Process: 5/2015-T

Date: May 22, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This CAAD tax arbitration case (Process 5/2015-T) addresses whether a car rental company remains liable for IUC (Imposto Único de Circulação - Single Circulation Tax) on vehicles that were stolen and declared total loss by insurance companies. The claimant, A...Automóveis de Aluguer, Lda., challenged IUC assessments for 2009-2012 totaling €3,352.51, arguing that once vehicles were stolen and insurers declared total loss, the company ceased to be the actual owner and therefore should not be subject to IUC liability. The claimant contended that vehicle registration serves merely for publicity purposes under Decree-Law 54/75 and does not determine actual ownership or tax liability. The company had delivered all necessary documentation to insurance companies to cancel vehicle registrations pursuant to Article 41(5) of Decree-Law 291/2007 and Article 119(8) of the Highway Code. However, the Tax and Customs Authority (AT) defended the assessments based on Article 3 of the CIUC (Single Circulation Tax Code), which establishes that passive subjects of IUC are persons appearing in the vehicle register as owners, regardless of actual ownership status. The AT argued the claimant's interpretation was biased and ignored the systematic legal framework and ratio legis of the CIUC regime. The central legal issue concerns whether the legal presumption of ownership based on vehicle registration creates absolute IUC liability, or whether proof of loss of actual ownership through theft and total loss declaration suffices to terminate tax obligations. The case highlights the tension between formal registration requirements and substantive ownership rights in Portuguese vehicle taxation law.

Full Decision

ARBITRAL TAX DECISION

Arbitral Tax Decision

CAAD—Tax Arbitration

Case No. 05/2015-T

Claimant – A…-Automóveis de Aluguer, Lda., NIPC: …

Defendant - Tax and Customs Authority (AT)

Subject - Assessment of Single Circulation Tax (IUC)

Appointed Arbitrator - Maria de Fátima Alves

1 REPORT

1.1 A…Automóveis de Aluguer, Lda., with NIP: …, Claimant in the tax proceeding, above and hereinafter referenced, hereinafter referred to as "Claimant", came, invoking the provisions of Articles 2, No. 1, paragraph a), Article 5, No. 2, paragraph a), Article 6, No. 1, Article 10, No. 1, paragraph a) and No. 2, all of Decree-Law No. 10/2011, of 20 January (hereinafter RJAT), in Article 99 of the Tax Procedure and Process Code (CPPT) and in Numbers 1 and 2 paragraph d) of Article 95 of the General Tax Law (LGT), to request the establishment of the Singular Arbitral Tribunal, with a view to:

  • The annulment of the assessment acts relating to the Single Circulation Tax (hereinafter designated as IUC), for the years: 2009; 2010; 2011 and 2012 concerning the vehicles listed in the Claim proceedings, attached to the Request for Arbitral Ruling, doc. 1, better identified in the table, at pages 1, 2, and 3 of the body of the Initial Petition;

  • The reimbursement of the total amount of € 3,352.51, plus the respective compensatory interest provided for in Article 53 of the LGT and in Article 61 of the CPPT.

1.2 Pursuant to the provisions of paragraph a) of No. 2 of Article 6 and paragraph b) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council appointed as sole arbitrator Maria de Fátima Alves, who communicated her acceptance of the office within the applicable period:

  • On 27-02-2015 the parties were duly notified of this appointment, and neither manifested the will to refuse the appointment of the arbitrator, pursuant to the combined provisions of Article 11, No. 1, paragraphs a) and b) of the RJAT and Articles 6 and 7 of the Code of Ethics;

  • Therefore, the arbitral tribunal was constituted on 16-03-2015, as required by paragraph c) of No. 1 of Article 11 of Decree-Law No. 10/2011, of 20 January, in the wording introduced by Article 228 of Law No. 66-B/2012, of 31 December.

1.3 The Claimant, in substantiation of its request for arbitral ruling, states, in summary, the following:

  • The vehicles to which the single circulation tax assessed relates were not, at the date of the taxable events, the property of the Claimant, the latter not being the passive subject of the tax, a fact which denies it any subjective liability for its payment;

  • The Claimant substantiates its position on the fact that the taxed motor vehicles were stolen and their total loss declared by the respective insurance companies on dates prior to the dates on which the aforementioned taxes became due;

  • Invoking the legal duty of the aforementioned insurance companies to proceed with the cancellation of the respective registrations with the competent road authorities, from those same dates;

  • Emphasizing the fact that when delivering to the insurance companies all the necessary documentation for them to proceed with the cancellation of registrations with the competent authorities and, like many other situations, the Claimant trusted that they would proceed in accordance with their legal obligations;

  • That in the case at issue, it would be to proceed with the respective cancellation of the corresponding registrations;

  • Proof that the Declarations of Total Loss of the vehicles, targets of taxation, are contextualized through the indemnities received, and that they are sufficient proof to verify that the IUC tax was unduly assessed, see document No. 3, attached to the Initial Petition (and to the administrative claims), which are deemed to be fully reproduced for all legal effects;

It further states that: "upon receipt of the aforementioned communications by the insurers, the Claimant proceeded to deliver all the legal documentation necessary for them to cancel the registrations of the vehicles with the competent road authorities, pursuant to the provisions of Article 41, No. 5, of Decree-Law No. 291/2007, of 21 August and of Article 119, No. 8 of the Highway Code";

  • Evidencing that the documents attached to the case file are Declarations of Total Loss issued and communicated by insurance companies which attest: that the motor vehicles at issue were stolen without their recovery being achieved and, that for this reason, they declared their total loss in accordance with the insurance contracts concluded with the Claimant;

  • Given the facts presented, the Claimant cannot be attributed ownership of the aforementioned vehicles, and therefore cannot be the passive subject of the tax, given the letter and spirit of Article 3 of the Code of Single Circulation Tax (hereinafter designated as CIUC);

  • Considering that the registration of vehicles in the competent Motor Vehicle Registration Office is not a condition for the transfer of ownership, since such registration aims only to give publicity to the legal status of the assets, as results from, in particular, the provision of Article 1 of Decree-Law No. 54/75, of 12 February;

  • Therefore, taxation relating to the CIUC cannot be based solely on whoever appears in the register as owner of the vehicles but not on their actual owners.

1.4 The Defendant, Tax and Customs Authority (hereinafter designated as AT), proceeded to attach the Tax Administrative Process and presented a response, from which it follows that the tax acts in question do not suffer from any defect of violation of law, pronouncing itself for the dismissal of the claim and for the maintenance of the questioned assessment acts, defending, in summary, the following:

  • The passive subjects of the single circulation tax are the persons appearing in the register as owners of the vehicles, as provided in No. 1 of Article 3 of the CIUC, which in the case at issue is the case with respect to the Claimant;

  • Provided that the registration of the vehicles is in the name of a certain person so that such person embodies the position of passive subject of the IUC tax obligation;

  • That notoriously the interpretation that the Claimant makes of the provision of Article 3 of the CIUC is incorrect, insofar as it incurs in a "biased interpretation of the letter of the law" and in the adoption of "an interpretation that does not heed the systematic element, aimed at the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system", and the Claimant further follows an "interpretation that ignores the ratio of the regime established in the article in question and, likewise throughout the CIUC".

1.5 The meeting provided for in Article 18 of the RJAT took place on 14-05-2015, where it was decided by the Tribunal, with the agreement of the parties, to dispense with the production of final submissions:

  • At the aforementioned meeting it was, by consensus, verified that there was no exception susceptible of being appreciated and decided before addressing the claim;

  • The Tribunal, in compliance with the provision of Article 18, No. 2 of the RJAT, designated the issuance of the arbitral decision by 22-05-2015.

2 ISSUES TO BE DECIDED

2.1 Given the foregoing in the preceding numbers, relating to the submissions of the parties and the arguments presented, the main issues to be decided are the following:

  • The allegation made by the Claimant relating to the substantive assessment of the assessment acts, for the years 2009, 2010, 2011, 2012, relating to the IUC on the vehicles above referenced in the Administrative Process;

  • The incorrect interpretation and application of the norms of subjective incidence of the single circulation tax assessed and collected, which constitutes the central issue to be decided in the present proceedings;

  • The legal value of the registration of motor vehicles.

3 FINDINGS OF FACT

3.1 As a matter of fact relevant to the decision to be rendered, the present Tribunal finds established, based on the elements in the case file, the following facts:

  • The Claimant presented Declarations of Total Loss of the motor vehicles in question, relating to the moment prior to the taxation period – see documents, certified by the respective Insurance Companies, attached in the administrative claims (contained in the Administrative Process) and attached to the Initial Petition, which are deemed to be fully reproduced for all legal effects;

  • Unknown whether the outcome of the aforementioned vehicles and the fact that the Insurance Companies did not "deregister" the registrations of the stolen automobiles.

3.1.1 SUBSTANTIATION OF THE PROVEN FACTS

  • The facts found as proven are based on the Declarations of Total Loss of the vehicles in question, expressed by the respective Insurance Companies, attached in the administrative claims (contained in the Administrative Process) and attached to the Initial Petition, which are deemed to be fully reproduced for all legal effects.

3.1.2 FACTS NOT PROVEN

  • There are no facts found as not proven, since all facts considered relevant for the appreciation of the claim were proven.

4 LEGAL GROUNDS

4.1 The Tribunal is materially competent and is regularly constituted, pursuant to Articles 2, No. 1, paragraph a), 5, No. 2, paragraph a), 6, No. 1, 10, No. 1, paragraph a) and No. 2 of the RJAT:

  • The parties have standing and capacity and are legitimate, ex vi, Articles 4 and 10, No. 2, of the RJAT and Article 1 of Ordinance No. 112-A/2011, of 22 March;

  • The proceeding does not suffer from any nullities;

  • There being no preliminary question upon which the Tribunal should pronounce itself.

4.2 The claim object of the present proceeding is the declaration of annulment of the acts of assessment of the IUC relating to the motor vehicles better identified in the case file.

4.2.1 Condemnation of the AT to reimburse the amount of the tax relating to such assessments in the amount of € 3,352.51;

4.2.2 Condemnation of the AT to payment of compensatory interest on the same amounts.

4.3 According to the understanding of the AT, it is sufficient that in the register the vehicle appears as the property of a certain person, for that person to be the passive subject of the tax obligation.

4.4 The matter of fact is established, as stated in No. 3.1 above, being important to now determine the law applicable to the underlying facts, in accordance with the issues to be decided, identified in No. 2.1 above, and it is certain that the central issue in the present case, with respect to which there are absolutely opposing understandings between the Claimant and the AT, consists in knowing whether No. 1 of Article 3 of the CIUC relating to the subjective incidence of the single circulation tax establishes or not a rebuttable presumption.

4.5 All analyzed and, having regard, on the one hand, to the positions of the parties in confrontation, mentioned in points 1.3 and 1.4 above and, considering, on the other hand, that the central issue to be decided is whether No. 1 of Article 3 of the CIUC establishes or not a legal presumption of tax incidence, it is necessary, in this context, to appreciate and render a decision.

5 ISSUE OF INCORRECT INTERPRETATION AND APPLICATION OF THE NORM OF SUBJECTIVE INCIDENCE OF THE IUC

5.1 Considering that it is consensually understood in doctrine that in the interpretation of tax laws the general principles of interpretation apply in full, which shall be only and naturally limited by the exceptions and particularities dictated by the law itself which is the object of interpretation. This is an understanding that has come to be recognized in the General Tax Laws of other countries and which also came to be enshrined in Article 11 of our General Tax Law, which has, moreover, been frequently underlined by case law.

It is consensually accepted that with a view to grasping the meaning of the law, interpretation resorts, a priori, to reconstructing the legislative thought through the words of the law, which means seeking its literal sense, valuing it and assessing it in light of other criteria, involving the so-called elements of a logical, rational or teleological nature and of a systematic order:

  • With regard to the interpretation of tax law, there is to be considered the case law, namely, the Decisions of the Administrative Supreme Court of 05-09-2012, case No. 0314/12 and of 06-02-2013, case No. 01000/12, available at www.dgsi.pt, the importance of the provision of Article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

  • No. 1 of Article 3 of the CIUC provides that "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 names the same are registered";

  • The formulation used in the aforementioned article resorts to the expression "being considered" which raises the question of whether to such expression can be attributed a presumptive sense, equating it with the expression "being presumed", these are expressions frequently used with equivalent meanings;

  • As Jorge Lopes de Sousa teaches, in Tax Procedure and Process Code, Annotated and Commented, Volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in matters of tax incidence, presumptions may be revealed by the expression "it is presumed" or by similar expression, mentioning various examples of such presumptions, referring to the one contained in Article 40, No. 1 of the Corporate Income Tax Code, in which the expression "it is presumed" is used and the one contained in Article 46, No. 2, of the same Code, in which use is made of the expression "is considered", as an expression with an effect similar to the former and, equally embodying, a presumption;

  • In the legal formulation set forth in No. 1 of Article 3 of the CIUC, in which a presumption was established, revealed by the expression "being considered", of meaning similar and of equivalent value to the expression "being presumed", in use since the creation of the tax in question;

  • The use of the expression "being considered" aimed at nothing more than the establishment of a more marked and clear approximation between the passive subject of the IUC and the actual owner of the vehicle, which is in harmony with the reinforcement given to the ownership of the vehicle, which now became the generating event of the tax, pursuant to Article 6 of the CIUC;

  • The relevance and interest of the presumption in question, which historically was revealed through the expression "being presumed" and which now uses the expression "being considered", lies in the truth and justice that, by this means, is conferred on tax relations and that embody fundamental fiscal values, allowing to tax the real and actual owner and not the one who, by circumstances of various nature, is often merely an apparent and false owner. If the case were not considered thus, not admitting and revealing the presentation of probative elements intended to demonstrate that the actual owner is, after all, a person different from the one appearing in the register and, which initially, and in principle, was supposed to be the true owner, such values would be objectively postponed.

5.2 There is also to be considered the principle of equivalence, inscribed in Article 1 of the CIUC, which underlies the polluter-pays principle and, realizes the idea inscribed therein that whoever pollutes should, therefore, pay. The aforementioned principle has constitutional basis, insofar as it represents a corollary of the provision of paragraph h) of No. 2 of Article 66 of the Constitution, having also basis in community law, whether at the level of primary law, Article 130-R, of the Treaty of Maastricht (Treaty on European Union, of 07-02-1992), where the aforementioned principle came to be contained as support of Community Policy in the environmental field and which aims to hold responsible whoever contributes to the damages that result to the community, arising from the use of motor vehicles, are assumed by their owner-users, as costs that only they should bear.

5.3 Given the facts above described, it is important to note that the aforementioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, whether those respecting the logical elements of interpretation, of a historical nature or of a rational order, all point in the direction that the expression "being considered" has a sense equivalent to the expression "being presumed", and thus it should be understood that the provision of No. 1 of Article 3 of the CIUC establishes a legal presumption which, given Article 73 of the LGT, which establishes that "Presumptions established in tax incidence norms always admit proof to the contrary", shall necessarily be rebuttable, which means that the passive subjects are, in principle, the persons in whose names such vehicles are registered. They shall, therefore, be those persons, identified in such conditions to whom the AT must necessarily address itself:

  • But it shall be, in principle, given that in the context of prior hearing, of mandatory character, given the provision of paragraph a) of No. 1 of Article 60 of the LGT, the tax relationship may be reconfigured, validating the passive subject initially identified or redirecting the proceeding in the direction of whoever is, after all, the true and actual passive subject of the tax in question;

  • The taxpayer has the right to be heard, by means of prior hearing (José Manuel Santos Botelho, Américo Pires Esteves and José Cândido de Pinho, in Tax Procedure Code, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 of Article 100);

  • The prior hearing which, naturally, is to be realized at the moment immediately preceding the assessment procedure, corresponds to the proper venue and time to, with certainty and security, identify the passive subject of the IUC.

6 ON THE LEGAL VALUE OF REGISTRATION

6.1 With respect to the legal value of registration, it is important to note what is established in No. 1 of Article 1 of Decree-Law No. 54/75, of 12 February (variously amended, the last being by Law No. 39/2008, of 11 August), when it provides that "the registration of vehicles has essentially as its purpose to give publicity to the legal status of motor vehicles and their trailers, with a view to the security of legal commerce":

  • Article 7 of the Land Registry Code (CRP), applicable supplementarily to the registration of automobiles, by force of Article 29 of the Automobile Registry Code (CRA), provides that "Definitive registration constitutes a presumption that the right exists and belongs to the holder registered, in the precise terms in which the registration defines it";

  • Definitive registration constitutes nothing more than a rebuttable presumption, admitting therefore, counterproof, as follows from the law and case law has been pointing out, and can be seen, among others, in the Decisions of the Supreme Court of Justice No. 03B4369 of 19-02-2004 and No. 07B4528, of 29-01-2008, available at: www.dgsi.pt;

  • Therefore, the function legally reserved to the register is, on the one hand, to publicize the legal status of assets, in the case in question, of vehicles and, on the other hand, allows us to presume that the right exists over those vehicles and that it belongs to the holder, as such registered in the register, it does not have a constitutive nature of the right of ownership, but only declarative, which is why registration does not constitute a condition of validity of the transfer of the vehicle from seller to buyer;

  • The acquirers of vehicles become owners of those same vehicles by means of the conclusion of the corresponding contracts of sale and purchase, with or without registration;

  • In this context it is worth recalling that, given the provision of No. 1 of Article 408 of the CC, the transfer of real rights over things, in the case at issue, motor vehicles, is determined by mere effect of the contract, and that pursuant to the provision of paragraph a) of Article 879 of the CC, among the essential effects of the contract of sale and purchase, stands out the transfer of the thing;

  • Given the foregoing, it becomes clear that the legislative thought points in the direction that the provision of No. 1 of Article 3 of the CIUC establishes a presumption "juris tantum", consequently rebuttable, thus allowing the person who, in the register, is inscribed as owner of the vehicle, to present probative elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, for whom ownership was transferred.

7 THE PRESUMPTION OF ARTICLE 3 OF THE CIUC AND THE DATE ON WHICH THE IUC IS DUE

7.1 THE PRESUMPTION OF ARTICLE 3 OF THE CIUC

  • The AT considers that the presumption that exists in No. 1 of Article 3 of the CIUC is a result of an interpretation against law, resulting from a biased reading of the letter of the law and, therefore, violating the unity of the legal system, however, and with all due respect, the understanding of case law goes in the direction that the existence of a legally rebuttable presumption should be considered, and therefore consequently serves the values and interests questioned, both at the level of material fiscal justice and at the level of the environmental purposes aimed at by the IUC;

  • Concerning the unity of the legal system, all of the above is to be noted, namely, regarding the ratio of Article 1 of the CIUC; regarding the norms and principles of the LGT; regarding the relevant norms applicable to the registration of motor vehicles, regarding the interpretation that best serves and achieves the aforementioned unity and ensures the connection of those same norms, considering the legal presumption that is established in Article 3 of the CIUC.

7.2 DATE ON WHICH THE IUC IS DUE

  • The IUC is a periodic taxation tax, whose periodicity corresponds to the year which begins at the time of registration or on each of its anniversaries, as provided in Nos. 1 and 2 of Article 4 of the CIUC;

  • It is due pursuant to No. 3 of Article 6 of the aforementioned Code;

  • It being important to note that, as to the assessment of the IUC taxed to the Claimant on the vehicles above referenced, for the years 2009 to 2012, these are not to be considered, because at the time of the taxable events the vehicles no longer belonged to it, since the aforementioned vehicles were stolen from the Claimant, see the Declarations of Total Loss, expressed by the respective Insurance Companies, attached to the administrative claims (contained in the Administrative Process) and, document No. 3, attached to the Initial Petition, which are deemed to be fully reproduced for all legal effects.

7.2.1 Regarding the burden of proof, Article 342, No. 1 of the CC provides "it falls to the one invoking a right to prove the constitutive facts of the right alleged";

7.2.2 Also Article 346 of the CC (counterproof) determines that "to the proof that is produced by the party on whom the burden of proof falls, the other party may oppose counterproof regarding the same facts, intended to make them doubtful; if it succeeds, the question is decided against the party burdened with the proof." (As stated by Anselmo de Castro, A., 1982, ED. Almedina Coimbra, "Declaratory Civil Procedure Law", III, p. 163, "when the burden of proof falls on one of the parties, it suffices for the other party to oppose counterproof, this being proof intended to make doubtful the facts alleged by the first".

Thus, in the case at issue, what the Claimant has to prove, in order to rebut the presumption that arises both from Article 3 of the CIUC and from the Motor Vehicle Register itself, is that it, the Claimant, was not the owner of the vehicles in question in the period to which the disputed assessments relate, thus presenting the respective Declarations of Total Loss, expressed by the respective Insurance Companies, since the motor vehicles were stolen from it (see probative documents attached to the Administrative Claims, contained in the Administrative Process, and documents No. 2 and 3, attached to the Initial Petition, which are deemed to be fully reproduced for all legal effects.

7.3 REBUTTAL OF THE PRESUMPTION

  • The Claimant, as referred to in 3.1, regarding the facts proven, alleged, with the purpose of eliminating the presumption, not to be the owner of the vehicles at the time of the occurrence of the taxable events, offering for this purpose the following documents;

  • Declarations of Total Loss of the stolen vehicles;

  • In this way, the ownership of the aforementioned vehicles no longer belonged to it, since the situations which are the object of the disputed assessments occurred on a date prior to the generating event of the tax, that is, in the years 2009 to 2012;

  • And, if the aforementioned vehicles were the object of theft, on dates prior to those, confirmed by the respective Insurance Companies, as expressed in document No. 3, attached to the Initial Petition, they are considered means of proof, with sufficient and adequate force, to rebut the presumption founded on the register, as provided in No. 1 of Article 3 of the CIUC, documents which enjoy the presumption of truthfulness provided for in No. 1 of Article 75 of the LGT. Thus following that at the date when the IUC was due, whoever had ownership of the motor vehicles was not the Claimant.

8 OTHER ISSUES RELATING TO THE LEGALITY OF THE ASSESSMENT ACTS

  • Regarding the existence of other issues relating to the legality of the assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of defects, as provided for in Article 124 of the CPPT, that proceeding on the basis of defects that prevent the renewal of the disputed assessments, the knowledge of other defects is eliminated, because useless, it does not appear necessary to know of the other issues raised.

9 REIMBURSEMENT OF THE TOTAL AMOUNT PAID

  • Pursuant to the provision of paragraph b) of No. 1 of Article 24 of the RJAT and, in accordance with what is established there, the arbitral decision on the merits of the claim from which no appeal or challenge is available binds the tax administration from the end of the period provided for appeal or challenge, and this must, in the exact terms of the success of the arbitral decision in favor of the passive subject and until the end of the period provided for the spontaneous execution of the sentences of the judicial tax courts "Restore the situation that would have existed if the tax act which is the object of the arbitral decision had not been carried out, adopting the acts and operations necessary for this purpose";

  • These are legal commands that are in complete harmony with the provision of Article 100 of the LGT, applicable to the case, ex vi, the provision of paragraph a) of No. 1 of Article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of full or partial success of claims or administrative appeals or judicial proceedings in favor of the passive subject, to the immediate and full restoration of the situation that would have existed if the illegality had not been committed, the payment of compensatory interest corresponding to the terms and conditions provided by law";

  • The case contained in the present proceedings raises the manifest application of the aforementioned norms, since as a consequence of the illegality of the assessment acts referenced in this proceeding, there must, by force of these norms, be reimbursement of the amounts paid, whether as tax paid or of the corresponding compensatory interest, as a means of achieving the restoration of the situation that would have existed if the illegality had not been committed.

10 OF THE RIGHT TO COMPENSATORY INTEREST

  • The declaration of illegality and consequent annulment of an administrative act confers on the recipient of the act the right to the reinstatement of the situation in which the same would have found itself before the execution of the annulled act;

  • In the context of the assessment of the tax, its annulment confers on the passive subject the right to the restitution of the tax paid and, as a rule, the right to compensatory interest, pursuant to No. 1 of Article 43 of the LGT;

  • Therefore, the Claimant is entitled to compensatory interest on the amount of tax paid relating to the annulled assessments;

11 DECISION

Given the foregoing, this Arbitral Tribunal decides:

  • To hold the claim for declaration of illegality of the assessment of the IUC, for the years: 2009, 2010, 2011, 2012, regarding the motor vehicles identified in the present proceeding, to be well-founded, and consequently annuls the corresponding tax acts;

  • To hold the claim for condemnation of the Tax Administration to reimburse the amount wrongfully paid, in the amount of 3,352.51 euros, plus the respective compensatory interest, to be well-founded;

  • Condemning the Tax and Customs Authority to make these payments.

VALUE OF THE PROCEEDING:

In accordance with the provisions of Articles 306, No. 2 of the Code of Civil Procedure and 97-A, No. 1 of the CPPT and of Article 3, No. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the proceeding is fixed at 3,352.51 €.

COSTS: In accordance with No. 4 of Article 22 of the RJAT, the amount of costs is fixed at 612.00 €, pursuant to Table I, attached to the Regulation of Costs in Tax Arbitration Proceedings, at the charge of the Tax and Customs Authority.

Notify the parties.

Lisbon, 22-05-2015

The Arbitrator

Maria de Fátima Alves

(the text of the present decision was prepared by computer, pursuant to Article 131, No. 5 of the Code of Civil Procedure, applicable by reference of Article 29, No. 1 paragraph e) of Decree-Law 10/2011, of 20 January (RJAT), governed in its drafting by current spelling)

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC (Imposto Único de Circulação) when a vehicle has been stolen?
Under Article 3 of the CIUC (Single Circulation Tax Code), the taxable person for IUC is the person appearing in the vehicle register as owner, regardless of whether the vehicle has been stolen. Portuguese tax law establishes a legal presumption that the registered owner is the passive subject of IUC tax liability. Even when a vehicle is stolen, the registered owner remains liable for IUC until the vehicle registration is officially cancelled with the competent road authorities (IMT - Instituto da Mobilidade e dos Transportes). The registration creates a formal presumption of tax liability that continues until administrative cancellation occurs, despite the loss of actual possession and control over the vehicle.
Can the registered owner be exempt from IUC liability if the vehicle was declared a total loss by the insurance company?
No, under current interpretation of Article 3 of the CIUC, the registered owner cannot be automatically exempt from IUC liability solely based on an insurance company's total loss declaration. While the claimant argued that total loss declarations by insurers should terminate tax liability since actual ownership ceased, the Tax Authority maintains that formal registration determines tax liability. The registered owner must ensure proper cancellation of vehicle registration with the competent road authorities (IMT). According to Article 41(5) of Decree-Law 291/2007 and Article 119(8) of the Highway Code, insurance companies have a legal obligation to cancel registrations upon total loss declarations. However, until such cancellation is officially processed and recorded, the registered owner remains the IUC passive subject. Taxpayers should verify cancellation completion rather than assume insurers fulfilled this obligation.
How do legal presumptions of vehicle ownership affect IUC tax liability in Portugal?
Legal presumptions of vehicle ownership have determinative effect on IUC tax liability in Portugal. Article 3 of the CIUC establishes that whoever appears in the vehicle register as owner is presumed to be the passive subject (taxpayer) for IUC purposes. This creates a formal, registration-based system rather than one based on actual ownership or possession. While Decree-Law 54/75 confirms that registration serves primarily for publicity and is not a condition for ownership transfer in civil law terms, tax law applies different principles. The registration presumption in tax matters is strong and continues until official cancellation occurs. This means the legal presumption overrides arguments about actual ownership, possession, or control. Taxpayers cannot rebut IUC liability simply by proving they no longer actually own or possess a vehicle; they must ensure formal deregistration. This systematic approach provides administrative certainty for tax collection but can create hardship when vehicles are stolen, destroyed, or otherwise lost.
What is the procedure for challenging IUC tax assessments through CAAD tax arbitration?
To challenge IUC tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration, taxpayers must follow the procedure established in Decree-Law 10/2011 (RJAT - Legal Regime of Tax Arbitration). The process includes: (1) Filing a request for arbitral ruling invoking Articles 2(1)(a), 5(2)(a), 6(1), and 10(1)(a) of RJAT, citing the specific IUC assessments being challenged; (2) The CAAD Ethics Council appoints a sole arbitrator who must be accepted by both parties; (3) The arbitral tribunal is constituted within the legal timeframe (typically 10 working days after appointment); (4) The Tax Authority submits the administrative file and response; (5) A preliminary meeting occurs under Article 18 of RJAT where procedural issues are addressed; (6) The arbitrator issues a decision within the designated timeframe. Taxpayers can request annulment of IUC assessments and reimbursement of amounts paid plus compensatory interest under Articles 53 LGT and 61 CPPT. This arbitration provides a faster alternative to judicial tax courts.
Is the taxpayer entitled to a refund and compensatory interest when IUC is wrongfully assessed on stolen vehicles?
Whether a taxpayer is entitled to refund and compensatory interest when IUC is wrongfully assessed on stolen vehicles depends on successfully proving the assessment was unlawful. If the taxpayer can demonstrate that: (1) the vehicle was stolen and declared total loss by the insurer before the tax liability arose; (2) all required documentation was properly submitted to insurance companies for registration cancellation; and (3) the failure to cancel registration was attributable to third parties (insurers) not the taxpayer, then a claim for refund may succeed. Upon favorable arbitral or judicial decision, Article 53 of the LGT (General Tax Law) and Article 61 of the CPPT (Tax Procedure Code) provide for compensatory interest on amounts wrongfully collected from the date of payment until reimbursement. The interest compensates taxpayers for loss of use of funds. However, given the Tax Authority's strong position that registered owners remain liable until formal cancellation regardless of circumstances, taxpayers face significant challenges proving assessments were unlawful rather than merely harsh consequences of the registration-based liability system.