Process: 515/2017-T

Date: March 22, 2018

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 515/2017-T) addresses a fundamental question in Portuguese vehicle tax law: whether a company can be held liable for IUC (Single Vehicle Circulation Tax) on a vehicle it sold years earlier but remains registered in its name. The claimant company was assessed IUC for 2016 on a vehicle it allegedly sold in February 2005, supported by invoice no. 831 and corresponding receipt. The company argued that Article 3(1) of the IUC Code establishes a rebuttable presumption of ownership based on registration, which it successfully rebutted through documentary evidence of the sale. The Tax Authority (AT) took the opposing position, arguing that Article 3(1) does not create a rebuttable presumption but rather establishes a legal definition of the taxable person. The AT contended that the legislator deliberately used the phrase 'considered as such' rather than 'presumed,' creating an irrebuttable legal fiction that ties IUC liability exclusively to vehicle registration records. This interpretation is supported by systematic analysis of Article 6 of the IUC Code, which links the taxable event to registration, and by the practical administrative consideration that the Tax Authority relies on Motor Vehicle Registration data for tax assessments. The central legal question is whether private sale documents (invoices and receipts) can overcome the registration-based liability rule, or whether only formal registration transfer can terminate IUC obligations. This case has significant implications for companies and individuals who sell vehicles without ensuring proper registration transfer, as it determines whether they remain indefinitely liable for annual circulation tax despite no longer owning the vehicle.

Full Decision

ARBITRAL DECISION

The Arbiter Marisa Almeida Araújo, appointed by the Deontological Council of the Administrative Arbitration Centre (CAAD) to form the Singular Arbitral Tribunal, hereby renders the following,

ARBITRAL DECISION

Report

A…, Lda., (hereinafter referred to as the "Claimant") with registered office at Rua do…, …-… …, holder of the unique registration number and legal entity …, submitted a request for an arbitral decision and constitution of an arbitral tribunal on 21 September 2017, under the provisions of Article 4 and Article 10, no. 2, of Decree-Law no. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to as "LRATM"), in which the Tax and Customs Authority is named as Respondent (hereinafter referred to as "Respondent" or "TCA").

The Claimant intends, in the aforementioned request for an arbitral decision, that the Arbitral Tribunal declare:

Annulled, as unlawful, the tax assessment act for the Single Vehicle Circulation Tax and compensatory interest, relating to the year 2016, concerning the vehicle with registration plate …, in the amount of € 1,013.59.

The request for constitution of the Arbitral Tribunal was accepted by the President of the CAAD and notified to the Respondent on 21 September 2017.

The Claimant did not appoint an arbiter, therefore, under the provisions of Article 6, no. 2, paragraph a), of the LRATM, the undersigned was appointed as arbiter by the President of the Deontological Council of the CAAD, the appointment having been accepted within the legally prescribed terms and periods.

The arbitral tribunal was constituted on 6 December 2017.

Notified to this effect on 6 December 2017, the Respondent presented its Response on 22 January 2018 and forwarded a copy of the administrative file on 24 January 2018.

By order of 25 January 2018, notified to the parties on 26 January, the arbitral hearing provided for in Article 18 of the LRATM was dispensed with, and both the Claimant and Respondent were invited to make written submissions.

The Claimant made no submissions and the Respondent presented its written submissions on 12 March 2018 reaffirming the position already taken.

By order of 12 March 2018, the final deadline for publication of the decision was set for 9 April 2018.

The Claimant bases its claim, in summary, in the following manner:

The Claimant was notified of a Single Vehicle Circulation Tax assessment no. 2016 … concerning the vehicle with registration plate …, with a total value of € 1,013.59, including compensatory interest.

The Claimant filed a gracious complaint, which was dismissed, and subsequently filed a hierarchical appeal on 13-06-2017 which was likewise dismissed by order dated 08-07-2017 (and notified to the Claimant on 11-07-2017).

The Claimant disagrees with the grounds for dismissal of the hierarchical appeal – which are summarily based on the registered ownership of the automobile in question in these proceedings – since the same, according to the Claimant, was sold on 17 February 2005 to the company "B…, Lda.", with invoice no. 831 being issued for the amount of € 2,713.00 plus VAT, with the price being paid by the buyer and the corresponding receipt issued on 09-03-2005 with no. ….

Which, according to the Claimant, ceased to be owned by it from the date of the purchase and sale, therefore not being, under the terms of no. 1 of Article 3 of the Single Vehicle Circulation Tax Code, the subject of taxation of the tax which establishes a presumption (despite the expression "considered as"), which presumption, under the terms of Article 73 of the General Tax Law, is rebuttable.

In summary, the Claimant contends that, not being the owner of the vehicle and having rebutted the aforementioned legal presumption, by attaching copies of the aforementioned invoice and receipt which, according to the Claimant, enjoy the presumption of truthfulness under Article 75, no. 1 of the General Tax Law, it is not therefore the subject of taxation of the tax, and therefore the Single Vehicle Circulation Tax assessment of 2016 in question is unlawful and should be annulled.

The Respondent responded, contending the lack of merit of the request for an arbitral decision and alleging, in summary, that:

The Respondent considered that the aforementioned assessment act should be maintained, there being no error in the interpretation of Article 3 of the SVCT Code.

Considering that the tax legislator, by establishing in Article 3, no. 1, who the subjects of taxation of the Single Vehicle Circulation Tax are, expressly and intentionally established that these are the owners, being considered as such the persons in whose names they are registered.

Not having the legislator purposefully used the expression "presumed" and, within its legislative discretion, expressly and intentionally, establishes what should be considered legally, for purposes of taxation, as the subject of taxation.

The Respondent makes a parallel regarding legislative technique, raising by way of example Articles 2 of the Code of Municipal Tax on Onerous Property Transfers, 2, 3 and 4 of the Code of Personal Income Tax and 4, 17, 18 and 20 of the Code of Corporate Income Tax.

Concludes the Respondent in this manner that the legislator expressly and intentionally established that the persons in whose names they [the vehicles] are registered are to be considered as such, insofar as this is the interpretation that preserves the unity of the tax-legal system.

To understand that the legislator established here a presumption would be unequivocally to make an interpretation contrary to law.

Such position is supported, according to the Respondent, in the context of proceedings no. 210/13.0BEPNF of the Administrative and Fiscal Court.

On the other hand, the Respondent also raises the systematic element of interpretation of the law.

In these terms, and in the same sense, Article 6 of the SVCT Code, under the heading "Taxable Event and Enforceability", in its no. 1, establishes that: "The taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration or registration in national territory."

From the articulation between the subjective scope of the Single Vehicle Circulation Tax and the constitutive fact of the corresponding tax obligation there follows unequivocally that only the legal situations subject to registration (without prejudice to the permanence of a vehicle in national territory for a period exceeding 183 days, provided for in no. 2 of Article 6) generate the birth of the tax obligation.

For its part, no. 3 of the same article provides that "the tax is deemed enforceable on the first day of the tax period referred to in no. 2 of Article 4", that is, the moment from which the tax obligation is constituted presents a direct relationship with the issuance of the registration certificate, which must include the facts subject to registration. (See the provisions of no. 2 of Article 4 and no. 3 of Article 6, both of the SVCT Code, in no. 1 of Article 10 of Decree-Law no. 54/75, of 12 February and in Article 42 of the Motor Vehicle Registration Regulations.)

In the same sense, according to the Respondent, the legislative solution adopted by the tax legislator in no. 2 of Article 3 of the SVCT Code operates, by making the equivalences there established coincide with the situations in which the motor vehicle registration requires its registration.

Such position is also evident in the circumstance that the Motor Vehicle Registration to which the Tax Administration has or may have access, and the certificate in which the acts subject to registration must appear, whose exhibition may be required by the same Tax Administration from the interested party, contain all the elements destined for the determination of the Subject of Taxation, without need of access to the contracts of a private nature that confer such Rights, enumerated by the SVCT Code as constitutive of the Legal situation of Subject of Taxation of this Tax. In the absence of such registration, naturally, the Owner will be notified to fulfill the corresponding tax obligation, since the Tax Administration, taking into account the current configuration of the Legal System, will not have to carry out the assessment of the Tax based on elements that do not appear in registers and public documents and, as such, authentic. In these terms, the non-updating of the registration, under the terms provided for in Article 42 of the Motor Vehicle Registration Regulations, will be imputable to the legal sphere of the Subject of Taxation of the Single Vehicle Circulation Tax and not to the State, as the active subject of this Tax.

Even putting into question the statute of limitations of the tax and calling into question, unequivocally, the legal certainty and security should the Claimant's position be upheld.

In light of a teleological interpretation of the regime established throughout the Single Vehicle Circulation Tax Code, according to the Respondent, the interpretation championed by the Claimant to the effect that the subject of taxation of the Single Vehicle Circulation Tax is the effective owner, independently of whether or not appearing in the motor vehicle registration, such registration being of that quality, is manifestly wrong, insofar as it is the very ratio of the regime established in the Single Vehicle Circulation Tax Code that constitutes clear proof that what the tax legislator intended was to create a Single Vehicle Circulation Tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle registration (in this regard, it should be noted from the outset that the cases specifically typified in Article 3 of the SVCT Code, both in its no. 1 and in no. 2, correspond exactly to the cases of compulsory motor vehicle registration, under the terms of the Motor Vehicle Registration Code).

In effect, the SVCT Code carried out a reform of the tax regime for vehicles in Portugal, substantially altering the motor vehicle tax regime, such that the subjects of taxation of the tax became the owners appearing in the property register, independently of the circulation of vehicles on the public highway. That is, the Single Vehicle Circulation Tax became payable by the persons appearing in the register as owners of the vehicles, according to the Respondent.

It was in this sense, according to the Respondent, that the parliamentary debates surrounding the approval of Decree-Law 20/2008, of 31 January, proceeded, from which it follows unequivocally that the Single Vehicle Circulation Tax is payable by the persons appearing in the register as owners of the vehicles.

The approval of the aforementioned decree-law, according to the Respondent, had as its objective to establish procedures tending to adapt the motor vehicle registration to the new tax regime, so as to avoid the existing problems, namely those related to the fact that there were many vehicles not registered in the name of the real owner.

And this precisely because the new Single Vehicle Circulation Tax regime substantially altered the motor vehicle tax regime, such that the subjects of taxation of the tax became the owners appearing in the property register, independently of the circulation of vehicles on the public highway.

Because the Single Vehicle Circulation Tax became payable by the persons appearing in the register as owners of the vehicles.

On the other hand, the Respondent also raises that even if the provision established a rebuttable presumption, it would still require an appreciation of the documents filed by the Claimant and their probative value with a view to such rebuttal.

The Respondent contends that the invoices, which it challenges as raising doubts, are not sufficient proof to undermine the (supposed) legal presumption established in Article 3 of the SVCT Code, insofar as they are not capable of proving the conclusion of a synallagmatic contract such as is a purchase and sale, since such documents do not in themselves reveal an indispensable and unequivocal declaration of will (i.e., acceptance) on the part of the purported purchasers.

Concluding the Respondent that such documents can never benefit from the presumption of truthfulness to which Article 75 of the General Tax Law alludes.

And nothing would, according to the Respondent, have prevented on the one hand the Claimant from having repurchased the vehicle, and the fact of having allegedly sold vehicles in the years in question does not mean that it was not the debtor of the tax assessed in those same years.

The TCA further challenges the very validity and sufficiency of the 2nd copy of the invoices for the sale of the vehicles.

And it further alleges that if the invoices are only valid after proof of their proper collection, and if such proof was not made, then the invoices are invalid, or at least clearly insufficient, for proof of the facts alleged.

Likewise as regards the relevance of the lack of proof of proper collection and, therefore, as to the demonstration of the invalidity or insufficiency of the invoices for the proof sought, as well as regarding the certified invoice issuance program.

The Respondent further raises that were the interpretation put forward by the Claimant to be accepted, it would be contrary to the Constitution, insofar as such interpretation results in the violation of the principle of trust, the principle of legal certainty, the principle of efficiency of the tax system and the principle of proportionality.

The interpretation proposed by the Claimant is an interpretation that devalues the registral reality to the detriment of an informal reality and incapable of minimum control by the Respondent, is offensive of the fundamental principle of trust and legal certainty that should govern any legal relationship, here including the tax relationship.

Being such position defended by the Claimant, according to the Respondent, is an understanding that is at the antipodes of that principle and of the reform of motor vehicle taxation insofar as, by seeking to disregard the registral reality, a reality that constitutes the cornerstone upon which the entire edifice of the Single Vehicle Circulation Tax rests, it generates for the Respondent, and ultimately for the Portuguese State, additional administrative costs, impediment of the performance of its services, absence of control of the tax and uselessness of the registral information systems.

Finally, the argument put forward by the Claimant represents a violation of the principle of proportionality, insofar as it completely disregards it in confrontation with the principle of taxpayer's capacity to pay, when in reality the Claimant has the legal mechanisms necessary and adequate for the safeguarding of that capacity (e.g., motor vehicle registration, request for seizure of documents and request for cancellation of registrations), without, however, having exercised them in due time.

Furthermore, the Respondent contends that even if the Claimant's understanding were to be upheld, it did not take care to update the motor vehicle registration, as it could and should [Article 5/1-a) of Decree-Law 54/75, of 12 February, and Article 118/4 of the Traffic Code], and not having ordered the cancellation of the registrations of the vehicles here in question, it is inevitable to conclude that the Claimant did not proceed with the diligence required of it, and which inexorably led the Respondent to limit itself to giving compliance with the legal obligations to which it is bound and, in parallel, to follow the registral information that was provided to it by those entitled to do so.

Consequently, the Claimant should be condemned to pay the arbitral costs arising from this request for an arbitral decision, under the terms of Article 527, no. 1 of the Civil Procedure Code ex vi Article 29, no. 1, e) of the LRATM.

The same reasoning applies regarding any possible condemnation to pay compensatory interest.

The Respondent concludes that the tax acts in question are valid and lawful, because they are in conformity with the legal regime in force as of the date of the tax facts, therefore no error occurred, in this case, imputable to its services.

Thus, the legal requirements that confer the right to compensatory interest are not met.

Clarification

The Tribunal is competent and is regularly constituted, under the terms of Articles 2, no. 1, paragraph a), 5 and 6, all of the LRATM.

The parties have legal personality and capacity, are entitled and are represented, under the terms of Articles 4 and 10 of the LRATM and 1 of Ordinance no. 112-A/2011, of 22 March.

The claim is timely.

There are no nullities or preliminary issues affecting the entire proceeding, therefore it is now necessary to address the merits of the claim.

3. Object of the Arbitral Decision

The following questions are posed to the Tribunal, under the terms described above:

Who is the subject of taxation of the Single Vehicle Circulation Tax when, on the date of the occurrence of the taxable event, the motor vehicle has already been sold?

What is the legal value of the motor vehicle registration in the context of the Single Vehicle Circulation Tax, especially for purposes of the subjective scope of the tax?

Is the invoice for the sale of the vehicle filed by the Claimant capable of proving the purported sale?

Findings of Fact (Facts Established)

The following facts are considered established, with relevance for the decision, based on the documentary evidence filed with the record:

The Claimant was notified of a Single Vehicle Circulation Tax assessment no. 2016 … concerning the vehicle with registration plate …, with a total value of € 1,013.59, including compensatory interest, relating to the year 2016.

The Claimant filed a gracious complaint, which was dismissed, and subsequently filed a hierarchical appeal on 13-06-2017 which was likewise dismissed by order dated 08-07-2017 (and notified to the Claimant on 11-07-2017).

The Claimant sold on 17 February 2005 to the company "B…, Lda." the vehicle in question in these proceedings, with invoice no. 831 being issued for the amount of € 2,713.00 plus VAT.

The Claimant issued the payment receipt on 09-03-2005 to the buyer with no. ….

The facts established result from the conviction of the tribunal based on examination of the documents filed with the record.

There are no unproven facts with interest for the decision of the case, considering the possible legal solutions.

On the Law

Regarding the Assessment of the Legality of the Contested Assessment Act

The questions underlying this request for an arbitral decision, enumerated above, take into account the Single Vehicle Circulation Tax assessment concerning the year 2016, filed with the record.

For this purpose, it will be necessary to determine the subjective scope of the Single Vehicle Circulation Tax.

Regarding the Interpretation and Application of the Norm of Subjective Scope of the Single Vehicle Circulation Tax

Who is the subject of taxation of the Single Vehicle Circulation Tax when, on the date of the occurrence of the taxable event, the motor vehicle has already been sold?

Article 3, no. 1 of the Single Vehicle Circulation Tax Code provides that:

"The subjects of taxation 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 they are registered."

Pursuant to Article 11 of the General Tax Law, tax laws are interpreted in accordance with general principles, except for the exceptions and particularities dictated by the norm subject to interpretation.

The object of interpretation of Article 3, no. 1 of the Single Vehicle Circulation Tax Code is in the expression "considered as" and it is necessary to determine whether the legislator, with this expression, intended to maintain or not the nature of a presumption. That is, whether the formulation used by the legislator can be attributed a presumptive sense.

Following what is referred to in decisions 43/2014-T and 207/2017-T of the CAAD (consulted at www.caad.pt), "it is verified, by way of example, that in Articles 243, no. 3 of the Civil Code and 45, no. 6 and 89-A, no. 4 of the General Tax Law, the expression "considered as" is also used, and yet we are dealing with legal presumptions, whereby, in accordance with the general rules of interpretation provided for in Article 9, no. 2 of the Civil Code, it is considered that the minimum verbal correspondence is assured for purposes of determining the legislative intent that is embodied in the norm in question – literal element."

Jorge Lopes de Sousa teaches (in CPPT, Annotated and Commented, Vol. I, 6th Edition, Área Editora, p. 589) that in matters of tax scope, presumptions may be revealed by the expression "presumed" or by a similar expression, there being mentioned various examples of such presumptions, referring to that contained in Article 40, no. 1 of the Personal Income Tax Code, in which the expression "presumed" is used, and that contained in Article 46, no. 2 of the same Code, in which the expression "considered as" is used as an expression with an effect similar to that one and, likewise constituting a presumption; In the legal formulation set out in no. 1 of Article 3 of the Single Vehicle Circulation Tax Code, in which a presumption is established, revealed by the expression "considered as", of similar significance and equivalent value to the expression "presumed", in use since the creation of the tax in question.

That is, both expressions have been used by the legislator without it being possible to conclude that the legislator did not intend to establish, in fact, a legal presumption, and it cannot be inferred that the change in the expression could lead to a different interpretive sense.

On the other hand, as is extracted from the aforementioned decision 43/2014-T of the CAAD (consulted at www.caad.pt), whose position is supported: "Still within the framework of the elements of interpretation in accordance with Article 9 of the Civil Code, it is important to consider the historical element. Thus, recalling Decree-Law no. 599/72, of 30 December and Decree-Law no. 116/94, of 3 May, with regard to subjective scope, a presumption was provided that the subjects of taxation of the Single Vehicle Circulation Tax are the persons in whose names the vehicles were registered on the date of assessment."

Thus, as to this element of interpretation, the Respondent does not appear to be correct.

On the other hand, considering the rational and teleological element, the Single Vehicle Circulation Tax has as its foundation the environmental and road cost of the effective use of the automobile, and should not be imputed to one who is not, in fact, the owner, despite appearing as such in the register, since it is not this party that gives rise to any environmental cost.

The Single Vehicle Circulation Tax has, therefore, underlying it the principle of equivalence provided for in Article 1 of the Single Vehicle Circulation Tax Code, with a view to "burdening taxpayers in measure of the environmental and road cost that they cause, in implementation of a general rule of tax equality".

Thus giving effect to the constitutional command provided for in Article 66, in which sustainable development requires that the State ensure "that tax policy makes development compatible with environmental protection and quality of life" (paragraph h) of no. 2).

Promoting a principle of "polluter pays", fulfilling the requirement of material equality among all citizens that give rise to environmental cost, thus embodying the Single Vehicle Circulation Tax the environmental concerns that tax policy must observe.

Thus, and in these terms, the interpretation given, contrary to the position defended by the TCA, is in conformity with the Fundamental Law.

Now, to consider that the tax legislator intended something other than admitting a rebuttable presumption in Article 3, no. 1 of the Single Vehicle Circulation Tax Code would be to violate the principle of equivalence, causing the payment of the tax to fall on the owner appearing in the register and not on the real owner, even if that party was not (as it would not be) the cause of the environmental and road cost that the tax burden intended to burden.

Thus, also according to this element, Article 3, no. 1 of the Single Vehicle Circulation Tax Code should be interpreted to mean that there is a true presumption.

From the literal element of Article 3, no. 1, the legislator, contrary to what it had done previously, used the expression "considered as" and not "presumed", but from a complete analysis of the legislation and from the absence of any provision that confers any other effect beyond that above referred to, we are led to conclude that the legislator intended, in fact, to use both expressions with identical sense.

Thus, following the decision rendered in proceedings no. 634/2016-T of the CAAD (consulted at www.caad.pt), "the relevance and interest of the presumption in question, which historically was revealed through the expression "presumed" and which now serves the expression "considered as", resides in the truth and justice that, by this means, is conferred on tax relationships and that embody fundamental tax values, allowing to tax the real and effective owner and not the one who, by circumstances of diverse nature, is merely, at times, an apparent and false owner. If this case were not so considered, not admitting and valuing the presentation of probative elements destined to demonstrate that the effective owner is, after all, a different person from the one appearing in the register and who initially, and in principle, was supposed to be the true owner, those values would be objectively disregarded."

Thus concluding that Article 3, no. 1 of the Single Vehicle Circulation Tax Code establishes a presumption, and that this presumption is rebuttable under the terms of Article 73 of the General Tax Law – "presumptions established in norms of tax scope always admit proof to the contrary, whereby they are rebuttable."

All of which the Claimant demonstrated to the TCA but which, nevertheless, ended up not being upheld by this understanding even though the Respondent was properly informed independently of any registral reference.

A matter of registration which we analyze next.

The Value of the Motor Vehicle Registration

What is the legal value of the motor vehicle registration in the context of the Single Vehicle Circulation Tax, especially for purposes of the subjective scope of the tax?

Under the terms of Article 7 of the Real Property Registration Code, applicable ex vi Article 29 of Decree-Law no. 54/75 (Motor Vehicle Registration), "the 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."

With a view to assessment, it is necessary to analyze the effects of the registration of the vehicle.

The registration of the right of ownership of the vehicle has a merely declarative effect and not a constitutive effect of the right, whereby it is configured as a presumption of the existence of the right, in the terms in which it is registered, that can be rebutted, that is, it admits proof to the contrary.

The definitive registration constitutes nothing more than a rebuttable presumption, admitting therefore counterproof, as arises from the law and jurisprudence has been pointing out, being able to see, among others, the Judgments of the Supreme Court of Justice no. 03B4369 of 19-02-2004 and no. 07B4528 of 29-01-2008, available at www.dgsi.pt.

At the level of the Single Vehicle Circulation Tax Code there is no legal provision that attributes to the registration of the vehicle any other legal effect, including a condition of validity or effectiveness of the causal transaction, that is, of the purchase and sale contract of which the vehicle is its mediate object.

If this is the case, that is, there being no other distinct effect to attribute to the act of registration and considering that ownership is thus transferred by means of the conclusion of a purchase and sale contract, without there being any legally required form, with the principle of freedom of form being in effect, under the terms of Article 879, paragraph a) of the Civil Code, one of the effects of this contract is exactly the real effect of the transfer of the title of the right.

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

In light of the foregoing, it becomes clear that the legislative intent points in the direction that the provisions of no. 1 of Article 3 of the Single Vehicle Circulation Tax Code establish a "juris tantum" presumption, consequently rebuttable, thus allowing that the person who in the register is registered as owner of the vehicle may present probative elements destined to demonstrate that such ownership is inserted in the legal sphere of another person, to whom the ownership was transferred, as was the case.

By virtue of the foregoing, and as to these two questions, we conclude, following the decision rendered in the context of proceedings 624/2016-T of the CAAD (consulted at www.caad.pt), "it is important to emphasize that the aforementioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, or those relating to logical elements of interpretation, of a historical nature or of a rational order, all point in the direction that the expression "considered as" has a sense equivalent to the expression "presumed", and therefore should be understood that the provisions of no. 1 of Article 3 of the Single Vehicle Circulation Tax Code establish a legal presumption that, given Article 73 of the General Tax Law, where it is established that "Presumptions established in norms of tax scope always admit proof to the contrary", will necessarily be rebuttable, which means that the subjects of taxation are, in principle, the persons in whose names such vehicles are registered. These will therefore be those persons, identified in those conditions to whom the TCA must necessarily address itself."

Thus, establishing Article 3, no. 1 of the Single Vehicle Circulation Tax Code a presumption, this is rebuttable under the terms of Article 73 of the General Tax Law. The "prohibition of irrebuttable presumptions emanating from Article 73 of the General Tax Law is limited to norms of tax scope, but encompassing both those of subjective scope as well as those of objective or real scope. Norms of scope, in a broad sense, are those that "define the plane of scope, that is, the complex of requirements from whose conjunction results the birth of the tax obligation, as well as the elements of the same obligation. In this sense, norms of scope are those that determine the active and passive subjects of the tax obligation, those that indicate what the taxable matter is, the rate and tax benefits" (cf. SOUSA, Jorge Lopes de - Tax Procedure and Process Code – Annotated and Commented, Áreas Editora, 6th edition, 2011, vol. I, p. 586).

For all these reasons we must conclude that being a rebuttable presumption, it falls to the entity that is registered in the register as owner of the vehicle and who, for that reason was considered by the TCA as the subject of taxation of the tax, to present probative elements aimed at demonstrating that the holder of the property is another person, to whom the property was transferred.

It is this probative exercise falling to the Claimant that we must analyze next.

What is the Probative Value of the Invoice for the Sale of the Vehicle?

Is the invoice for the sale of the vehicle filed by the Claimant capable of proving the purported sale of the vehicle in question in these proceedings?

The Claimant, in fulfillment of its burden of proof, filed an invoice for the sale of the vehicle in question in these proceedings and a receipt for payment of the price received by the buyer, thus proving that as of the date of the assessment of the tax, and even though the Claimant appeared in the register as owner of the vehicle, the truth is that it had already sold it.

Let us examine whether the proof carried out by the Claimant is capable of achieving such objective.

With a view to proving that the vehicle in question in these proceedings was sold at a date prior to the occurrence of the taxable event, the Claimant files the invoice for sale (and receipt).

As to this document, the Respondent invokes that the same is not capable of proving the conclusion of the purchase and sale contract, particularly considering that it does not reveal, from the outset, the declaration of will of the alleged buyer.

The Respondent, indeed, challenges the documents alluded to, particularly the invoice for sale filed with the record, alleging that it does not comply with legal requirements.

But, as already stated, not providing the law any specific form for the conclusion of a purchase and sale contract for a motor vehicle, and even though the Respondent has challenged the invoice, the truth is that it does not demonstrate a factual circumstance that calls into question its authenticity.

In fact, invoices embody a unilateral legal transaction on the part of the Claimant that does not correspond to the causal transaction that is described as resulting from them. But we cannot ignore that the causal transaction in question, that is, the purchase and sale of an automobile, is subject to a principle of freedom of form.

Thus, it is not necessary that there be any documentary support for the validity or effectiveness of the causal transaction, which, accordingly, is also true that such an element is not, or cannot be, the only one for proof of the fact that gives it cause.

In this way, in the absence of documentary support the proof of the causal transaction is possible with recourse to other documents or even to other means of proof, such as invoices.

In this sense, the invoice filed is suitable to rebut the presumption that the Claimant was, at the date of the Single Vehicle Circulation Tax assessment, the owner of the motor vehicle. In the present case, in which an Invoice is involved, with the Receipt, this proves the transmission of the asset and its corresponding payment.

In effect, it expressly results from no. 1 of Article 75 of the General Tax Law that "Presumed to be true and in good faith are the statements of taxpayers presented under the terms provided for in the law, as well as the data and determinations recorded in their accounting or books, when these are organized in accordance with commercial and tax legislation, without prejudice to the other requirements on which the deductibility of expenses depends."

Being true that the Respondent questions the validity of the invoice, alleging it to be a 2nd copy and only valid after proof of proper collection, or raising the certification of the invoicing system, the truth is that, invoices enjoying the presumption of truthfulness of no. 1 of Article 75 of the General Tax Law above referred to, these documents appear to be suitable and with sufficient force to rebut the presumption on which that assessment is based. Indeed, the Respondent did not argue facts that fall within the paragraphs of no. 2 of Article 75 of the General Tax Law and that would rebut the presumption of truthfulness regarding the aforementioned documents.

As results from decision 227/2014-T of the CAAD (available at www.caad.pt), which we join, "(...) considering that the law does not require for this type of contract a written form, proof of the sale of the vehicle can be made by any means, namely by witness testimony or documentary proof. There are no legal restrictions to documentary proof consisting in the presentation of an invoice/receipt for the sale of the vehicle. Thus, the presumption resulting from the register is rebutted through these documents (invoice/receipt for the sale of the vehicle) and the TCA cannot come to require the seller to pay the Single Vehicle Circulation Tax. Unless the TCA invokes sufficiently substantiated reasons that call into question the authenticity of the invoices/receipts for the sale of the vehicles, which does not happen in these proceedings.

Second, if Single Vehicle Circulation Tax was assessed on the sale of the vehicle having been sufficient as proof of the transmission the invoice/receipt for the sale, it cannot then come to question the probative value of that same document for purposes of the Single Vehicle Circulation Tax.

Finally, through the presentation of an invoice/receipt for the sale of the vehicle the Tax Administration becomes aware that there was a transmission of the vehicle independently of whether the seller registered the purchase or not. In this case respect for the principles of good faith, justice and impartiality imposes, in our understanding, that the Tax Administration does not ignore the transmission that occurred and refrains from requiring the seller to pay the Single Vehicle Circulation Tax."

Thus, it is not perceived that the arguments on which the Respondent bases itself to allege the invalidity of the documents permit the presumption of truthfulness referred to to be undermined, and not having done so, the documents filed by the Claimant, more specifically the Invoice and Receipt, prove the transmission of the vehicles in question.

For this reason, bearing in mind that the owner of the vehicle, as of the date of the tax fact, was not the Claimant, considering the sale of the automobile, with the respective invoice, that is, it was not the Claimant who was the subject of taxation of the tax, and therefore the requirements of Article 3, no. 1 of the Single Vehicle Circulation Tax Code are not met, which determines the annulment of the corresponding assessment act.

Regarding Responsibility for Payment of Arbitral Costs

Under the terms of Article 527, no. 1 of the Civil Procedure Code, ex vi 29, no. 1, e) of the Legal Regime for Arbitration in Tax Matters, it is established that a party shall be condemned to costs to which it has given cause or, in the absence of success of the action, the party that derived benefit from the proceedings.

No. 2 of the aforementioned article specifies the expression "given cause" understanding this to be the unsuccessful party.

Being true that the TCA based itself on the elements contained in the motor vehicle register, the truth is that after the invoice for sale of the automobile was presented the presumption as to the ownership of the vehicle was rebutted and the TCA, nevertheless, maintained its position, whereby considering the claim of the Claimant to be well-founded in this regard, and the law being clear as to the responsibility for arbitral costs, we understand that the Respondent should be condemned in the arbitral costs.

Decision

In these terms, and with the grounds stated, this Arbitral Tribunal decides:

To render judgment in favor of the claim for an arbitral decision and to annul, as unlawful, the tax assessment act for the Single Vehicle Circulation Tax and compensatory interest, relating to the year 2016, concerning the vehicle with registration plate …, in the amount of € 1,013.59, with the corresponding consequences.

To condemn the Respondent in the costs of these proceedings.

Value of the Matter in Dispute

In accordance with the provisions of Articles 306, no. 2 of the Civil Procedure Code and 97-A, no. 1 of the Tax Procedure and Process Code and 3, no. 2 of the Regulations of Costs in Tax Arbitration Proceedings, the value of the matter in dispute is fixed at € 1,013.59.

Arbitration Fee

The arbitration fee is fixed at € 306.00 (three hundred and six euros), under the terms of Table I attached to the Regulations of Costs in Tax Arbitration Proceedings.

Let notification be made.

Lisbon, 22 March 2018

The Arbiter

(Marisa Almeida Araújo)

Frequently Asked Questions

Automatically Created

Can a company be charged IUC tax for a vehicle it has already sold?
Yes, under Portuguese tax law a company can be charged IUC for a vehicle it has sold if the vehicle remains registered in the company's name. The Tax Authority argues that Article 3(1) of the IUC Code creates an irrebuttable link between registration and tax liability, meaning that until the registration is formally transferred, the registered owner remains liable regardless of actual ownership. However, the claimant company contends this is a rebuttable presumption that can be overcome with evidence of sale such as invoices and receipts.
How does the registration presumption under Article 3(1) of the IUC Code affect vehicle tax liability?
Article 3(1) of the IUC Code states that the taxable persons are the owners, 'considered as such' those in whose names vehicles are registered. The Tax Authority interprets this as establishing a legal definition rather than a rebuttable presumption, meaning registration conclusively determines tax liability. This interpretation means that only persons appearing in Motor Vehicle Registration records can be considered liable for IUC, creating certainty for tax administration but potentially creating hardship for sellers who fail to complete registration transfers.
Can invoices be used to rebut the presumption of vehicle ownership for IUC purposes?
The legal debate centers on whether invoices can rebut the registration presumption. The claimant argues that invoices enjoy a presumption of truthfulness under Article 75(1) of the General Tax Law and should be sufficient to prove the sale and rebut the ownership presumption under Article 73 of the General Tax Law. The Tax Authority counters that Article 3(1) of the IUC Code does not establish a rebuttable presumption but rather a legal definition, meaning private documents like invoices cannot override registration records for IUC tax purposes.
What is the procedure for contesting an IUC tax assessment through CAAD arbitration in Portugal?
To contest an IUC assessment through CAAD arbitration in Portugal, the taxpayer must first exhaust administrative remedies. In this case, the claimant filed a gracious complaint (reclamação graciosa) which was dismissed, then a hierarchical appeal (recurso hierárquico) which was also dismissed. After exhausting these remedies, the company submitted a request for arbitral decision under Article 4 and Article 10(2) of Decree-Law 10/2011 (LRATM). An arbiter was appointed by the CAAD Deontological Council, the tribunal was constituted, the Tax Authority submitted its response and administrative file, and both parties had opportunities for written submissions before the final decision.
What happens when a vehicle's registered owner differs from the actual owner for IUC tax purposes?
When the registered owner differs from the actual owner for IUC purposes, a legal conflict arises regarding who bears tax liability. According to the Tax Authority's interpretation, the registered owner remains exclusively liable for IUC regardless of actual ownership, as Article 3(1) and Article 6 of the IUC Code tie the taxable event and tax obligation to registration records. This means that even with a valid sale documented by invoices and receipts, if the vehicle registration is not formally transferred to the new owner, the former owner continues to be assessed IUC. This highlights the critical importance of completing proper registration transfers when selling vehicles in Portugal.