Process: 447/2018-T

Date: July 17, 2019

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral decision (Process 447/2018-T) addresses a dispute concerning 602 IUC (Single Circulation Tax) assessments totaling €41,420.84 for tax years 2009-2014. The Applicant, a financial institution acting as incorporating entity following a merger, contested assessments on vehicles that had allegedly been transferred, leased, or sold before the taxable event occurred. The core legal issue concerns subjective tax incidence under Article 3 of the IUC Code (CIUC), which establishes that passive taxpayers are vehicle owners, defined as persons in whose name vehicles are registered. The Applicant argued that the Tax Authority relied solely on outdated Motor Vehicle Register data without considering that vehicles had been alienated or leased before IUC due dates. The Tax Authority countered that Article 3 establishes a legal fiction, not a rebuttable presumption, and must be read systematically with Article 19 CIUC, which obligates leasing entities to provide user identification data to tax authorities. The AT argued that the legislator intentionally used 'is considered' rather than 'is presumed,' creating a definitive legal qualification based on registration. The decision examines whether registration creates an irrebuttable presumption of tax liability or whether entities can prove transfer of ownership/possession before the taxable event. This case has significant implications for financial institutions engaged in leasing and vehicle financing, establishing precedent on burden of proof requirements and the interplay between civil registration systems and tax liability determination.

Full Decision

ARBITRAL DECISION

The Arbitrator Raquel Franco, appointed by the Deontological Council of the Centre for Administrative Arbitration ("CAAD") to form the Arbitral Tribunal constituted on 20.11.2018, decides in the following terms and on the following grounds:

I – REPORT

A... BRANCH IN PORTUGAL, hereinafter referred to as the Applicant, legal entity no. ..., domiciled at Street ..., ..., Lisbon, under the jurisdiction of the ... Lisbon Tax Service, domiciled at Street ..., ..., Lisbon, in its capacity as incorporating entity, by merger, of the company, subsequently extinguished, B... – FINANCIAL CREDIT INSTITUTION, SA ("A...", hereinafter), former legal entity no. ..., which had its registered office at the same address, filed a petition for the constitution of an Arbitral Tribunal and for arbitral pronouncement on 10.09.2018, which was accepted and automatically notified to the Tax and Customs Authority ("AT"), in its capacity as the Respondent.

The Applicant contests the legality of the dismissal order, dated 30.05.2018, from the Directorate of Finance of Lisbon, which dismissed the petition for Official Review filed against 602 assessments of the Single Circulation Tax (IUC) and compensatory interest (JC) relating to the years 2009 to 2014, inclusive, totalling € 41,420.84, as well as the legality of these same assessments.

The Applicant grounds its petition, overall, on the fact that the assessments refer to vehicles whose passive taxpayer subject to IUC was no longer, at the moment when the taxable event occurred, the A... (the incorporating company).

The Applicant did not appoint an arbitrator, whereby, in accordance with the provisions of article 6, no. 2, paragraph a) and article 11, no. 1, paragraph a) of the RJAT, the President of the Deontological Council of CAAD appointed the undersigned as arbitrator of the Single Arbitral Tribunal, who communicated acceptance of the assignment within the applicable period.

On 31.10.2018, the parties were notified of this appointment and did not express any desire to refuse it.

In accordance with the provisions of article 11, no. 1, paragraph c) of the RJAT, the Single Arbitral Tribunal was constituted on 20.11.2018.

On 18.12.2018, the Respondent, duly notified for this purpose, presented its answer defending itself by contestation.

By order of 15.03.2019 – on that date notified to the Parties – this Tribunal communicated to the Parties the ability to present written arguments, having granted the Applicant a period of 10 days counted from notification of this order and the Respondent the same period counted from the presentation of arguments by the Applicant or from the expiration of the period for this purpose. On this date (30.04.2019) it is noted that both periods have expired, whereby an arbitral decision may be rendered, whose period expires on 20.05.2019 (a period of which the Parties were warned in a timely manner, as well as, in the case of the Applicant only, of the necessity to make payment of the subsequent arbitration fee).

Summary of the Applicant's Position

The Applicant argues that the Tax and Customs Authority, in proceeding with the assessments contested, based itself solely on information contained in the Motor Vehicle Register (IRN – Institute for Records and Notarization, and IMTT – Institute for Mobility and Land Transport), which would not be current in cases of lack of "annotation" of any lessee and vehicles still being registered in the name of A... on the dates of IUC due dates (dates of anniversary of the vehicles) despite having already been alienated on those dates.

The Applicant informs that the following documents were annexed to the Official Review petition:

  • Document no. 1: Summary table relating to the 602 Self-Assessments of IUC relating to vehicles identified by their respective licence plate number;

  • Document no. 2: File relating to each of the vehicles under analysis which includes copies of financial leasing contracts and operational leasing contracts with promise of sale, as well as invoices for sale, as appropriate;

  • Document no. 3: Table relating to vehicles allocated to financial leasing contracts and operational leasing contracts with promise of sale;

  • Document no. 4: Table relating to vehicles that were alienated before the IUC due date.

Summary of the AT's Position

The AT considers, generically, that the understanding advocated by the Applicant derives from a biased reading of the letter of the law and the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and further derives from an interpretation that ignores the ratio of the regime enshrined in the article in question, as well as throughout the CIUC.

Regarding the case law invoked by the Applicant, the AT emphasizes that it does not have binding precedential value, but merely persuasive value. On the other hand, it emphasizes that the most recent case law of arbitral tribunals at CAAD has followed a different direction, citing exemplarily the cases no. 126/2014-T and no. 220/2014-T.

The AT further argues the following:

  • The application of article 3 of the CIUC must be combined with the provisions of article 19 of the same code, which establishes that "for the purposes of article 3 of this code (…), entities that proceed with financial leasing, operational leasing or long-term rental of vehicles are obliged to provide the Directorate-General for Taxes with data relating to the identification of users of the leased vehicles." Thus, if the thesis advocated by the Applicant regarding the fact that article 3 of the CIUC establishes a rebuttable presumption were to be followed, it would be necessary to conclude that the functioning of that article (i.e., the rebuttal of the presumption) equally depends on compliance with the provisions of article 19 of the CIUC, as is apparent from its literal element ("for the purposes of article 3 of this code (…)")

  • As for assessments relating to vehicles alienated before the tax due date, the understanding advocated by the Applicant 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 throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and further derives from an interpretation that ignores the ratio of the regime enshrined in the article in question, as well as throughout the CIUC.

  • The tax legislator, in establishing in article 3, no. 1 who are the passive taxpayers of the IUC, established expressly and intentionally that these are the owners (or in the situations provided for in no. 2, the persons listed there), being considered as such the persons in whose name they are registered.

  • Note that the legislator did not use the expression "are presumed," as it could have done, for example, in the following terms: passive taxpayers of the tax are owners of vehicles, being presumed as such the natural or legal persons, of public or private law, in whose name they are registered. In contrast, the tax regulation is replete with provisions analogous to that enshrined in the final part of no. 1 of article 3, in which the tax legislator, within its legislative discretion, expressly and intentionally, establishes what is to be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others. Thus, if it were understood that by using the expression "is considered" the tax legislator would have established a presumption, practically all norms of incidence under corporate income tax would be set aside precisely because accounting prescribes solutions different from those of the CIRC, which is exactly the legislator's intent to set aside such accounting rules.

  • Also the systematic element of interpretation of the law demonstrates that the solution advocated by the Applicant is intolerable, finding the understanding supported by it no support in the law. Even admitting that, from the perspective of civil law rules and real property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real effect, according to the provisions established in the CIUC (which in the case at hand constitutes special law, which, according to general legal principles, derogates from the general rule), the tax legislator deliberately and expressly wanted to consider as owners, lessees, purchasers with reservation of ownership or holders of the right of purchase option in long-term rental, the persons in whose name the vehicles are registered.

  • In light of a teleological interpretation of the regime enshrined throughout the CIUC, the interpretation advocated by the Applicant to the effect that the passive taxpayer of the tax is the beneficial owner, regardless of not appearing in the motor vehicle register, is manifestly wrong. And it is a wrong interpretation to the extent that it is the very ratio of the regime enshrined in the CIUC that constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the vehicle owner as recorded in the motor vehicle register. And this precisely because the new regime for the taxation of IUC substantially altered the regime for motor vehicle taxation, with the passive taxpayers of the tax becoming the owners listed in the property register, regardless of the circulation of vehicles on public roads.

  • As for the documents attached to the proceedings by the Applicant as proof of its petition, the Respondent considers that invoices and copies of vehicle rental contracts without driver are insufficient. Invoices are not apt to prove the conclusion of a synallagmatic contract such as purchase and sale, as such documents do not reveal by themselves an essential and unequivocal declaration of intention (i.e., acceptance) by the purported purchasers. The unequivocal declaration of intention of the purported purchasers could be indicated by attaching a copy of the said official model for motor vehicle property registration, as it is a document signed by the intervening parties. However, the Applicant did not attach copies of said official model for motor vehicle property registration when it could and should have done so, namely in the arbitral petition request, and is now precluded from doing so at a later time. Furthermore, the lack of synallagmatic character of the invoices could be remedied by proof of receipt of the price contained therein by the Applicant. The Applicant did not attach documentary proof of receipt of the price when it could and should have done so, namely in the arbitral petition request, and is now precluded from doing so at a later time, according to...

  • As for indemnity interest and costs, the AT considers these are neither due nor its responsibility to the extent that the IUC is assessed in accordance with registration information duly transmitted by the Institute for Records and Notarization and not in accordance with information generated by the Respondent itself. Now, having the Applicant not taken care of updating the motor vehicle register, as it could and was obliged to [article 5/1-a) of Decree-Law 54/75, of 12 February, and article 118/4 of the Highway Code], and having not mandated the cancellation of the registration plates of the vehicles here in question, it is necessary to conclude that the Applicant did not proceed with the diligence that was required of it. And by not proceeding with the diligence required of it, it led inexorably the Respondent to limit itself to fulfilling the legal obligations to which it is bound and, in parallel, to follow the registration information that was provided to it by the appropriate person. Consequently, the Applicant should be condemned to pay the arbitration costs arising from this arbitral petition request, in accordance with article 527/1 of the CPC by virtue of article 29/1-e) of the RJAT, in line, moreover, with a similar matter decided within the scope of the case that, under no. 72/2013-T, proceeded in this arbitration center. The same reasoning applies to the Applicants' request for condemnation to payment of indemnity interest.

For the reasons stated, the AT concludes for the dismissal of the arbitral petition.

II. PROCEDURAL PREREQUISITES

The Arbitral Tribunal is materially competent and is regularly constituted, in accordance with articles 2, no. 1, paragraph a), 5 and 6, no. 1, of the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, as provided in articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22.03.

The action is timely and the proceedings are not subject to any nullities.

As to the cumulation of petitions made by the Applicant, considering the existence of a direct relationship between the tax assessments whose legality is questioned in the present proceedings, nothing prevents the joint consideration of the tax acts in question, given that, in light of what is alleged and the documentation attached, it is evident that, in essence, any merit of the petition depends on the same factual circumstances and on the interpretation and application of the legal norms relating to the subjective incidence of the IUC. Thus, it is essentially a matter of the consideration of the same factual circumstances and the application of the same legal norms concerning the subjective incidence of the IUC, and the cumulation of petitions is legal, in accordance with article 3 of the RJAT and 104 of the CPPT.

III. REASONING

A. MATTER OF FACT

A.1. Proven Facts

  • The Applicant incorporated A... by cross-border merger, with global transmission of the assets (assets and liabilities) of A..., allocation of the same assets to the Applicant (branch in Portugal) and consequent extinction of A....

  • A... is a Financial Institution that, within the scope of its corporate purpose, engages in operations permitted to Banks, with the exception of the receipt of deposits.

  • Within the scope of its corporate purpose, A... concludes with its customers contracts for Long-Term Rental (ALD) and Financial Leasing contracts of motor vehicles.

  • It has also concluded contracts of a different nature with its customers, among which stand out rental contracts for vehicles without driver with promise of sale, financial leasing contracts and financing contracts.

  • A... acquires new vehicles from national importers C... and D... and typically makes rentals – leasing (financial leasing) or ALD (long-term rental) – of those same vehicles in favor of third parties.

  • Following the end of such contracts, A... proceeds to transmit ownership of the vehicles to the corresponding lessees or to third parties, for a residual value.

  • In exceptional cases, A... grants credit/financing to third parties for the purchase of automobiles, reserving however the ownership of the vehicles.

  • The Applicant was notified of the assessments contested, relating to the years 2009 to 2014, in the total amount of € 41,420.84.

  • The Applicant made payment of the assessments contested, both of tax and compensatory interest, within the respective payment deadline.

  • The Applicant presented a petition for official review regarding the assessments identified in the previous point, on 02.02.2017, which came to be processed under no. ...-2017/....

  • The petition was dismissed by order of 2018-05-30 from the Head of the Tax Justice Division of the Directorate of Finance of Lisbon.

  • The vehicles identified in document 10 attached to the arbitral petition request were covered by financial leasing contracts or vehicle rental contracts without driver with promise of sale on the date the taxable event occurred.

  • The remaining vehicles that gave rise to assessments of IUC and compensatory interest in question in these proceedings and that appear in the list reproduced in document 10 attached to the arbitral petition request had already been alienated by the Applicant on the date the taxable event occurred.

A.2. Unproven Facts

There are no facts alleged that should be considered unproven with relevance to the decision.

A.3. Reasoning of the Proven and Unproven Matter of Fact

The facts relevant to the judgment of the case were selected and defined according to their legal relevance, in light of the plausible solutions to the legal issues, in accordance with the combined application of articles 123, no. 2, of the Code of Tax Procedure and Process ("CPPT"), and 596, no. 1 and 607, no. 3 of the Code of Civil Procedure ("CPC"), by referral of article 29, no. 1, paragraphs a) and e) of the RJAT.

Allegations made by the parties and presented as facts consisting of strictly conclusive statements, incapable of proof and whose veracity is to be assessed in relation to the concrete consolidated matter of fact, were not given as proven or unproven.

With regard to the proven facts, the arbitrator's conviction was based on the positions taken by the parties in their respective procedural documents and on the critical analysis of the documentary evidence attached to the proceedings.

B. LAW

The substantive issue in question in these proceedings is whether the facts alleged by the Applicant constitute grounds for exclusion of subjective tax incidence and whether, consequently, it should be considered that the acts contested are affected by error regarding the presuppositions of the taxable event, which would constitute a defect of violation of law determining their annulment, with the legal consequences of restitution of the tax and interest paid unduly.

The Applicant grounds its petition on the argument that the presuppositions of subjective incidence provided for in article 3 of the CIUC are not met because, on the dates of IUC due dates relating to the vehicles in question, A... or (1) had leased those vehicles in favor of third parties, or (2) was not even the owner of the vehicles in question, having already sold them to previous lessees or to third parties.

It invokes the provisions of article 3 of the CIUC, according to which those responsible for payment of the IUC are the owners of the vehicles on the date of the IUC due date, that is, on the date of registration or on the anniversary dates in relation to the date of registration (no. 1 of article 3 of the CIUC), and also the "(…) financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract" on the same date, since these are equated to owners of automobiles (no. 2 of article 3 of the same legal instrument).

It maintains that the sales by A... to third parties occur on the date of issuance of invoices by A... to those third party purchasers – invoices that therefore evidence the sales of the vehicles – and the sale price is paid to A... on the date of issuance of the sales invoice.

It further states that the principle of equivalence – provided in article 1 of the CIUC – is the basic principle of taxation under IUC, from which it follows that taxpayers must be burdened to the extent of the environmental impact they cause to the environment and the road network, thereby establishing the polluter-pays principle. To that extent, the burden of imposing the tax cannot be reconciled with the mere appearance that those alleged owners of the automobile will be the causers of that environmental – and road – damage. Now, A... was never the real polluter and causer of environmental damages, to the extent that it merely leased the said automobiles and sold them, in cases where the lease contracts had already terminated.

(1) Vehicles covered by financial leasing contract, by vehicle rental contract without driver with promise of sale or by vehicle rental contract without driver on the date the taxable event occurred

The facts alleged by the Applicant concerning this set of assessments were considered proven, that is, that the vehicles to which the tax assessed through these assessments relates were subject to a financial leasing contract or equivalent on the date the taxable event occurred.

The Respondent, however, considers that it was incumbent upon the Applicant to demonstrate compliance with the ancillary obligation imposed by article 19 of the CIUC. We understand, however, that this allegation by the AT seeks to superimpose a formal obligation to a substantial reality that is self-demonstrative of the Applicant's condition as a leasing entity in the underlying contracts. The fact that the obligation provided for in article 19 of the CIUC was not complied with does not have the effect of obscuring the existence of a lease contract or the condition that derives therefrom for the respective parties.

In this regard, see, by way of example, what is stated in the arbitral decision rendered in case no. 14/2013-T, of 15/10/2013: "the financial lessee is equated to an owner for the purposes of no. 1 of article 3 of the CIUC, the same is to say to be a passive taxpayer of the IUC (cf. no. 2 of art. 3). [...] not having the lessor, by legal and contractual requirement, the potential for use of the vehicle and the lessee having exclusive enjoyment of the automobile, [and reaffirming] the conclusion we had already reached that [...] it is commanded by the ratio legis of the CIUC that, in accordance with the aforementioned no. 2 of article 3 of this Code, it is the lessee who is responsible for payment of the tax, since it is he who has the potential for use of the vehicle and causes the road and environmental costs inherent to it. The same conclusion is reached when one verifies the importance given to users of leased vehicles in article 19 of the CIUC. In fact, according to the provisions of this article, entities that carry out, in particular, financial leasing of vehicles are obliged to provide the AT (former DGCI), the tax identity of the users of the leased vehicles for the purposes of the provisions of article 3 of the CIUC (subjective incidence), as well as of no. 1 of article 3 of the Law of their respective approval, since according to this rule of Law no. 22-A/2007, if the revenue generated by the IUC is incurrent on vehicles subject to long-term rental or operational leasing, it must be allocated to the municipality of residence of the respective user (emphasis ours). [...] [But, despite that obligation, that does not prevent that,] on the date the taxable event occurs, a financial leasing contract [having] effect [for] an automobile, for the purposes of the provisions of article 3, nos. 1 and 2, of the CIUC, [the] passive taxpayer of the IUC [is] the lessee even if the registration of the property right of the vehicle is made in the name of the leasing entity, provided this proves the existence of the said contract."

Thus, as to these assessments, having been proven that, effectively, on the dates when the taxable events occurred, the vehicles on which the tax is incurrent were covered by contracts in which the Applicant occupied the position of lessor, it is considered, in accordance with the provisions of article 3, no. 2, of the CIUC that the Applicant is correct, and the assessment acts should be annulled, due to invalidity as a consequence of error regarding the factual and legal presuppositions on which the assessment is based.

(2) Vehicles allegedly alienated before the due date of the tax

As for the other set of assessments, the Applicant alleges that the vehicles on which the IUC is incurrent had already been alienated on the date the taxable event occurred, seeking to prove such facts through elements it attaches with the designation "file for each vehicle" and which contain the following categories of documents:

  • invoices;
  • internal documents with the designation "list of terminated contracts," from which appear the customer, the licence plate, the date of delivery, the end date, the financed amount, the invoiced amount and the residual value in euros and in escudos;
  • documents with the designation "authorization for debit from account";
  • copies of purchase and sale promise contracts for motor vehicles and respective authorizations for bank debit;
  • copies of vehicle rental contracts without driver;
  • copies of vehicle rental contracts without driver and provision of services;
  • declarations of vehicle delivery;
  • declarations of waiver of the reflection period associated with vehicle purchase and sale contracts;
  • letters indicating receipt of incomplete rental contracts;
  • references for payment via ATM of the values of the contracts;
  • adhesion forms to replacement vehicle contracts;
  • standardized information sheets on consumer credit (pre-contractual information).

The invoices contain the following alternative indications: "valid as a receipt after good collection" or "document produced by computer and therefore does not require signature. Valid as a receipt after good collection. The settlement of this invoice must be made to A... (Portugal), ..., ..., ...-... ..., assignee of this charge" or "we thank you to note that on this date we made the following debit entry in your Current Account, relating to the vehicle in question. The settlement of this document must be made to A... – Branch Portugal, Avenue ..., ..., ...-... Lisbon, assignee of this charge" or "document produced by computer and therefore does not require signature. Valid as a receipt after good collection. Used vehicle sold in the condition it is and without warranty" or "we thank you to note that on this date we made the following debit entry in your Current Account, relating to the vehicle in question. The settlement of this document must be made to E..., S.A., Av. ..., ... Lisbon, assignee of this charge" or "we thank you to note that on this date we made the following debit entries in your Current Account. The settlement of this document must be made to A... – Branch Portugal, Avenue... ..., ...-... Lisbon, assignee of this charge".

The AT considers that these invoices are not apt to prove the conclusion of a synallagmatic contract such as purchase and sale, as they do not reveal an essential and unequivocal declaration of intention (i.e., acceptance) by the purported purchasers.

The Applicant invokes the provisions of article 3 of the CIUC, which, in its understanding, establishes an implicit presumption of ownership of the vehicles in favor of those in whose name they are registered, a presumption that, by virtue of the application of the general rule provided in article 73 of the General Tax Law, is rebuttable by contrary proof. For the Respondent, article 3 of the CIUC does not establish any implicit presumption, but a true legal fiction, irrebuttable.

On the date of the taxable events of the tax assessed through the assessments contested, no. 1 of article 3 of the CIUC established that:

"Passive taxpayers of the tax are owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose name they are registered."

The question being discussed regarding this rule is the following: should it be understood that the legislator used the word "considered" as it could have used the word "presumed" or, on the contrary, that the legislator intended to establish a legal fiction, preventing the possibility of producing contrary proof?

In accordance with the provisions of article 349 of the Civil Code, "presumptions are the inferences that the law or the judge draws from a known fact to establish an unknown fact." On the other hand, no. 2 of article 350 of the Civil Code clarifies that legal presumptions may be rebutted by contrary proof, except in cases where the law prohibits it.

With regard to presumptions of tax incidence, article 73 of the General Tax Law determines that these always admit contrary proof.

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

Now, contrary to what the Respondent argues, the analysis of the literal element, as well as the historical and teleological elements present in the rule in question lead to the conclusion that the legislator did not intend to establish any legal fiction but only a presumption, rebuttable by contrary proof in accordance with and for the purposes of the provisions of article 73 of the General Tax Law. Being the provision of incidence provided in no. 1 of article 3 of the CIUC a provision of tax incidence, any other understanding would be clearly contrary to the principles governing the legal tax relationship.

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

It is true that, in the CIUC, the legislator replaced the expression "presumed" with the expression "considered," which, from the Respondent's perspective, translated the establishment of a legal fiction, irrebuttable. We do not, however, consider that this is the case. The change of verb does not constitute a substantive change in the provision of incidence, which, in our view, continues to establish a presumption rebuttable by contrary proof – in accordance, moreover, with the provisions of article 73 of the LGT.

As stated by DIOGO LEITE CAMPOS, BENJAMIM SILVA RODRIGUES AND JORGE LOPES DE SOUSA, in the annotation to no. 3 of article 73 of the LGT, "presumptions in matters of tax incidence may be explicit, revealed by the use of the expression is presumed or similar (…). However, presumptions may also be implicit in provisions of incidence, in particular of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not unfeasible to ascertain the real value."

In summary, in matters of tax incidence, presumptions may be revealed by the expression "is presumed" or by similar expression. By way of example, JORGE LOPES DE SOUSA notes that in article 40, no. 1, of the CIRS, the expression "is presumed" is used, whereas in article 46, no. 2 of the same Code the expression "is considered" is used, with no difference between one and the other expression, both meaning, after all, the same thing: a legal presumption.

As to the teleological element, it is important to note that the structuring principle of the reform of motor vehicle taxation is precisely that of the incidence of taxation on the true user of the vehicle, and this principle is not consistent with the "blind" reading of the letter of the law, which could, after all, lead to taxing those who are not owners and, in this way, those who are not the subject causing the "environmental and road cost" provoked by the vehicle, to which article 1 of the CIUC alludes.

Thus, regarding the subjective incidence of the tax, it should be concluded that there are no changes relative to the situation previously in force within the scope of the Municipal Tax on Vehicles, Circulation Tax and Haulage Tax, as is widely recognized by legal scholars, with a rebuttable presumption continuing to apply in this matter. This understanding is, moreover, the only one that appears adequate and consistent with the principle of material truth and justice, underlying tax relationships, with the objective of taxing the real and effective owner and not the one who, by circumstances of a different nature, is sometimes nothing more than an apparent and false owner, by being listed in the motor vehicle register.

In this conformity, considering the elements of interpretation of the law referred to, we are led to the conclusion that the expression "is considered" has exactly the same sense as the expression "is presumed," and should, therefore, be understood that article 3, no. 1, of the CIUC, establishes a true presumption of ownership and not any fiction, and therefore such presumption is rebuttable. Because of this, the person listed in the motor vehicle register must be permitted the possibility of presenting sufficient evidential elements to demonstrate that the true owner is, after all, a different person from the one listed in the register.

Finally, it is necessary to consider, in this analysis, the legal value of the motor vehicle register. Thus, in accordance with the provisions of no. 1 of article 1 of DL 54/75, of 12 February, which instituted the Motor Vehicle Property Register, "the registration of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and their respective trailers, with a view to the security of legal commerce." Article 7 of the Real Property Register Code further adds that "definitive registration constitutes a presumption that the right exists and pertains to the person listed, in the precise terms in which the registration defines it." Motor vehicle property registration does not, therefore, have constitutive nature, but merely declarative, allowing only the registration in the register to presume the existence of the right and its ownership. Thus, the presumption resulting from the register may be rebutted by contrary proof. And this is so precisely because, in accordance with the provisions of article 408 of the Civil Code, except as otherwise provided by law, the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, its validity not being dependent on inscription in the register.

In summary, the motor vehicle register, in the economy of the CIUC, represents mere rebuttable presumption of the passive taxpayers of the tax. In the case of a purchase and sale contract of a motor vehicle, with the law providing no exception for the same, the contract has real effect, with the purchaser becoming its owner, regardless of registration; likewise, the person listed in the register will cease to be the owner, despite being able to appear, for some time or even much longer, in the register as such.

It should also be noted that the transmissions effected are opposable to the Respondent, despite the provisions of no. 1 of article 5 of the Real Property Register Code, which provides: "facts subject to registration produce effects against third parties only when registered." The notion of third parties for purposes of registration is enshrined in no. 4 of the same article 5: third parties, for purposes of registration, are those who have acquired from a common author rights incompatible with each other, which is manifestly not the case with the AT. Thus, the AT is not a third party for purposes of registration.

As a consequence of the foregoing, the registered owner of an automobile may prove, for purposes of taxation under IUC, that he is no longer the effective owner of the vehicle in question, in particular by having proceeded to its sale. For this, it is important to note that we are dealing with purchase and sale contracts that, being relating to movable property and not being subject to any special formalities in accordance with article 219 of the Civil Code, effect the corresponding transfer of real rights in accordance with no. 1 of article 408 of the same code.

On the other hand, proof of the existence of a purchase and sale contract may be effected by any means, and an invoice is a bookkeeping document suitable for this purpose, as for many others, in particular fiscal ones. Invoices evidence sales, transactions or provision of services and, insofar as issued in legal form, constitute elements supporting bookkeeping entries systematized in accounting organized in accordance with commercial and fiscal legislation, with the data contained in them being covered by the presumption of truthfulness to which article 75, no. 1, of the LGT refers. In this sense, it is not accepted that their evidentiary weight be questioned solely for the purpose of proof of transmission of vehicle ownership, under penalty of falling into the legal absurdity of, from the same document, recognizing that the transaction existed for purposes of the incidence of income tax, but did not exist for purposes of IUC.

Being a presumption, nothing prevents demonstration of its falsity or inadequacy in light of the legal requirements established in article 36 of the VATA. It is, also in this case, a rebuttable presumption, with the burden of proof resting with the AT.[1] However, the AT neither challenged, nor raised doubts as to the operations evidenced by the invoices presented by the Applicant, having limited itself to questioning the ability of the same to evidence sales and provide proof of them. It is certain that, as the Respondent alleges, the invoices attached "do not reveal by themselves an essential and unequivocal declaration of intention (i.e., acceptance) by the purported purchasers." However, with the law providing for no specific form for the conclusion of a purchase and sale contract of a motor vehicle, and the Respondent not having raised the falsity of the invoices attached, limiting itself to attempting to set aside their evidentiary weight, it will, necessarily, have to be accepted as proof of the purchase and sale contract the invoice issued in accordance with legal provisions, as is the case with the invoices in question in these proceedings.

Also the fact that the invoices attached expressly state that they only serve as a receipt after good collection and it is not demonstrated in the proceedings that payment of the respective amount was made is irrelevant for the purposes that matter here. In fact, what matters to ascertain in this connection is the suitability of the invoices to demonstrate the alienation of the vehicle and not their ability to serve or not as a receipt or acknowledgment of receipt of the respective price [which is not even an essential element of the purchase and sale contract, but rather an effect of the same - as follows from the provisions of article 879 c) of the Civil Code].

Thus, the sales alleged by the Applicant, occurring at a moment prior to the occurrence of the taxable event, are considered proven. The presumption of ownership derived from the motor vehicle register provided in article 3 of the CIUC is thereby rebutted, and therefore the corresponding assessments identified in document 10 attached to the arbitral petition request should be annulled, on the grounds of illegality and error in the presuppositions on which they are based.

In accordance with the provisions of article 6, no. 3 of the CIUC, the tax is considered due on the first day of the tax period referred to in article 4, no. 2 of the CIUC. On these dates, the Applicant had alienated all the vehicles in question in these proceedings, despite the said alienations not yet being reflected in the competent register.

Thus, given the fact that, as already stated, the presumption resulting from the register is rebuttable by contrary proof, proof that is considered to have been effected by the presentation of the sales invoices of the vehicles, it is verified that, regarding the vehicles in question in these proceedings, the Applicant was not their owner on the date of the taxable event, and is not, therefore, the passive taxpayer of the IUC assessed.

From which it is clearly apparent that there is no legal basis for the assessment acts contested, requiring, therefore, their annulment, as well as the annulment of the dismissal order of the petition for official review dated 30.05.2018.

On Indemnity Interest

The Applicant finally requests that it be recognized as having the right to indemnity interest, under articles 43 and 100 of the LGT.

Article 100 of the LGT provides that "The tax administration is obliged, in case of total or partial merit of objections or administrative appeals, or of judicial proceedings in favor of the passive taxpayer, to the immediate and full reconstitution of the situation that would have existed if the illegality had not been committed, including the payment of indemnity interest, under the terms and conditions provided by law."

On the other hand, in accordance with no. 1 of article 43 of the LGT, indemnity interest will be due "when it is determined, in administrative objection or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount higher than legally due."

In the present case, the annulment of the assessments occurs only by way of challenge of the dismissal of the petition for official review presented by the Applicant on 02.02.2017, whereby it is equally applicable to it the provisions of para. c) of no. 3 of article 43 of the LGT: "3 - Indemnity interest is also due in the following circumstances: (…) - c) When the revision of the tax act at the initiative of the taxpayer takes place more than one year after the taxpayer's request, except if the delay is not attributable to the tax administration."

The AT rendered a dismissal order of the petition for review on 30.05.2018, following which the Applicant presented itself before this tribunal. Now, as the Supreme Tax Court has already decided,[2] the principle of equality imposes similar treatment between the taxpayer whose petition for review succeeds beyond the one-year period at the administration, and the taxpayer who obtains the same result, also beyond that period, before the tribunal. In either case, the delay of more than one year is attributable to the administration and derives from the practice of an illegal act: either because it delayed in giving the taxpayer reason or because it did not give it and it later proved that it should have. It is therefore verified, in casu, the Applicant's right to indemnity interest, to be counted from the expiration of the period of one year after presentation of the petition for official review and until the date of restitution to the Applicant of the amounts corresponding to the annulled assessments.

IV – DECISION

In these terms, this Arbitral Tribunal decides:

  • To judge the arbitral petition for annulment of the above-identified tax acts, relating to IUC and compensatory interest, in the total amount of € 41,420.84, as having merit;

  • To judge the petition for annulment of the dismissal order of the petition for official review dated 30.05.2018 as having merit;

  • To order the restitution to the Applicant of the amount paid as tax and compensatory interest;

  • To judge the petition for payment of indemnity interest, at the legal rate, to be counted from the expiration of the period of one year after presentation of the petition for official review and until the date of restitution to the Applicant of the amounts corresponding to the annulled assessments, as having merit.

V – VALUE OF THE CASE

The value of the case is set at € 41,420.84 (forty-one thousand, four hundred and twenty euros and eighty-four cents), in accordance with article 97-A, no. 1, a), of the Code of Tax Procedure and Process, applicable by virtue of paragraphs a) and b) of no. 1 of article 29 of the RJAT and of no. 2 of article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

VI – COSTS

The amount of the arbitration fee is set at € 2,142.00 in accordance with Table I of the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 17 July 2019

The Arbitrator

(Raquel Franco)

[1] In this sense, cf., among others, Arbitral Decisions of 19.7.2013, Case 26/2013-T, of 10.9.2013, Case 27/2013-T, of 15.10.2013, Case 14/2013-T, of 5.12.2013, Case 73/2013-T, of 14.2.2014, Case 170/2013-T, of 30.4.2014, Case 256/2013-T, of 2.5.2014, Case 289/2013-T, of 6.6.2014, Case 294/2013-T, of 25.6.2014, Case 42/2014, of 6.7.2014, Case 52/2014-T, of 15.9.2017, Case 173/2017-T and of 4.10.2017, Case 185/2017-T.

[2] Cf., by way of example, the decisions rendered in cases 0890/16 and 0926/17.

Frequently Asked Questions

Automatically Created

Who is the subjective taxpayer liable for IUC (Imposto Único de Circulação) on leased or financed vehicles in Portugal?
Under Article 3 of the IUC Code, the subjective taxpayer liable for IUC is the vehicle owner, legally defined as the natural or legal person in whose name the vehicle is registered. For leased vehicles, Article 3(2) establishes that the lessee is the passive taxpayer when annotated as such in the registration. However, in financial and operational leasing contexts, if no lessee annotation exists, the registered owner (typically the financial institution) remains liable. The Tax Authority argues this creates a legal fiction rather than a rebuttable presumption, while taxpayers contend they can prove actual transfer of possession or ownership before the tax due date to avoid liability.
Can a financial institution be held liable for IUC on vehicles that were already transferred or returned before the taxable event occurred?
The legality of holding financial institutions liable for IUC on transferred or returned vehicles depends on interpretation of Article 3 CIUC. The Tax Authority maintains that registration creates definitive tax liability regardless of actual possession, arguing the legislator intentionally established a legal qualification ('is considered') rather than a presumption. However, taxpayers argue this interpretation is overly formalistic and contradicts tax justice principles when documentary evidence proves alienation, lease transfer, or vehicle return occurred before the anniversary date triggering IUC liability. Article 19 CIUC requires leasing entities to provide user identification data, suggesting the system contemplates liability transfer, though the AT argues non-compliance with this reporting obligation doesn't shift tax liability from the registered owner.
What is the legal procedure for challenging IUC assessments through official review (revisão oficiosa) in Portugal?
Challenging IUC assessments through official review (revisão oficiosa) requires filing a petition with the relevant Tax Service demonstrating legal or factual errors in the assessment. Taxpayers must provide documentary evidence such as sale invoices, leasing contracts, transfer documentation, and registration timeline proof. The petition should include detailed identification of contested assessments, amounts involved (principal tax and compensatory interest), and legal grounds for annulment. If the review petition is dismissed, taxpayers may escalate to arbitral proceedings at CAAD within the statutory deadline, as occurred in this case where 602 assessments totaling €41,420.84 were contested following dismissal of the official review on May 30, 2018.
How does corporate merger by incorporation affect IUC tax liability for previously assessed vehicles?
Corporate merger by incorporation transfers all rights and obligations from the absorbed entity to the incorporating entity under Portuguese law. In this case, the Applicant acted as incorporating entity following merger with the financial institution originally assessed for IUC. The merger doesn't extinguish underlying tax liabilities; rather, the incorporating entity assumes legal standing to contest assessments originally issued to the extinct entity. The Applicant maintained jurisdiction under the Lisbon Tax Service and possessed legal capacity to file arbitral proceedings challenging the 602 IUC assessments. This procedural continuity ensures tax disputes aren't extinguished by corporate reorganizations, though it also means acquiring entities inherit potential tax liabilities from absorbed companies, highlighting the importance of due diligence in merger transactions regarding pending or potential tax assessments.
What are the grounds for annulling IUC assessments and compensatory interest when the taxpayer is no longer the registered vehicle owner?
Grounds for annulling IUC assessments when the taxpayer claims non-ownership include: (1) demonstrating vehicle alienation before the tax due date (vehicle anniversary) through sale invoices and transfer documentation; (2) proving lease termination and vehicle return before the taxable event; (3) establishing lessee annotation in vehicle registration that should trigger Article 3(2) liability transfer; (4) demonstrating Tax Authority reliance on outdated Motor Vehicle Register data without considering current ownership/possession evidence; and (5) arguing Article 3 creates a rebuttable rather than irrebuttable presumption. However, success depends on the tribunal's interpretation of whether 'is considered' in Article 3(1) establishes a legal fiction or rebuttable presumption, the systematic interpretation with Article 19 reporting obligations, and whether documentary evidence sufficiently proves the taxpayer wasn't the legal owner or possessor when IUC liability crystallized on the vehicle's anniversary date.