not belong to category F or G, referred to in article 4 of the CIUC;

  7. On the date of the occurrence of the taxable event, an invoice for the sale of the vehicle referred to in 1 above had already been issued by the Claimant to a third party.

b. Unproven facts

No other relevant fact was proven.

c. Basis for the factual findings

The conviction regarding the facts found to be proven was formed on the basis of the documentary evidence attached by the Claimant, indicated in relation to each of the points, and whose correspondence to reality was not questioned, as well as the matter alleged and not contested contained in the motions attached to the file.

IV. CASE MANAGEMENT/PRELIMINARY ASSESSMENT

The Arbitral Tribunal is properly constituted and has material jurisdiction.

The parties have legal personality and capacity, are legitimate and are regularly represented.

The proceedings do not suffer from defects that would affect their validity.

V. ON THE LAW

a. On matters of exception:

i) On error in the form of proceedings and lack of material jurisdiction of the arbitral tribunal:

Having established the factual matters, it is now necessary, by reference to those matters, to determine the applicable law.

First and foremost, it is necessary to consider the exception of "partial impropriety of the request for arbitral decision and consequent lack of jurisdiction of the arbitral tribunal" raised by the Respondent.

The Tax Authority bases its claim, with respect to this exception, on the fact that judicial challenge of the decision applying penalties for non-payment of the tax is not the appropriate remedy to challenge the administrative decision in question, but rather a judicial appeal to the first-instance tax court.

It is necessary, however, to note that, comparing the content of documents numbers 2 to 4 attached by the Claimant with the initial petition, it appears that it was not notified of any decision applying penalties, but rather to submit a defence or proceed to advance payment of the penalty.

Now, this notification to submit a defence or advance payment of the penalty is not subject to judicial review, with the parties only being allowed, as stated in the notification itself, to submit a defence or proceed to advance payment of the penalty, in which case they benefit from the reduction of the penalty to the legal minimum and procedural costs to half.

But, even if in the present case it were not a notification to submit a defence or advance payment of the penalty but a decision applying the penalty, still this decision would not be subject to judicial review by this means.

Indeed, as is explicitly stated in both article 53 and paragraph 1 of article 80, both of the General Regime of Tax Infringements, "decisions applying penalties and ancillary sanctions may be subject to appeal to the first-instance tax court".

In the same sense, paragraph c) of article 101 of the General Tax Law defines, as a tax procedural remedy, "the appeal, in the same proceedings, of acts applying penalties and ancillary sanctions".

Along the lines of what has been stated, the Supreme Court of Justice decided, by judgment of April 13, 2011, case No. 087/11, available at www.dgsi.pt, that "the appropriate procedural remedy to review the administrative decision applying penalties is an appeal of that decision (article 80 of the RGIT and paragraph c) of article 101 of the General Tax Law)".

Thus, since judicial challenge is not the appropriate procedural remedy to challenge the decision applying penalties for non-payment of tax, it must be concluded that a request for arbitral decision would not be the appropriate remedy either, in the hypothesis that in the present case it were a decision applying a penalty, which, as we have seen, is not the case.

Thus, an error in the form of proceedings used by the Claimant is evident.

With that said, article 97, paragraph 3 of the LGT (General Tax Law) and article 98, paragraph 4 of the CPPT (Code of Tax Procedure and Process) provide that, when the remedy used is not the appropriate one according to law, the correction of the proceedings or their conversion into the appropriate form of proceedings must be ordered, in accordance with the law.

In this case, this tribunal could not order the correction of the proceedings or their conversion into the appropriate form of proceedings for the reason that the notification to the Claimant to submit a defence or advance payment of the penalty is not, as has been seen, subject to judicial review.

In any case, even if we were dealing with a decision applying a penalty, this arbitral tribunal could never order such conversion, as it is materially incompetent to review the legality of the decision applying penalties.

Consider the following.

Article 2, paragraph 1, paragraph a) of the RJAT prescribes that arbitral tribunals are competent to review requests for declaration of illegality of acts of assessment of taxes, self-assessment, withholding at source and prepayment on account.

In turn, regarding the binding of the tax administration to the jurisdiction of arbitral tribunals, article 4, paragraph 1 of the said regime provides that this depends on a regulation by the members of the Government responsible for the areas of finance and justice.

The jurisdiction of the arbitral tribunal is thus delimited by the regulation binding the Tax Administration to the jurisdiction of the Administrative Arbitration Centre (Regulation No. 112-A/2011, of March 22).

Under the provisions of article 2 of the mentioned Regulation, which exhaustively regulates and delimits the claims that can be submitted to the material jurisdiction, it appears that this list does not include claims related to the review of the legality of penalties applied in administrative infringement proceedings.

Thus, even if we were dealing with a decision applying a penalty, the request for declaration of its illegality would not be within the scope of jurisdiction of the arbitral tribunal.

Lack of material jurisdiction constitutes absolute lack of jurisdiction which results in dismissal of the claim, under article 96, paragraph a) and article 99, paragraph 1 of the Code of Civil Procedure, applicable by virtue of article 29, paragraph 1, paragraph e) of the RJAT.

In light of the above, and without need for further consideration, the exception of lack of material jurisdiction of this tribunal to review the legality of the notification to submit a defence or advance payment of the penalty is found to be well-founded, with the consequent dismissal of the claim in that part.

ii) On the lateness of the request for arbitral decision:

The Tax Authority also argues that, with respect to the challenged assessments, the period for submitting a request for constitution of an arbitral tribunal in tax matters and for arbitral decision has expired, given that the request was submitted after the 90-day period, counted from the payment deadline for the tax, referred to in article 10, paragraph 1, paragraph a) of the RJAT.

Indeed, the Tax Authority continues, given that the payment deadline for the tax in question in the present proceedings was February 24, 2014, the present request for arbitral decision should have been submitted by May 25, 2014.

Since the request for constitution of an arbitral tribunal and for arbitral decision was submitted on June 16, 2014, the stated 90-day period had already been exceeded, and therefore the Claimant's right to petition for a declaration of its illegality had already expired.

It concludes, requesting that the request for arbitral decision submitted by the Claimant be considered late, and therefore the Tax Authority be absolved of the claim.

In response to the exception raised, the Claimant defended itself, arguing that it only became aware of the notification sent by the Tax Authority on March 20, 2014, because until that date its legal representative did not have access to the password of the electronic mail to which the challenged assessments were sent.

The Claimant concludes by arguing that, having only been notified to proceed with payment of the tax on March 20, 2014, the 90-day period for submitting the request for constitution of the arbitral tribunal and for arbitral decision should begin to run only from that date, and that the exception raised should therefore be found to be without merit.

The Tax Authority replied to this motion, arguing for the merit of the exception raised.

It is necessary to decide:

As appears from the proven facts - see point 2 - the tax in question in the present proceedings had a payment deadline of February 24, 2014.

It also appears from the proven facts that the Claimant only accessed the electronic mailbox to which the assessments in question in the present proceedings were sent on March 20, 2014, which was due to the fact that only on that date its legal representative had access to the corresponding password – see point 4 of the proven facts.

Finally, it is proven that the request for constitution of an arbitral tribunal in tax matters and for arbitral decision was submitted by the Claimant on June 16, 2014 – see point 5 of the proven facts.

With that said, considering, on the one hand, that the payment deadline for the tax ended on February 24, 2014 and, on the other, that the 90-day period established in article 10, paragraph 1, paragraph a) of the RJAT, counted from the end of the period for voluntary payment of those obligations, ended on May 25, 2014, with the deadline being transferred to the first business day following – May 26, 2014 - it is manifest that on the date of submission of the request for arbitral decision – June 16, 2014 - the Claimant's corresponding right had already expired.

This would not be the case only if the Claimant had only been notified of the respective assessments after the expiry of the period for challenging them.

In the present case, as we have already seen and as was proven – see point 4 of the proven facts – the Claimant accessed the electronic mailbox and thus had access to the challenged assessments on March 20, 2014.

On that date the period for challenging the assessments had not yet expired, which, as has been seen, ended on May 26, 2014, and therefore nothing would have prevented the Claimant from challenging the assessments within the legal period.

Nor should it be said, as the Claimant argues, that merely because it only had access to the electronic mailbox on March 20, 2014, it would be justified that the 90-day period for submitting the request for arbitral decision would begin to run from that date.

Indeed, such a consequence might possibly be admitted in the case of late access to the assessments having occurred due to a fact not attributable to the Claimant – which, in this case, was not the situation.

In fact, analyzing the constituent facts of the alleged obstacle, it appears that these arose solely and exclusively from the fault of the Claimant, by virtue of a lack of diligence shown by its legal representative.

In truth, it is not at all acceptable that, in this day and age, the legal representative of a company should go more than two months without having access to notifications made by electronic means, without arranging to ensure that such notifications were known to another or taking steps in that direction, as was demonstrated in the present case.

On the other hand, the possibility of just cause for impediment should not be considered, for two reasons: first, because at the time the Claimant became aware of the assessments it still had a period in which to submit the request for arbitral decision; and second, because as is provided for in article 140, paragraph 1 of the Code of Civil Procedure, just cause for impediment shall only be admitted when it is immediately invoked, the respective proof is presented and the act is performed.

In this way, not even a situation of just cause for impediment could be admitted, because in the case sub judice, it was not invoked at the time of submission of the request for arbitral decision by the Claimant, nor was the respective proof presented.

Furthermore, it can be said that any just cause for impediment would terminate when the Claimant became aware of the assessments in question, that is, on March 20, 2014.

From which it is concluded that, even in this situation, it would still be within the period to submit the corresponding request for arbitral decision, if it so wished.

Accordingly, given that the Claimant submitted the present request for arbitral decision on June 16, 2014, it is manifest that the legal period for challenging it had already been exceeded.

It is therefore necessary to conclude that the exception of expiry of the right to submit the request for arbitral decision raised by the Tax Authority is well-founded, with the consequent dismissal of the claim, under article 576, paragraph 3 of the CPC applicable "ex vi" article 29, paragraph 1, paragraph e) of the RJAT.

With the said exceptions verified, the consideration of the merits of the case is thus rendered unnecessary.

VI. OPERATIVE PART

In light of the above, it is decided:

a. To find well-founded the dilatory exception of lack of material jurisdiction of this arbitral tribunal to review the legality of the notification to submit a defence or advance payment of the penalty and, as a consequence, to absolve the Tax and Customs Authority of the claim in that part;

b. To find well-founded the peremptory exception of expiry of the right to submit a request for arbitral decision with a view to reviewing the legality of the IUC assessments and, as a consequence, to absolve the Tax and Customs Authority of the claim in that part.

The value of the case is fixed at €3,261.72 under the provisions of article 97-A, paragraph 1, paragraph a) of the Code of Tax Procedure and Process, applicable by virtue of article 29, paragraph 1, paragraphs a) and b) of the RJAT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings.

The arbitration fee is fixed at €612.00, under the provisions of Table I of the Regulation of Costs in Tax Arbitration Proceedings, as well as article 12, paragraph 2 and article 22, paragraph 4, both of the RJAT, and article 4, paragraph 4, of the said Regulation, to be paid by the Claimant as the unsuccessful party.

Register and notify.

Lisbon, February 18, 2015.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, under article 131, paragraph 5 of the CPC, applicable by reference under article 29, paragraph 1, paragraph e) of Decree-Law No. 10/2011, of January 20.

The drafting of this decision is governed by [text incomplete in original]

Frequently Asked Questions

Automatically Created

What is the material incompetence exception in IUC arbitration proceedings before CAAD?
The material incompetence exception in IUC arbitration proceedings before CAAD relates to the jurisdictional limits of tax arbitral tribunals established in Article 2(1) of the RJAT (Legal Framework for Arbitration in Tax Matters). The Tax Authority argued that arbitral tribunals lack material jurisdiction to review penalty decisions, which are governed by Articles 53 and 80(1) of the RGIT (General Regime of Tax Infringements). According to this exception, while arbitral tribunals can review the substantive tax assessments, they cannot adjudicate challenges to administrative penalties imposed for tax infringements. This means that even if the IUC assessment itself can be challenged through arbitration, the associated penalties of €576.10 fall outside the tribunal's competence and must be challenged through different legal channels. This limitation stems from the specific scope of tax arbitration, which is designed to resolve disputes regarding tax assessments rather than administrative sanctions.
Can the IUC taxpayer presumption based on vehicle registration be rebutted after a sale without transfer of registration?
The rebuttability of the IUC taxpayer presumption based on vehicle registration is the central legal controversy in this case. The Claimant argued that Article 3 of the CIUC contains a rebuttable presumption - that registered owners are presumed to be actual owners, but this presumption can be overcome with sufficient proof of sale. They contended that vehicle registration has merely declarative (not constitutive) effect, serving only to publicize ownership rather than create it, and that sale contracts have real effect transferring ownership immediately. However, the Tax Authority maintained a contrary interpretation, arguing that Article 3 CIUC establishes a legal fiction rather than a presumption. According to this view, the law does not say owners are 'presumed' to be those registered, but rather that they 'are considered' to be those registered - creating an irrebuttable fiction. Under this interpretation, the registered owner remains liable for IUC regardless of actual ownership status, and the Tax Authority cannot assess tax based on elements not appearing in the register. The failure to register the ownership transfer makes the previous registered owner liable, even after selling the vehicle as scrap.
What is the 90-day deadline for filing an arbitration request under Article 10 of the RJAT?
The 90-day deadline for filing an arbitration request under Article 10 of the RJAT is a critical procedural requirement that determines whether taxpayers retain the right to challenge tax assessments through arbitration. According to Article 10(1)(a) of RJAT, taxpayers have 90 days from the voluntary payment deadline of the tax assessment to file a request for constitution of an arbitral tribunal. In this case, the IUC payment deadline was February 24, 2014, meaning the 90-day period to request arbitration expired on May 25, 2014. The Claimant's arbitration request was filed on June 16, 2014, approximately three weeks after the deadline. The Tax Authority argued this late filing resulted in caducidade (lapse of the right), making the tax assessments final and unreviewable. The Claimant attempted to justify the delay by arguing they only accessed their electronic mailbox on March 20, 2014 due to password access issues with their legal representative, and requested that their defense period should begin from actual access rather than from the notification date. This raised important questions about when notification periods begin running in electronic notification systems.
Is the registered vehicle owner always liable for IUC even after selling the vehicle as scrap?
Whether the registered vehicle owner remains liable for IUC after selling the vehicle as scrap is the substantive legal question at the heart of this dispute. The Tax Authority's position is unequivocal: the registered owner is absolutely liable for IUC until the ownership transfer is properly registered, regardless of whether the vehicle was sold, scrapped, or no longer circulates on public roads. This interpretation is based on Article 3 of the CIUC, which states that tax subjects are those in whose names vehicles are registered. The Tax Authority argued that the legislator intentionally established this system to provide certainty and administrative efficiency - the tax authority can only assess IUC based on official registration records, not on private arrangements or unregistered transfers. The failure of the buyer to register the transfer and the Claimant's failure to ensure proper registration or cancellation of the vehicle created a situation where the Claimant remained the registered owner. The fact that the vehicle was sold as scrap and allegedly did not circulate after the sale date is irrelevant under this strict interpretation. The Tax Authority further questioned the probative value of the invoice provided by the Claimant, noting it was a unilaterally issued document insufficient to prove the sale.
What happens when the right to challenge IUC tax assessments has expired (caducidade do direito)?
When the right to challenge IUC tax assessments has expired through caducidade do direito (lapse of the right), the tax assessments become final and settled in the legal order, immune from judicial or arbitral review. Caducidade is a procedural bar that extinguishes the right to challenge administrative acts after specified deadlines expire. In this case, if the arbitral tribunal determined that the 90-day deadline from the payment date had passed without a timely filing, the consequence would be dismissal of the arbitration request without examination of the merits. The tax assessments of €2,461.00 for the 2010-2012 tax years would become definitive and enforceable, regardless of their substantive legality or whether the Claimant was actually the vehicle owner. The penalties and interest would likewise become final. Caducidade serves the public interest in legal certainty and finality of administrative decisions, preventing indefinite challenges. Unlike prescription (prescrição), which can be interrupted or suspended, caducidade deadlines are generally strict and peremptory. The Claimant's argument that the delay should be excused due to late access to the electronic mailbox raised questions about whether special circumstances can extend caducidade periods, but such exceptions are narrowly construed in Portuguese administrative law.