Process: 54/2016-T

Date: June 17, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitral tax decision (Process 54/2016-T) addresses a fundamental dispute regarding the subjective incidence of Portugal's Single Circulation Tax (IUC). A financial credit institution challenged ten IUC assessments totaling €1,443.50 for the 2015 tax year, arguing it should not be considered the taxable person for vehicles no longer in its economic possession. The institution operated in automobile financing through loans and financial leasing contracts, and claimed that nine vehicles had been sold to third parties before 2015, while one vehicle was under a financial lease regime during the assessment period. The central legal question concerns the interpretation of Article 3 of the CIUC (Single Circulation Tax Code), specifically whether vehicle registration or actual ownership determines tax liability. The Tax Authority maintained that the passive subject of IUC is whoever appears in the vehicle register as owner, pursuant to Article 3(1) CIUC, arguing this represents a clear legal presumption. The financial institution countered that registration serves merely a publicity function under Decree-Law 54/75 and does not automatically establish tax liability. The Applicant emphasized Article 3(2) CIUC, which expressly equates financial lessees, purchasers with reservation of ownership, and holders of purchase options under lease contracts to owners for tax purposes. This provision suggests that economic reality, rather than formal registration, should determine the taxable person. The institution provided documentary evidence including sales invoices and financial lease contracts demonstrating the vehicles' disposal or transfer prior to the tax period. This case illustrates the tension between legal formalism (registration-based taxation) and economic substance (actual possession and control) in Portuguese tax law. The outcome has significant implications for financial institutions engaged in vehicle financing and leasing, as it determines whether they bear IUC liability during the period between transaction completion and administrative registration updates, potentially affecting thousands of similar transactions annually.

Full Decision

ARBITRAL-TAX DECISION

1. STATEMENT OF FACTS

1.1 – A…, S.A.; with the Tax Number (NIPC): … (duly identified in the respective proceedings), Claimant in the tax procedure, referenced above and marginally noted, hereinafter denominated "Applicant", came, invoking the provisions of articles 2 and 10 of Decree-Law nº 10/2011, of 20 January (hereinafter RJAT) and article 99 of the Code of Tax Procedure and Process (CPPT) and numbers 1 and 2 letter d) of article 95 of the General Tax Law (LGT), to request the constitution of the Single Arbitral Tribunal, with a view to:

  • The annulment of 10 acts of assessment relating to the Single Circulation Tax (hereinafter designated as IUC), referring to the year 2015 concerning vehicles listed in the Annex to the Request for Arbitral Pronouncement (doc. 3), the contents of which are considered fully reproduced for all legal purposes;

  • The reimbursement of the total amount of €1,443.50 (doc. 1), plus the respective compensatory interest provided for in article 43 of the LGT and article 61 of the CPPT.

1.2 Pursuant to the provisions of letter a) of number 2 of article 6 and letter b) of number 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 Maria de Fátima Alves as single arbitrator, who communicated acceptance of the charge within the applicable deadline:

  • On 05-04-2016 the parties were duly notified of this appointment, and did not manifest an intention to recuse the arbitrator's appointment, pursuant to the combined provisions of article 11 number 1 letters a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics,

  • Therefore, the Arbitral Tribunal was constituted on 20-04-2016, as provided for in letter c) of number 1 of article 11 of Decree-Law nº 10/2011, of 20 January, in the wording introduced by article 228 of Law 66-B/2012, of 31 December;

  • Upon the Response of the Respondent (Tax Authority), on 25-05-2016, it requested exemption from the hearing, under article 18 of the RJAT;

  • Consequently, the Arbitral Decision was determined to be pronounced on 17-06-2016.

1.3 The Applicant "is a Financial Credit Institution, whose corporate purpose is the practice of operations permitted to banks, with the exception of the receipt of deposits (doc. 2)", continuing with the activity in the field of automobile financing, namely, in the form of granting loans for the acquisition of vehicles or the execution of financial lease contracts", and therefore, in the substantiation of its request for arbitral pronouncement, states, in summary, the following:

  • The Applicant was notified by the Tax Authority, in the context of prior hearing, for allegedly being considered the passive subject of the Single Circulation Tax, due to the exercise of the year 2015 (doc. 1);

  • Although it did not exercise the right to prior hearing, the Applicant made payment for all the vehicles for which it was notified;

  • However, it considers that, with regard to the ten vehicles, better identified in document nº 3, attached to the proceedings, the Applicant cannot be considered the passive subject of the IUC, because nine (9) of the disputed vehicles were disposed of on a date prior to the year 2015 and, one of the vehicles was in a financial lease regime, "during the exercise of 2015";

  • It follows from the above that the 10 vehicles (contained in document 3, attached to the proceedings), to which the single circulation tax assessment relates, were not, at the date of the tax events, property of the Applicant, the Applicant not being the passive subject of the tax, a fact that prevents any subjective responsibility for its payment;

  • The Applicant bases its position on the fact that 9 of the taxed motor vehicles had already been sold to third parties, as described: "listing in the name of the companies, assessment number and value (doc. nº 3), the sales invoices (doc. nº 5), financial lease contracts (doc. nº 6)", all attached to the Application and considered fully reproduced for all legal purposes;

  • In light of the facts presented, the ownership of the said vehicles cannot be attributed to the Applicant, and the Applicant cannot be the passive subject of the tax, in view of the letter and spirit of article 3 of the Code of the Single Circulation Tax (hereinafter designated as CIUC);

  • It is a fact that number 1 of article 3 of the CIUC considers the ownership of the motor vehicle to be the person in whose name it is registered, however, number 2 of the same article emphasizes that: financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the LEASE CONTRACT are considered equivalent to owners;

  • However, the registration of vehicles in the competent Motor Vehicle Registration Office is not a condition for the transmission of ownership, since such registration aims solely to give publicity to the legal situation of the assets, as results, in particular, from the provision in article nº 1 of Decree-Law nº 54/75, of 12 February;

  • Therefore, the tax taxation relating to the CIUC cannot focus solely on whoever appears in the register as owner of the vehicles; one must consider their actual owners.

1.4 The Respondent, Tax and Customs Authority (hereinafter designated as Tax Authority), proceeded to attach the Administrative Tax Procedure and presented a Response, from which it is clear that the tax acts in question do not suffer from any defect of violation of Law, arguing for the inadmissibility of the claim and the maintenance of the disputed assessment acts, defending, summarily, the following:

  • The passive subjects of the single circulation tax are the persons appearing in the register as owners of the vehicles, as provided for in number 1 of article 3 of the CIUC, which in the case, sub judice, applies to the Applicant;

  • It is verified, for this purpose, that the registration of the vehicles be in the name of a determined person so that such person embodies the position of passive subject of the IUC tax obligation;

  • That notoriously erroneous is the interpretation that the Applicant makes of the provision in article 3 of the CIUC, insofar as it incurs in a "skewed interpretation of the letter of the law" and in the adoption "of an interpretation that does not attend to the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-tax system", the Applicant still following an "interpretation that ignores the ratio of the regime established in the article in question and, likewise, throughout the CIUC".

2. QUESTIONS TO BE DECIDED

2.1 In view of the above in the preceding numbers, relative to the written submissions of the parties and the arguments presented, the principal questions to be decided are as follows:

  • The challenge made by the Applicant relating to the material assessment of the assessment acts, relating to the year 2015, referring to the IUC on the vehicles above-referenced in the Application;

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

  • The legal value of the registration of motor vehicles.

3. FACTUAL FOUNDATIONS

3.1 In matters of fact, relevant to the decision to be rendered, this Tribunal considers as established, in view of the elements existing in the proceedings, the following facts:

  • The Applicant presented evidentiary elements of the motor vehicles in question, corresponding to the moment before the taxation period – cf. copies of sales invoices of vehicles, copies of financial lease contracts (contained in docs. nos. 1, 3, 5, 6) which are considered fully reproduced for all legal purposes.

3.1.1 SUBSTANTIATION OF PROVEN FACTS

  • The facts given as proven are based on the Listing in the name of the companies (assessment number and value)

  • on the invoices issued on the date of sale of vehicles to third parties;

  • Copies of the Financial Lease Contracts in question;

3.1.2 UNPROVEN FACTS

  • There are no facts given as unproven, since all facts deemed relevant for the assessment of the claim were proven.

4. LEGAL FOUNDATIONS

3.2 The Tribunal is materially competent and is duly constituted, pursuant to articles 2 number 1 letter a), 5 number 2 letter a), 6 number 1, 10 number 1 letter a) and number 2 of the RJAT:

  • The parties have legal personality and capacity and are legitimate, ex vi, articles 4 and 10, number 2, of the RJAT and article nº 1 of Ordinance nº 112-A/2011, of 22 March;

  • The proceedings do not suffer from any nullities;

  • There being no preliminary question on which the Tribunal must pronounce itself;

  • The Request, object of the present proceedings, is the declaration of annulment of the (10) assessment acts of the IUC relating to the motor vehicles better identified in the proceedings.

3.2.1 Condemnation of the Tax Authority to reimburse the amount of tax relating to such assessments in the amount of €1,443.50;

3.2.2 Condemnation of the Tax Authority to payment of compensatory interest on the same amount.

3.3 According to the understanding of the Tax Authority, it is sufficient that in the register the vehicle appears as property of a determined person for that person to be the passive subject of the tax obligation.

3.4 The disputed matter of fact is fixed, as it appears in number 3.1 above, it being important now to determine the Law applicable to the underlying facts, in accordance with the questions to be decided, identified in number 2.1 above, it being certain that the central question, at issue, in the present proceedings, regarding which there are absolutely opposed understandings between the Applicant and the Tax Authority, consists in knowing whether number 1 of article 3 of the CIUC establishes or not a rebuttable presumption.

3.5 Everything considered and, taking into account, on the one hand, 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 question to be decided is whether number 1 of article 3 of the CIUC establishes or not a legal presumption of tax incidence, it is necessary, in this context, to assess and render a decision.

4. QUESTION OF ERRONEOUS INTERPRETATION AND APPLICATION OF THE RULE OF SUBJECTIVE INCIDENCE OF THE IUC

4.1 Considering it to be uncontroversial understanding, in legal doctrine, that in the interpretation of tax laws the general principles of interpretation apply fully, which shall be, only and naturally, limited by the exceptions and particularities dictated by the Law itself, object of interpretation. This is an understanding that has come to be accepted in the General Tax Laws of other countries and that also came to be embodied in article 11 of our General Tax Law, which, moreover, has been frequently underscored by case law.

It is consensually accepted that, having in view the apprehension of 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, with the so-called elements of a logical, rational or teleological nature and of a systematic order intervening:

  • With regard to the interpretation of tax law, case law must be considered, in particular, the Decisions of the STA of 05-09-2012, case nº 0314/12 and 06-02-2013, case 01000/12, available at www.dgsi.pt, the importance of the provision in article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

  • Number 1 of article 3 of the CIUC provides that "The passive subjects of the tax are the owners of the vehicles, considering as such the natural or legal persons, of public or private law, in whose name the same are registered";

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

  • As teaches Jorge Lopes de Sousa, in Code of Tax Procedure and Process, Annotated and Commented, volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in matters of tax incidence, presumptions can be revealed by the expression "is presumed" or by similar expression, various examples of these presumptions being mentioned, referring to the one contained in article 40, number 1 of the CIRS, in which the expression "is presumed" is used and the one contained in article 46 number 2, of the same Code, in which use is made of the expression "is considered", as an expression with an effect similar to that and constituting, likewise, a presumption;

  • In the legal formulation set forth in number 1 of article 3 of the CIUC, in which a presumption was established, revealed by the expression "considering", of meaning similar and equivalent value to the expression "presumed", in use since the creation of the tax in question;

  • The use of the expression "considering" aimed at nothing more than the establishment of a closer and clearer approximation between the passive subject of the IUC and the actual owner of the vehicle, which is in line with the reinforcement given to the ownership of the vehicle, which came to constitute the taxable event, pursuant to article 6 of the CIUC;

  • The relevance and interest of the presumption in question, which historically was revealed by means of the expression "presumed" and which now, resorts to the expression "considering", resides in the truth and justice that, by that means, is conferred to tax relations and, which embody fundamental tax values, allowing to tax the real and actual owner and not the one who, by circumstances of a different nature, is sometimes nothing more than an apparent and false owner. If the case were not so considered, not admitting and making relevant the presentation of evidentiary elements intended to demonstrate that the actual owner is, in fact, a person different 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.

4.2 The principle of equivalence, inscribed in article 1 of the CIUC, must also be considered, which underlies the polluter-pays principle and implements the idea inscribed in it that whoever pollutes must, therefore, pay. The said principle has constitutional basis, insofar as it represents a corollary of the provision in letter h) of number 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 of the European Union, of 07-02-1992), where the aforesaid principle came to be included as a support of Community Policy in the environmental field and which aims to hold responsible whoever contributes to the prejudices that arise for the community, resulting from the use of motor vehicles, to be assumed by their owner-users, as costs that only they should bear.

4.3 In view of the facts described above, it is important to emphasize that the already-mentioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, whether those relating to logical elements of interpretation, of a historical or rational nature, all point in the sense that the expression "considering" has a meaning equivalent to the expression "presumed", and thus it should be understood that the provision in number 1 of article 3 of the CIUC establishes a legal presumption which, in view of article 73 of the LGT, where it is established that "Presumptions established in tax incidence rules always admit contrary proof", shall necessarily be rebuttable, which means that the passive subjects are, in principle, the persons in whose name such vehicles are registered. They shall be, therefore, those persons, identified in these conditions to whom the Tax Authority must necessarily direct itself;

  • But it shall be, in principle, since in the context of prior hearing, of a mandatory character, in view of the provision in letter a) of number 1 of article 60 of the LGT, the tax relationship may be reconfigured, validating the initially identified passive subject or redirecting the procedure towards the one who is, in fact, 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 Code of Administrative Procedure, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 of article 100).

  • The prior hearing which, naturally, must be carried out at a 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.

5. ON THE LEGAL VALUE OF REGISTRATION

5.1 Regarding the legal value of registration, it is important to note what is established in number 1 of article 1 of Decree-Law nº 54/75, of 12 February (amended various times, the last being by means of 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 situation of motor vehicles and their trailers, with a view to the security of legal commerce":

  • Article 7 of the Property Registration Code (CRP), applicable, as a supplement, to motor vehicle registration, by virtue of article 29 of the CRA, provides that "Definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it";

  • The definitive registration is no more than a rebuttable presumption, admitting, therefore, contrary proof, as follows from the law and case law has been signaling, which can be seen, among others, in the Decisions of the STJ nº 03B4369 of 19-02-2004 and nº 07B4528, of 29-01-2008, available at: www.dgsi.pt;

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

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

  • In this context it is worth recalling that, in view of the provision in number 1 of article 408 of the CC, the transfer of real rights over things, in the case sub judice, motor vehicles, is determined by the mere effect of the contract, and that pursuant to the provision in letter a) of article 879 of the CC, among the essential effects of the purchase and sale contract, stands out the transmission of the thing;

  • In light of the above, it becomes clear that the legislative thought points in the direction that the provision in number 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 evidentiary elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, to whom ownership was transferred.

6. THE PRESUMPTION OF ARTICLE 3 OF THE CIUC AND THE DATE ON WHICH THE IUC IS EXIGIBLE

6.1 THE PRESUMPTION OF ARTICLE 3 OF THE CIUC

  • The Tax Authority considers that the presumption that exists in number 1 of article 3 of the CIUC is derived from an interpretation contra legem, resulting from a skewed reading of the letter of the law and, therefore, violative of the unity of the legal system, however, and with all due respect, the understanding of case law is in the sense that one should consider the existence of a legally rebuttable presumption, therefore, consequently, serves the values and interests questioned, whether at the level of material tax justice or at the level of environmental purposes aimed at by the IUC;

  • Regarding the unity of the legal system, it is relevant to emphasize all that was mentioned above, in particular, concerning the ratio of article 1 of the CIUC; concerning the rules and principles of the LGT; concerning the relevant and applicable rules to motor vehicle registration, concerning the interpretation that best serves and achieves the mentioned unity and ensures the connection of those same rules, considering the legal presumption that is found prescribed in article 3 of the CIUC.

6.2 DATE ON WHICH THE IUC IS EXIGIBLE

  • The IUC is a periodic taxation tax, whose periodicity corresponds to the year that begins on the date of registration or on each of its anniversaries, as provided for in numbers 1 and 2 of article 4 of the CIUC;

  • It is exigible pursuant to number 3 of article 6 of the said Code;

  • It is to be noted that, as to the assessment of the IUC taxed to the Applicant on the vehicles above-referenced, in the year 2015, they should not be considered, because at the time of the tax events the vehicles no longer belonged to it, as the said vehicles were sold to third parties before the year 2015, and the vehicle that was governed under the financial lease contract should also be considered, cf. the evidentiary documents, already cited above and attached to the Application, which are considered fully reproduced for all legal purposes.

6.2.1 Regarding the burden of proof, article 342 number 1 of the CC stipulates "he who invokes a right is bound to prove the facts constitutive of the right alleged";

6.2.2 Also article 346 of the CC (counter-proof) determines that "against the proof produced by the party on whom the burden of proof rests, the opposing party may present counter-proof with respect to the same facts, intended to make them doubtful; if it succeeds, the question is decided against the party burdened with the proof." (As states Anselmo de Castro, A., 1982, ED. Almedina Coimbra, "Civil Procedure Law for Declaratory Relief", III, p. 163, "where the burden of proof rests on one of the parties, to the opposing party it is sufficient to present counter-proof, this being a proof intended to make doubtful the facts alleged by the first").

Therefore, in the case of the proceedings, what the Applicant must prove, in order to rebut the presumption that results both from article 3 of the CIUC and from the Motor Vehicle Register itself, is that it, the Applicant, was not owner of the vehicles in question during the period to which the disputed assessments relate. It proposes to prove, as results from the proceedings, that the ownership of the vehicles did not belong to it in the periods to which the assessments relate, cf. documents attached to the Application and considered fully reproduced for all legal purposes.

6.3 REBUTTAL OF THE PRESUMPTION

  • The Applicant, as is referred in 3.1., regarding the proven facts, alleged, with the purpose of setting aside the presumption, not to be owner of the vehicles at the time of occurrence of the tax events, offering for that purpose the following documents:

  • Listing in the name of the companies (assessment number and value);

  • Copies of invoices issued on the date of sale of the vehicles;

  • Copies of the financial lease contracts

  • In this way, the ownership of the said vehicles no longer belonged to it, and therefore could not enjoy the benefit of their use, from a date prior to that in which the IUC was exigible, thus embodying means of proof with sufficient strength and adequacy to rebut the presumption founded on the register, as prescribed in number 1 of article 3 of the CIUC, documents which enjoy the presumption of truthfulness provided for in number 1 of article 75 of the LGT.

  • It follows from this that at the date on which the IUC was exigible, the party holding ownership of the motor vehicles was not the Applicant.

7. 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 implicit in the establishment of an order of knowledge of defects, as provided for in article 124 of the CPPT, that proceeding from the request for arbitral pronouncement based on defects that prevent the renewal of the disputed assessments, it becomes prejudiced, because useless, the knowledge of other issues raised, it does not seem necessary to know of the other questions raised.

8. REIMBURSEMENT OF THE TOTAL AMOUNT PAID

  • Pursuant to the provision in letter b) of number 1 of article 24 of the RJAT and, in conformity with what is established there, the arbitral decision on the merit of the claim of which there is no remedy or challenge, binds the tax administration from the end of the deadline provided for the remedy or challenge, and it must, in the exact terms of the procedural success of the arbitral decision in favor of the passive subject and until the end of the deadline provided for the spontaneous execution of the sentences of the tax courts "Restore the situation that would exist if the tax act, object of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose."

  • These are legal commands that are in full harmony with the provision in article 100 of the LGT, applicable to the case, ex vi, the provision in letter a) of number 1 of article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial procedural success of claims or administrative remedies or judicial proceedings in favor of the passive subject, to immediately and fully restore the situation that would exist if the illegality had not been committed, corresponding to the payment of compensatory interest, pursuant to the terms and conditions provided for in the law".

  • The case contained in the present proceedings raises the manifest application of the mentioned rules, since, as a consequence of the illegality of the assessment acts, referenced in this proceeding, there must necessarily be place for the reimbursement of the amounts paid, whether for the tax paid or of the corresponding compensatory interest, as a way of achieving the restoration of the situation that would exist if the illegality had not been committed.

9. ON THE RIGHT TO COMPENSATORY INTEREST

  • The declaration of illegality and consequent annulment of an administrative act confers on the addressee of the act the right to the reintegration of the situation in which it would have found itself before the execution of the annulled act.

  • Within the scope of tax assessment, 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 number 1 of article 43 of the LGT and article 61 of the CPPT.

  • Therefore the Applicant has the right to compensatory interest on the amount of tax paid, relating to the annulled assessment.

10. DECISION

In view of the above, this Arbitral Tribunal decides:

  • To judge as well-founded the request for declaration of illegality of the assessment of the IUC, relating to the year 2015, regarding the motor vehicles identified in the present proceeding, thereby annulling the corresponding tax acts;

  • To judge as well-founded the request for condemnation of the Tax Administration to reimburse the amount unduly paid, in the amount of €1,443.50 (one thousand four hundred and forty-three euros and fifty cents), plus the respective compensatory interest legally due, condemning the Tax and Customs Authority to effect these payments.

VALUE OF THE PROCEEDING:

  • In conformity with the provision in articles 306 number 2 of the CPC and 97-A, number 1 of the CPPT and article 3, number 2 of the Regulation of Costs in Tax Arbitration Proceedings, the proceeding is fixed at the value of €1,443.50 (one thousand, four hundred and forty-three euros and fifty cents).

COSTS:

  • In accordance with number 4 of article 22 of the RJAT, the amount of costs is fixed at €306.00, pursuant to Table I, attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Tax and Customs Authority.

Notify the parties.

Lisbon, 17-06-2016

The Arbitrator

Maria de Fátima Alves

(the text of the present decision was prepared by computer, pursuant to article 131, number 5 of the Code of Civil Procedure, applicable by cross-reference of article 29, number 1 letter e) of Decree-Law 10/2011, of 20 January (RJAT), its drafting being governed by current Portuguese orthography)

Frequently Asked Questions

Automatically Created

Who is the taxable person for IUC when a vehicle is financed through a financial leasing contract?
Under Article 3 of the CIUC, the taxable person for IUC on vehicles subject to financial leasing contracts is the financial lessee, not the lessor. Article 3(2) explicitly states that financial lessees are considered equivalent to owners for IUC purposes. This means that even though the financial institution may appear as the registered owner, the party with possession and use of the vehicle under the lease agreement bears the tax liability. However, Article 3(1) establishes a legal presumption that the person registered as owner is the taxable person, creating potential disputes when registration has not been updated to reflect the economic reality of the leasing arrangement.
Can a financial credit institution challenge IUC assessments through tax arbitration in Portugal?
Yes, financial credit institutions can challenge IUC assessments through the CAAD (Administrative Arbitration Center) tax arbitration system in Portugal. This case demonstrates that under Articles 2 and 10 of Decree-Law 10/2011 (RJAT), combined with Article 99 CPPT and Article 95(1) and (2)(d) LGT, financial institutions have standing to request arbitral tribunal constitution to challenge IUC assessments. The institution must file a request for arbitral pronouncement, which can seek annulment of assessment acts and reimbursement of amounts paid plus compensatory interest. The arbitration process provides an alternative to judicial courts for resolving tax disputes, with a single arbitrator appointed by the Ethics Council to decide the case.
What are the legal presumptions regarding subjective incidence of IUC under Portuguese tax law?
Portuguese tax law establishes two key legal presumptions regarding IUC subjective incidence. First, Article 3(1) CIUC creates a rebuttable presumption that the person appearing in the vehicle register as owner is the taxable person for IUC. Second, Article 3(2) CIUC establishes that certain parties are legally equivalent to owners: financial lessees, acquirers with reservation of ownership, and holders of purchase option rights under lease contracts. These presumptions can create conflicts when registration does not reflect economic reality. Registration under Decree-Law 54/75 serves primarily a publicity function and is not legally required for ownership transfer, though the Tax Authority relies heavily on registration records for IUC assessment purposes.
How does CAAD handle disputes over vehicle circulation tax liability between lessors and registered owners?
CAAD handles IUC liability disputes by examining both the formal registration status and the economic substance of vehicle transactions. In cases involving lessors and registered owners, the tribunal analyzes documentary evidence such as sales invoices, financial lease contracts, and transfer documentation to determine actual ownership at the relevant tax period. The arbitrator must balance the legal presumption favoring registered owners under Article 3(1) CIUC against the statutory equivalence of lessees to owners under Article 3(2) CIUC. The tribunal considers whether registration updates have occurred, the timing of vehicle disposal or transfer relative to the tax assessment period, and whether the economic benefits and burdens of ownership have transferred to third parties, ultimately determining who should bear the tax liability based on legal interpretation and factual evidence.
What is the procedure for requesting annulment of IUC tax assessments and obtaining compensatory interest?
To request annulment of IUC assessments and obtain compensatory interest in Portugal, the taxpayer must: (1) file a request for arbitral pronouncement with CAAD under Articles 2 and 10 of Decree-Law 10/2011, invoking Article 99 CPPT and Article 95 LGT; (2) identify the specific assessment acts being challenged and attach supporting documentation; (3) provide evidence demonstrating the illegality of the assessments, such as sales invoices, lease contracts, or registration documents; (4) request both annulment of the assessment acts and reimbursement of amounts paid; (5) specifically claim compensatory interest under Article 43 LGT and Article 61 CPPT. The arbitral tribunal is constituted with a single arbitrator appointed by the Ethics Council, parties are notified and may object to the appointment, and the Tax Authority files a response. The tribunal then reviews the administrative file and documentary evidence before rendering a decision within statutory deadlines.