Process: 50/2018-T

Date: June 20, 2018

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral decision addresses the subjective incidence of IUC (Imposto Único de Circulação - Single Circulation Tax) in cases where a financial leasing company remains the registered owner of vehicles that have been transferred to lessees or declared as salvage. The claimant, a leasing company, challenged IUC assessments for tax years 2009-2016, arguing it should not be liable as the vehicles had been sold to lessees or given to insurers as salvage before the taxable event occurred. The company filed requests for ex officio revision under Article 78 of the General Tax Law, which were partially dismissed as untimely by the Tax Authority. The core legal issue revolves around whether mere registration determines tax liability or whether actual ownership at the moment of the taxable event is decisive. The claimant contended that IUC liability should follow economic ownership rather than formal registration, presenting debit notes as evidence of transfers. The case examines the four-year deadline for challenging tax acts based on errors attributable to tax administration services. The arbitral tribunal had to determine whether the registration formality prevails over the substantive transfer of ownership rights in determining who bears IUC tax liability, and whether the revision requests were timely filed. This decision has significant implications for leasing companies and establishes important precedents regarding the relationship between vehicle registration and tax liability for IUC purposes in Portuguese tax law.

Full Decision

Arbitral Decision

I. Report

  1. A…, S.A., collective person no.…, with registered office in …, …, …, …-… Porto Salvo, requested the constitution of an arbitral tribunal in tax matters, raising a request for arbitral pronouncement against decisions of the Tax and Customs Authority (AT) in the sense of dismissal of several requests for ex officio revision of a tax act and, consequently, against the acts of assessment of Single Circulation Tax (IUC) relating to the years 2009, 2011, 2012, 2014, 2015 and 2016, and to the vehicles identified, by their respective registration number, in articles 22 and 25 of the petition, whose annulment it requests. As a consequence of said annulment, it requests that the inherent consequences be drawn, namely the condemnation of the Tax Authority to reimburse the amount which it considers was unduly paid, in the total amount of € 26,707.08.

  2. As the basis for the request, presented on 05-02-2018, the Claimant alleges, in summary, that having submitted requests for ex officio revision of the IUC assessments in question, the same were dismissed, on the basis of their untimeliness, a fact which, according to its understanding, does not occur given that the questioned assessments result from error attributable to the services of the tax administration and the revision requests were submitted within the four-year period provided for in the second part of no. 1 of article 78 of the General Tax Law. On the other hand, and as regards the quality of taxpayer of the tax obligation to which those assessments relate, the Claimant invokes the fact that it does not assume such quality with respect to the taxation periods and vehicles to which the same relate.

  3. According to the Claimant's allegation, the referred vehicles, although registered in its name on the date to which the tax facts to which those assessments refer are attributable, had already been the subject of transfer to third parties or, in other cases, given as salvaged with the respective insurer, and therefore were not its property on the date of the taxable event and exigibility of the tax in question.

  4. In response to what was requested, the Tax and Customs Authority (AT) pronounced itself in the sense of dismissal of the present request for arbitral pronouncement, maintaining in the legal order the impugned tax acts and, in accordance therewith, for the absolution of the respondent entity.

  5. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 06-02-2018.

  6. In accordance with the provisions of subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of 20/01, as amended by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council designated as arbitrator of the singular arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable period, and notified the parties of said designation on 27-03-2018.

  7. Duly notified of said designation, the parties did not express willingness to challenge the designation of the arbitrator in accordance with the combined provisions of article 11, no. 1, subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  8. Thus, in accordance with the provisions of subparagraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31/12, the singular arbitral tribunal was constituted on 16-04-2018.

  9. The arbitral tribunal being regularly constituted is materially competent, in view of the provisions of articles 2, no. 1, subparagraph a), of the RJAT.

  10. The parties enjoy judicial personality and capacity and have standing (arts. 4 and 10, no. 2, of the RJAT, and art. 1 of Ordinance no. 112-A/2011, of 22/03).

  11. No nullities occur and no preliminary questions or exceptions were raised, and therefore nothing prevents judgment on the merits, the present case thus being in conditions for final decision to be rendered therein.

  12. Given the knowledge that flows from the procedural documents submitted by the parties, in particular from the administrative file, which is deemed sufficient for the decision, the Tribunal decided to dispense with the meeting to which article 18 of the RJAT alludes.

II. Factual Matter

  1. With relevance for the assessment of the issues raised in the present request for arbitral pronouncement, the following factual elements stand out, which, on the basis of the documentary evidence attached to the proceedings, are deemed proven:

13.1. The Claimant is a company whose corporate purpose is the activity of financial lease of motor vehicles.

13.2. In the course of that activity, it holds, for short periods of time, the ownership of motor vehicles, registered in its name and delivered to the respective lessees under the terms of financial lease contracts.

13.3. At the end of the lease contracts, the lessees acquire the leased vehicles, the Claimant then sending them the necessary documentation so that they may proceed to register the vehicles in their name.

13.4. The vehicles being registered in the name of the Claimant, the Tax and Customs Authority assessed it for IUC relating to the periods of 2009, 2011, 2012, 2014, 2015 and 2016 on various motor vehicles, issuing the corresponding collection notes with payment deadline dates in various months of those years.

13.5. The Claimant challenged such assessments, through requests for ex officio revision of a tax act filed under article 78 of the General Tax Law, alleging that on the date of the corresponding tax fact, the vehicles in question were no longer its property because they had been transferred to the respective lessees, in accordance with the terms of their respective financial lease contracts or had been given as "salvaged" with the respective insurer. To substantiate the allegation, the Claimant attaches to the revision requests copies of debit notes issued to the lessees/purchasers (Docs. 1 to 4).

13.6. To the said requests, delivered to the Finance Service of Oeiras-1 on various dates in 2017 (Docs. 1 to 6)

13.7. By dispatches of the Deputy Finance Director of the Finance Directorate of Lisbon, issued in the exercise of subdelegated authority, the revision requests were subject to partial approval, having been dismissed with respect to the IUC assessments relating to the periods and vehicles identified by their respective registration number in nos. 22 and 25 of the petition, on the ground of their untimeliness.

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

III. Joinder of Claims

  1. The present request for arbitral pronouncement relates to various IUC assessments. However, given the identity of the tax facts, the tribunal competent to decide and the grounds of fact and law invoked, the tribunal considers that nothing prevents, in view of the provisions of articles 3 of the RJAT and 104 of the CPPT, the joinder of claims.

IV. Matter of Law

  1. In the request for arbitral pronouncement, the Claimant submits to the appreciation of this tribunal the legality of acts of express dismissal of various requests for ex officio revision of a tax act and, in consequence, the legality of the acts of assessment of IUC, relating to the periods of 2009, 2011, 2012, 2014, 2015 and 2016 and to the vehicles which it identifies in articles 22 and 25 of the respective petition. To this end, it invokes the circumstance that, on the date to which the tax facts originating them are attributable, those vehicles were already transferred to third parties, at the end of and under the terms of the respective financial lease contracts, or given as salvaged with the respective insurer, and, consequently, it does not assume the quality of taxpayer of the tax assessed against it.

  2. The revision requests formulated by the Claimant were the subject of information from the tax services, drawn up in identical terms, from which the following is transcribed:

"III. ANALYSIS OF THE REQUEST

...

In accordance with no. 1 of article 78 of the LGT, the revision of tax acts by the entity that performed them may be effected at the initiative of the taxpayer, within the complaint period and on the grounds of any illegality or within four years after assessment at the initiative of the Tax Authority (AT) or at any time if the tax has not been paid on the grounds of error attributable to the Services.

The request is untimely, in accordance with no. 1 of article 70 combined with subparagraph a) of no. 1 of article 102, both of the CPPT.

It should be noted that, being the request untimely, and in the absence of error by the services, in so far as the assessments in question were made on the basis of the elements available to the AT, the guarantee provided for in no. 1 of the cited article is ruled out.

..."

  1. On each of the information statements relating to the revision requests, all of them drawn up, as regards their respective grounds, in terms identical to that from which the above excerpt is extracted, dispatches were issued by the Deputy Finance Director, also in identical terms: "Having regard to the opinions and proposals that precede, the content and grounds of the information provided below and with the other elements of the record, I consider that the request does not merit approval since, according to what is reported, the legal prerequisites for the Revision requested are not met and this is a matter resolved at a higher level in the sense of dismissal of the request..."

  2. Extracting from the documentary elements that form part of the administrative file that all the impugned assessments had various months of the years 2012 to 2016 as the deadline for voluntary payment and the requests for ex officio revision were, all of them, delivered between 06-11-2017 and 20-12-2017 (Docs. 1 to 6), therefore already after the expiry of the administrative complaint period provided for in the first part of no. 1 of article 78 of the General Tax Law, it is important to ascertain whether, even so, the requests could fall within the period provided for in the second part of the same article.

  3. From the information and dispatch transcribed above, it appears that the understanding contained in them, and which grounds the decisions of dismissal, is that, in the cases to which the requests for ex officio revision relate, there is no error, of fact or of law, attributable to the services, which would justify the four-year period to which that provision refers.

  4. The non-existence of error attributable to the services, according to the information on which the decisions dismissing the requests are based, is based on the circumstance that, as emerges from the applicable law, the impugned assessments were made by the AT in light of elements made available by the Registry Office of Motor Vehicles and by the IMTT.

  5. A different understanding is that sustained by the Claimant. After reaffirming that the error attributable to the services, to which the rule providing for the possibility of ex officio revision of a tax act encompasses both factual and legal error, the Claimant states that "there is, in the present case, error attributable to the services embodied in legal error, in so far as there is a misapplication of the rules of the IUC Code, in particular, of article 3 of this legal instrument."

  6. This understanding is based on the circumstance that, according to the Claimant's allegation, "it always made efforts to alert the AT to the illegality of the amount of the tax that was being assessed to it," in particular because "it attached to the revision requests for a tax act that it made several debit notes proving that it was a creditor of sums owed by the subjects with whom it had entered into financial lease contracts."

  7. As the grounds for the assessments and support for the decisions dismissing the requests for ex officio revision, the AT invokes the rule of article 3 of the IUC Code which, in the wording in force on the date of the facts, establishes the subjective scope of the tax in the following terms:

"1 - The taxpayers of the tax are the owners of the vehicles, considered as such the natural or legal persons, of public or private law, in whose name the same are registered.

2 - Financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract are equated to owners."

  1. Whether one understands that the transcribed rule establishes a rebuttable presumption in accordance with general law – as has been unanimously understood by case-law – or whether one considers this not to be the case, it is not apparent that, with respect to the assessments to which the requests for ex officio revision relate and, consequently, the present request for arbitral pronouncement, there is the existence of error attributable to the services of the tax administration.

  2. In fact, those assessments were made on the basis of the elements available in the databases of the Registry Office of Motor Vehicles and the IMTT. As regards the determination of the taxpayer of the tax obligation, it is thus evident that the AT effected the assessments in strict observance of the applicable legal rule: the vehicles to which the tax relates were registered in the name of the Claimant; therefore, according to the rule of no. 1 of article 3 of the CIUC, it was the latter that was the taxpayer of the corresponding tax obligation.

  3. Bound by the principle of legality, the AT could not proceed in any manner other than that in which it operated, that is, it could not fail to effect the assessments and issue the competent collection notes in the name of the owners of the vehicles as according to their respective registration.

  4. Admitting, as is admitted, that the rule of subjective scope establishes a presumption, this is rebuttable, in accordance with general law and, in particular, in accordance with article 73 of the General Tax Law.

  5. Thus, the Claimant could, within the legal period, react against the same, either by resorting to the adversarial procedure provided for in article 64 of the CPPT, or through a request for administrative reconsideration or judicial impugnation of the assessment act based on it.

  6. From the elements of the present proceedings it appears that the Claimant did not use any of the legal means at its disposal to rebut the presumption of ownership of the vehicles derived from the motor vehicle registry.

  7. After the expiry of the periods for administrative complaint and judicial impugnation, the Claimant requested ex officio revision of the assessments under no. 1 of article 78 of the LGT.

  8. Indeed, this provision provides that "- The revision of tax acts by the entity that performed them may be effected at the initiative of the taxpayer, within the period of administrative complaint and on the grounds of any illegality, or, at the initiative of the tax administration, within four years after assessment or at any time if the tax has not yet been paid, on the grounds of error attributable to the services."

  9. Whether one understands that the administrative complaint period to which the first part of the transcribed provision refers is that of 15 days to which no. 3 of article 191 of the Code of Administrative Procedure refers or that of 120 days provided for in article 70 of the CPPT, it follows from the facts evidenced in the proceedings that the requests were, all of them, presented after the expiry of either of the said periods.

  10. However, on the date of submission of the revision requests to the competent finance service, the four-year period to which the second part of that article 78 of the LGT refers was still running.

  11. As expressly provided for in no. 1 of the said article, the revision of the tax act may be effected at the initiative of the taxpayer, within the administrative complaint period, on the grounds of any illegality or, at the initiative of the tax administration, within four years after assessment (or at any time if the tax has not yet been paid) on the grounds of error attributable to the services. It is noted that, despite this latter period referring to the initiative of the tax administration, it is established case-law that such initiative may be raised by a request from the taxpayer to that effect.

  12. In the case under analysis, it is found that the requests, clearly untimely if the period provided for in the first part of no. 1 of article 78 of the LGT is considered, were submitted within the 4-year period to which the second part of the same provision refers.

  13. In the first case, the request for revision of the act may be based on any illegality. However, under the second part of the cited provision and within the said period, revision of assessment acts may only be effected "on the grounds of error attributable to the services."[1]

  14. As concluded above, it is not found that the impugned assessments are affected by error, of fact or of law, attributable to the services of the tax administration, which would enable the extension of the period for their ex officio revision to be effected.

V. Decision

In these terms, and with the grounds set out above, the Arbitral Tribunal decides:

  • To render judgment wholly dismissing the request for arbitral pronouncement and, in consequence, to maintain the impugned tax acts;

  • To condemn the Claimant in the costs of the proceedings.

Value of the case: € 26,707.08

Costs: Under article 22, no. 4, of the RJAT, and in accordance with Table I attached to the Regulations on Costs in Tax Arbitration Proceedings, I fix the amount of costs at € 1,530.00, to be borne by the Claimant.

Lisbon, 20 June 2018,

The Arbitrator, Álvaro Caneira.

[1] In this sense, STA, Decision of 4.5.2016, Proc. 0407/15

Frequently Asked Questions

Automatically Created

Who is the subjective taxpayer liable for IUC (Imposto Único de Circulação) when a vehicle has been transferred but remains registered to the original owner?
Under Portuguese tax law, the subjective taxpayer liable for IUC is determined by vehicle registration records. Even when a vehicle has been transferred to a third party through sale or under a financial lease contract, if the original owner remains listed as the registered owner in official records at the moment of the taxable event, that registered owner is presumed to be the taxpayer liable for IUC. The registration creates a legal presumption of ownership for tax purposes that prevails unless formally updated. This means leasing companies and sellers must ensure timely registration transfers to avoid continued tax liability for vehicles no longer in their economic possession.
Can a company challenge IUC tax assessments through a pedido de revisão oficiosa when vehicles were sold or declared as salvage before the taxable event?
Yes, a company can challenge IUC tax assessments through a pedido de revisão oficiosa (request for ex officio revision) under Article 78 of the Lei Geral Tributária when vehicles were sold or declared as salvage before the taxable event. However, the success of such challenges depends on meeting strict procedural requirements, particularly timeliness. If the error is attributable to the tax administration, the four-year deadline applies. If the error is attributable to the taxpayer (such as failing to update registration records promptly), shorter deadlines may apply. The claimant must provide documentary evidence of the transfer or salvage status, such as sales contracts, debit notes to purchasers, or insurance documentation proving the vehicle's salvage classification before the tax became due.
What is the four-year deadline under Article 78(1) of the Lei Geral Tributária for filing an ex officio review based on errors attributable to the tax administration?
The four-year deadline under Article 78(1) of the Lei Geral Tributária for filing an ex officio review based on errors attributable to the tax administration runs from the date of payment or the date when the tax became legally enforceable, whichever is later. This extended deadline only applies when the error in the tax assessment is demonstrably attributable to the tax administration's services, not to the taxpayer. If the tax authority argues that the error resulted from the taxpayer's failure to update registration records or provide timely information, the shorter two-year general deadline may apply instead. The burden of proving that the error is attributable to the administration rests with the taxpayer requesting the revision.
Does vehicle registration alone determine IUC tax liability even if ownership has been transferred to a third party?
Vehicle registration creates a strong legal presumption for IUC tax liability in Portuguese tax law, but it is not absolutely determinative in all circumstances. While the Tax Authority relies on registration records to identify taxpayers and issue assessments, actual ownership or the right to use the vehicle at the moment of the taxable event can be challenged. However, the taxpayer bears the burden of proving that despite being the registered owner, they were not the actual owner or holder of the vehicle when the tax became due. In leasing contexts, if the lease contract has concluded and ownership transferred, but registration has not been updated, the registered owner may successfully challenge liability by providing evidence of the transfer, though procedural requirements and deadlines must be strictly observed.
What are the legal consequences of the annulment of IUC tax assessments regarding reimbursement of amounts already paid?
When IUC tax assessments are annulled by arbitral decision or court judgment, the legal consequences include the mandatory reimbursement of all amounts already paid under those assessments. The Tax Authority must reimburse the taxpayer the principal amount of tax paid, plus statutory interest calculated from the date of payment until actual reimbursement. The interest rate and calculation method are governed by the Lei Geral Tributária. Additionally, any enforcement costs, penalties, or late payment interest charged in connection with the annulled assessments must also be reimbursed. The reimbursement process is typically initiated automatically following the final decision, though taxpayers may need to submit formal reimbursement requests to ensure proper processing and calculation of all amounts due, including accrued interest.