Process: 55/2017-T

Date: July 6, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

In Decision 55/2017-T, the CAAD arbitral tribunal examined the subjective incidence of IUC (Imposto Único de Circulação) on vehicles under financial leasing contracts. A financial institution challenged 77 IUC assessments for 59 vehicles (2013-2014), seeking annulment and refund of €5,787.23. The claimant argued that as a mere lessor under locação financeira contracts, it should not be liable for IUC once lessees exercised purchase options and became actual owners. The institution invoked the polluter-payer principle, asserting that only actual vehicle users should bear IUC liability. The Tax Authority countered that Article 3 of the CIUC establishes a legal presumption: whoever appears in vehicle registration is considered the owner for IUC purposes. While Article 73 of the LGT permits rebutting legal presumptions in tax incidence norms, the AT argued the financial institution remained liable despite the leasing arrangements. The case raises critical questions about the intersection of civil ownership rights and tax liability under financial leasing, the scope of legal presumptions in Article 3(2) CIUC, and whether registration-based liability can be overcome by contractual arrangements transferring economic ownership. The dispute also addresses procedural matters including the right to compensatory and indemnity interest under Articles 43 LGT and 61 CPPT following improper assessments, and the application of the equivalence principle in environmental taxation of vehicles.

Full Decision

TAX ARBITRATION DECISION

1 REPORT

1.1 – A…, S.A., NIPC:…, Claimant in the tax procedure, above and, on the margins referenced, hereinafter, referred to as "Requesting Party", came, invoking the provisions of numbers 1 and 2 of article 10 of Decree-Law no. 10/2011, of January 20 (hereinafter RJAT), article 99 of the Tax Procedure and Process Code (CPPT) and number 1 of article 95 of the General Tax Law (LGT), to request the establishment of the Singular Arbitral Tribunal, which embodies a request for challenge to the tax acts of assessment of Unique Vehicle Circulation Tax, described in the table contained in Annex A, which forms an integral part of this Request, in the following terms:

- The annulment of 77 additional assessment acts of the Unique Vehicle Circulation Tax (hereinafter designated as IUC), carried out by the Tax and Customs Authority (hereinafter AT), relating to 59 vehicles, for the years: 2013 and 2014, according to the table in Annex A, which forms an integral part of the Request for Tax Arbitration Pronouncement;

- The request for reimbursement of the total amount of € 5,787.23, which includes the corresponding compensatory interest, unduly paid by the Requesting Party (detailed, also, in the table of the aforementioned Annex A);

- The Requesting Party considers that it also has the right to indemnificatory interest provided for in articles 43 of the LGT and in article 61 of the CPPT, both, by virtue of article 29 of the RJAT.

1.2 Pursuant to the provisions in subparagraph a) of no. 2 of article 6 and subparagraph b) of no. 1 of article 11 of Decree-Law no. 10/2011, of January 20, as amended by article 228 of Law no. 66-B/2012, of December 31, the Deontological Council appointed as sole arbitrator, Maria de Fátima Alves, who communicated her acceptance of the position within the applicable period:

- The Arbitral Tribunal was constituted on 2017-04-18, as prescribed in subparagraph c) of no. 1 of article 11 of Decree-Law no. 10/2011, of January 20, as amended by article 228 of Law no. 66-B/2012, of December 31.

1.3 The Requesting Party, in the substantiation of its request for arbitral pronouncement, states, in summary, the following:

- The self-assessments challenged in the proceedings were made by the Requesting Party and paid in full, despite disagreeing with them (see, documents nos. 1 to 59, table in Annex A, attached to the file);

- Therefore, the Requesting Party filed a Voluntary Reclamation, which was dismissed;

- As a consequence of this dismissal, the Requesting Party filed a Hierarchical Appeal, also dismissed, according to Annex B, attached to the file;

- Now, the Requesting Party is a Financial Institution, which is also engaged, within the scope of its activity, in financing the automobile sector;

- Entering into, among others, financial leasing or leasing contracts;

- Contracts, which, in this case, were entered into with the respective clients, who had already chosen the type of motor vehicle they wished to acquire, including type, brand and price;

- The respective vehicles being subsequently delivered to the respective clients who assume, at that moment, the status of lessees with the execution of the leasing contract through monthly monetary payments (see, documents nos. 60 to 118, contained in the aforementioned table in Annex A);

- At the end of the contract, each lessee exercised the right to purchase the leased asset at the residual value, plus expenses and VAT, as evidenced by the invoices attached as documents nos.: 119 to 177 and identified in the table in Annex A;

- Therefore, on the dates relating to the facts giving rise to the contested assessments, the Requesting Party was no longer the owner of the said vehicles;

- Being unable, therefore, for the Requesting Party to assume the status of taxpayer of the assessed IUC;

- It reinforces the fact that it is not a taxpayer on the date of exigibility of the tax, as can be seen from the documents of the contracts and the sales invoices that prove the sale of the respective vehicles, contained in the aforementioned documents referred to in Annex A, relating to each of the contested vehicles and which form an integral part of the file.

- Invoices, which are sent automatically after their issuance to the respective clients, thereby transferring the ownership of the vehicles to their rightful owners.

- A situation that also occurs within the scope of leasing contracts, whereby responsibility of the Requesting Party for payment of the respective IUC is ruled out, pursuant to no. 2 of article 3 of the CIUC, since it is the owners of the vehicles by virtue of the leasing contract;

- The Requesting Party emphasizes the fact that it is a financial lessor of the respective motor vehicles and, given the typology of the said contracts, it never operated for its own account or in its own interest any of the leased vehicles contained in the table of the said Annex A, attached to the file;

- The Requesting Party considers that, given the facts, contextually described, that the attribution of IUC should only be applied to those who cause damage to the road network and the environment, as provided in the principle of equivalence, article 1 of the CIUC, which enshrines the principle of the polluter/payer, see Sérgio Vasques, in "The principle of equivalence as a criterion of tax equality", Almedina, 2008, p. 312 et seq.

- From which it follows that: the damage that arises for the environment, resulting from the use of motor vehicles, should be assumed by the real polluters, since they are the users of the same, who operate them in their own interest (see Sérgio Vasques, "Reform of Automotive Taxation: problems and perspectives, Taxation, no. 10, 2002, p. 60, 79 et seq".

- Which reinforces the position of the Requesting Party, regarding the assessments in question, since it was never the real polluter and cause of environmental damage, since it merely provided the cars in question for lease and sold them to the respective lessees or to third parties when the said contracts had already terminated, see documents nos. 60 to 118, 119 to 177, Annex A, attached to the file;

- In view of what was contextually described, on the date of the tax facts, the Requesting Party could not be considered a taxpayer of the tax, a fact that prevents any subjective liability for its payment.

1.4 The Respondent, Tax and Customs Authority (hereinafter designated as AT), filed a Response, from which it appears that the contested tax acts do not suffer from any defect of violation of law, ruling for the dismissal of the claim and for the maintenance of the questioned assessment acts, defending, briefly, the following:

- It considers that the Requesting Party makes an incorrect interpretation and application of the legal norms applicable to the case sub judice;

- Because the Requesting Party does not heed the systemic element, thus violating the unity of the regime enshrined throughout the CIUC and "more broadly, throughout the entire tax legal system, ignoring the ratio of the scheme in article 3 of the CIUC";

- Its position is based on the fact that it does not consider any legal presumption in article 3 of the CIUC;

- Since it considers it to be "a clear choice of legislative policy adopted by the legislator", understanding that the "legislator considers as owners those who, as such, appear in the vehicle registration";

- Because, although the fact that the Requesting Party "claims to have entered into financial leasing contracts, it is liable for IUC", not considering, therefore, no. 2 of article 3 of the CIUC, ruling out, thus, what is provided in article 73 of the LGT, which states that "the presumptions established in the norms of tax incidence always admit proof to the contrary";

- From all its allegations, substantiated in the terms of the Response, it follows that in the proceedings under analysis, IUC is only due by persons appearing in the vehicle registration;

- However, it must be considered that in the case sub judice, one is faced with a specific typology of vehicle circulation in public space, which embodies road and environmental damage caused by the respective users/polluters, who should be responsible, according to the principle of equivalence provided for in article 1 of the CIUC (which will be developed in the appropriate chapter);

- Facts that call into question the exigibility of the unique vehicle circulation tax;

- The Respondent also calls into question the truthfulness of the evidentiary means, leasing contracts and sales invoices, corresponding to the respective vehicles;

- As it does not consider them "fit to prove the conclusion of a synallagmatic contract";

- Now, perhaps due to an oversight, the Respondent does not consider that in this specific case, the purchase and sale of a vehicle has freedom of form, pursuant to art. 219 of the Civil Code, enabling the purchase and sale contract to be by verbal contract, although in the concrete case this does not occur;

- Since as is known, the change of ownership of the property right, acquired by verbal means, of purchase and sale of vehicles "is relevant for IUC purposes from the date of transmission of the respective vehicles, as provided in article 17-A of the CIUC;

- The Respondent bases that "the tax legislator, in articles 3 and 6 of the CIUC, clearly established the premises regarding the tax-generating event, as well as its exigibility, unequivocally establishing that such fact is constituted by ownership of the vehicle, as attested by registration or registration in national territory";

- Being, therefore, irrelevant that the Requesting Party has transmitted, with the "Leasing" contract and the sale, the ownership of the motor vehicles to "third parties";

- The Respondent, given the facts briefly presented:

- Does not take into account the principle of "equivalence", provided for in no. 1 of the CIUC, a corollary of the polluter/payer principle, based on no. 2 of article 66 of the CRP and in the Doctrine, above mentioned in point 1.3 and which will be better clarified (further ahead) in this Arbitration Decision;

- Does not consider the evidentiary means, established in the contracts and in the purchase and sales invoices, when it has them officially at its disposal, mainly within the scope of IRC, since the Requesting Party necessarily has organized bookkeeping, which allows it to assess the revenue and losses of its financial activity.

1.5 The meeting provided for in article 18 of the RJAT was dispensed with, as it is a matter already sufficiently debated both in the proceedings and in jurisprudence, this Tax Arbitration Tribunal understanding it unnecessary for final allegations, dispensing with the examination of witnesses.

1.6 This Tribunal having designated the date 2017-07-06 for the Final Decision.

2 ISSUES TO BE DECIDED

2.1 Given the foregoing in the previous numbers, regarding the exposition of the parties and the arguments presented, the main issues to be decided are as follows:

- The allegation made by the Requesting Party regarding the material illegality of the assessment acts and the illegality of the acts relating to accessory interest, for the years 2013 and 2014, relating to IUC on the vehicles aforementioned in the PI;

- The incorrect interpretation and application of the norms of subjective incidence of the unique vehicle circulation tax assessed and collected, which constitutes the central issue to be decided in this proceeding.

- The legal value of motor vehicle registration.

3 FACTUAL FINDINGS

3.1 As a matter of fact, relevant to the decision to be rendered, this Tribunal considers established, in view of the elements existing in the file, the following facts:

- The Requesting Party presented evidentiary elements contained in documents nos. 1 to 59, 60 to 118, 119 to 177, contained in the table in Annex A, attached to the file, which are hereby entirely reproduced for all legal purposes;

- Also considering the doctrine and jurisprudence presented by it, excluding the Request submitted by the Requesting Party to this Tribunal on 2017-07-04, as it is not considered necessary for the examination of the merits of this case.

- The Respondent in its Response based its defense on: legal descriptions, doctrines and jurisprudences, which were duly analyzed.

However, reserving the Request submitted to this Tribunal on 22-06-2017 as documentary evidence, which was not attached to the file by this Tribunal, pursuant to no. 1 of art. 6 of the CPC, by virtue of article 29 of the RJAT, understanding, after analysis, that it did not bring new facts for the proper decision of this case.

3.1.1 SUBSTANTIATION OF PROVEN FACTS

- The facts established as proven are based on the documents annexed to the request for arbitral pronouncement of the aforementioned PI and the Response of the Respondent and PA, all attached to the file, which are hereby entirely reproduced for all legal purposes.

3.1.2 UNPROVEN FACTS

- There are no facts established as unproven, since all facts considered relevant for the examination of the merits of the case have been proven.

4 LEGAL FOUNDATIONS

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

- The parties enjoy personality and judicial capacity and are legitimate, by virtue of articles 4 and 10, no. 2, of the RJAT and article no. 1 of Ordinance no. 112-A/2011, of March 22;

- The proceeding does not suffer from nullities.

4.2 The request, object of this proceeding, consists of the declaration of annulment of the IUC assessment acts, corresponding to the motor vehicles better identified in the file;

4.2.1 Condemnation of the AT to reimburse the amount of tax relating to such assessments in the total amount of € 5,787.23;

4.2.2 Condemnation of the AT to pay indemnificatory interest on the same amount.

4.3 According to the AT's understanding, it is sufficient that in the registration the vehicle is registered as property of a certain person for that person to be the taxpayer of the tax obligation.

4.4 The factual matter is fixed, as appears from no. 3.1 above, and it is now important to determine the applicable law to the underlying facts, according to the issues to be decided identified in no. 2.1 above, and it is certain that the central issue at hand in the present proceedings, with respect to which there are absolutely opposite understandings between the Requesting Party and the AT, consists in knowing whether no. 1 and 2 of article 3 of the CIUC relating to the subjective incidence of the unique vehicle circulation tax establishes or not a rebuttable presumption.

4.5 Everything analyzed 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 issue to be decided is whether no. 1 and 2 of article 3 of the CIUC establishes or not a legal presumption of tax incidence, it is necessary, in this context, to appreciate and render a decision.

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

5.1 Considering it to be settled understanding in doctrine that in the interpretation of tax laws the general principles of interpretation apply fully which will be limited only and naturally by the exceptions and particularities dictated by the law itself subject to interpretation. This is an understanding that has come to be accepted in the General Tax Laws of other countries and has also come to be enshrined in article 11 of our General Tax Law, which has, moreover, been frequently underlined by jurisprudence.

It is consensually accepted that in order to apprehend the meaning of the law, interpretation resorts, a priori, to reconstructing the legislative intent through the words of the law, which means seeking its literal sense, evaluating 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:

- Regarding the interpretation of tax law, account must be taken of jurisprudence, namely the Judgments of the STA of 05-09-2012, case no. 0314/12, of 06-02-2013, case no. 01000/12, available at www.dgsi.pt, the importance of the provision of article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

- Article 3 no. 1 of the CIUC provides that "Taxpayers 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 name the same are registered";

- The formulation used in the said article resorts to the expression "considering-se" [is considered] which raises the question of whether to such expression can be attributed a presumptive sense, equating it to the expression "presuming-se" [presuming], these being expressions frequently used with equivalent meanings;

- As taught by Jorge Lopes de Sousa, in Tax Procedure and Process Code, Annotated and Commented, volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in matters of tax incidence, presumptions can be revealed by the expression "presume-se" or by similar expression, mentioning various examples of such presumptions, referring to the one contained in article 40, no. 1 of the CIRS, in which the expression "presume-se" is used and the one contained in article 46 no. 2 of the same Code, in which use is made of the expression "considers-se" [is considered], as an expression with an effect similar to that one and, likewise, embodying a presumption;

- In the legal formulation set out in no. 1 of article 3 of the CIUC, in which a presumption was established, revealed by the expression "considering-se" [is considered], of meaning similar and of equivalent value to the expression "presuming-se" [presuming], in use since the creation of the tax in question;

- The use of the expression "considering-se" aimed at nothing more than establishing a more emphatic and clear approach between the taxpayer of IUC and the actual owner of the vehicle, which is in harmony with the reinforcement given to vehicle ownership, which came to constitute the tax-generating fact, pursuant to article 6 of the CIUC;

- The relevance and interest of the presumption in question, which historically was revealed through the expression "presuming-se" [presuming] and which now resorts to the expression "considering-se" [is considered], resides in the truth and justice that, by this means, is conferred to tax relations and which embody fundamental tax values, allowing the real and effective owner to be taxed and not the one who, due to circumstances of a different nature, sometimes turns out to be nothing more than an apparent and false owner. If the case were not so considered, not admitting and taking into account the presentation of evidence intended to demonstrate that the actual owner is, after all, a person different from the one appearing in the registration and who was initially and in principle presumed to be the true owner, those values would be objectively subordinated.

5.2 The principle of equivalence must also be considered, inscribed in article 1 of the CIUC, which has underlying it the principle of the polluter-payer and concretizes the idea inscribed in it that whoever pollutes should, for this reason, pay (see Fernanda Alves and Nuno Vitorino, "The Assessment of the Reform of Automotive Taxation", p. 42 et seq.; Sérgio Vasques, in "The principle of equivalence as a criterion of tax equality", Almedina, 2008, p. 312 et seq., and also by the same author "Reform of Automotive Taxation: problems and perspectives", Taxation, no. 10, 2002, p. 79 et seq.). The said principle has constitutional basis, insofar as it represents a corollary of the provision in subparagraph h) of no. 2 of article 66 of the Constitution, and also has basis in community law, whether at the level of original law, article 130-R of the Treaty of Maastricht (Treaty of the European Union, of 07-02-1992), where the aforementioned principle came to appear as support for Community Policy in the environmental field and which aims to hold responsible those who contribute with the damage that arises for the community, resulting from the use of motor vehicles, which should be assumed by their owner-users as costs that only they must bear.

5.3 In light of the facts described above, it is important to note 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 "considering-se" [is considered] has a sense equivalent to the expression "presuming-se" [presuming], and should thus be understood that the provision in no. 1 of article 3 of the CIUC establishes a legal presumption which, in light of article 73 of the LGT, where it is established that "Presumptions established in the norms of tax incidence always admit proof to the contrary", will necessarily be rebuttable, which means that taxpayers are, in principle, the persons in whose name such vehicles are registered. These persons, identified in these conditions, are those to whom the AT must necessarily be directed;

- But it will be in principle, since in the context of the mandatory prior hearing, pursuant to subparagraph a) of no. 1 of article 60 of the LGT, the tax relationship can be reconfigured, validating the initially identified taxpayer or redirecting the procedure towards the one who is, after all, the true and actual taxpayer of the tax in question.

- The taxpayer has the right to be heard through prior hearing (José Manuel Santos Botelho, Américo Pires Esteves and José Cândido de Pinho, in Tax Procedure Code, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 to article 100).

- Prior hearing, which, naturally, is to be concretized at the moment immediately preceding the assessment procedure, corresponds to the venue and the proper time to, with certainty and security, identify the taxpayer of IUC.

6 ON THE LEGAL VALUE OF REGISTRATION

6.1 Regarding the legal value of registration, it is important to note what is established in no. 1 of article 1 of Decree-Law no. 54/75, of February 12 (amended several times, most recently through Law no. 39/2008, of August 11), when it stipulates that "vehicle registration essentially aims to publicize the legal situation of motor vehicles and their respective trailers, with a view to the security of legal commerce":

- Article 7 of the Real Property Registry Code (CRP), applicable supplementarily to vehicle registration, by force 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";

- Definitive registration constitutes nothing more than a rebuttable presumption, thus admitting contrary evidence, as follows from the law and jurisprudence has been pointing out, and among others the Judgments of the STJ no. 03B4369 of 19-02-2004 and no. 07B4528, of 2008-01-29, available at: www.dgsi.pt;

- Therefore, the legally reserved function of registration is on the one hand to publicize the legal situation of the goods, in the case in question, of vehicles and on the other hand, allows us to presume that the right exists over these vehicles and that the same belongs to the title holder, as so inscribed in the registration, it does not have a constitutive nature of the right of property, but only declarative, hence registration does not constitute a condition of validity of the transmission of the vehicle from seller to buyer;

- Acquirers of vehicles become owners of those same vehicles through the execution of the corresponding purchase and sale contracts, with or without registration;

- In this context it is worth recalling that, in view of the provision in no. 1 of article 408 of the CC, the transfer of real rights over things, in the case sub judice, motor vehicles, is determined by mere effect of the contract, and pursuant to the provision in subparagraph 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 view of the foregoing, it becomes clear that the legislative intent points in the direction that the provision in no. 1 of article 3 of the CIUC establishes a presumption "juris tantum", consequently rebuttable, thus allowing the person who, in the registration, is inscribed as owner of the vehicle, to present evidence intended to demonstrate that such ownership is inscribed in the legal sphere of another person, to whom the ownership was transferred;

- Which regarding the contested facts, there are attached to the file documents that were proven by the Requesting Party, both at the prior hearing stage and in the request for arbitral pronouncement, thereby configuring the certainty that the subjective liability for the IUCs belongs to the respective owner-users of the vehicles, pursuant to no. 1 and 2 of article 3 of the CIUC.

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

7.1 DATE ON WHICH IUC IS EXIGIBLE

- IUC is a periodic taxation tax, the periodicity of which corresponds to the year which begins at the time of registration or at each of its anniversaries, as provided in nos. 1 and 2 of article 4 of the CIUC;

- It is exigible pursuant to no. 3 of article 6 of the said Code;

- It is to be noted that regarding the assessment of IUC attributed to the Requesting Party on the vehicles aforementioned above, in the years 2013 and 2014, account must be taken of the fact that at the time of the tax facts, the vehicles in question were in the legal sphere of the owner-users of the said motor vehicles, because they hold the use and enjoyment of the said vehicles, whereby pursuant to no. 1 and 2 of art. 3 of the CIUC, they must be held responsible for the payment of the obligation of the said tax, see documents nos. 60 to 118, 119 to 177, contained in the table in Annex A, attached to the file.

7.1.1 Regarding the burden of proof, article 342 no. 1 of the CC stipulates "he who invokes a right falls upon him to prove the constitutive facts of the right alleged";

7.1.2 Also article 346 of the CC (counter-evidence) determines that "to the evidence produced by the party on whom the burden of proof falls, the opposing party may oppose counter-evidence concerning the same facts, intended to make them doubtful; if it succeeds, the matter is decided against the party burdened with the proof." (As stated by Anselmo de Castro, A., 1982, ED. Almedina Coimbra, "Declaratory Civil Procedure Law", III, p. 163, "the burden of proof falling on one of the parties, the opposing party needs only to oppose counter-evidence, being such evidence intended to make doubtful the facts alleged by the former".

Thus, in the case of the proceedings, what the Requesting Party has to prove, in order to rebut the presumption arising both from article 3 of the CIUC and from the Vehicle Registration itself, is that it Requesting Party was not the owner of the vehicles in question in the period to which the contested assessments relate. It proposes to prove, as results from the file, is that the ownership of the vehicles did not belong to it in the periods to which the assessments relate. Thus presenting the sales invoices and the leasing contracts of the vehicles contained in documents 60 to 118, 119 to 177, identified in the table contained in Annex A, attached to the file, which are hereby entirely reproduced for all legal purposes.

7.2 REBUTTAL OF THE PRESUMPTION

- The Requesting Party, as mentioned in 3.1 regarding the facts proven, alleged, with the purpose of rebuting the presumption, that it is not a taxpayer of the tax at the time of the occurrence of the tax facts, offering for this purpose the following documents;

- Sales invoices to the respective lessees and third parties and leasing contracts (see documents attached to the file with nos. 60 to 118, 119 to 177, identified in the table contained in ANNEX A, attached to the file);

- Now, these documents enjoy the presumption of truthfulness provided in no. 1 of article 75 of the LGT. From this it follows that on the date on which IUC was exigible, those who held the ownership of the motor vehicles were the legitimate owners and users and not the Requesting Party, due to the typology of the financial leasing contract and respective sales.

8 OTHER ISSUES RELATING TO THE LEGALITY OF ASSESSMENT ACTS

- Regarding the existence of other issues pertaining to the legality of assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of defects, as provided for in article 124 of the CPPT, that proceeding with the request for arbitral pronouncement based on defects that prevent the renewal of the contested assessments, becomes prejudiced, because useless, the knowledge of other defects, whereby it does not seem necessary to examine the other issues raised.

9 REIMBURSEMENT OF TOTAL AMOUNT PAID

- Pursuant to the provision in subparagraph b) of no. 1 of article 24 of the RJAT and in accordance with what is established therein, the arbitral decision on the merits of the claim of which there is no recourse or challenge binds the tax administration from the end of the deadline provided for recourse or challenge, and it must, in the exact terms of the procedural success of the arbitral decision in favor of the taxpayer and until the end of the deadline provided for the voluntary execution of the sentences of tax courts "Restore the situation that would have existed if the tax act subject of the arbitral decision had not been carried out, adopting the necessary acts and operations for that purpose"

- These are legal commands that are in complete harmony with the provision in article 100 of the LGT, applicable to the case, by virtue of the provision in subparagraph a) of no. 1 of article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial success of complaints or administrative appeals or judicial proceedings in favor of the taxpayer, to the immediate and full restitution of the situation that would have existed if the illegality had not been committed, corresponding the payment of indemnificatory interest in the terms and conditions provided for by law";

- The case contained in these proceedings raises the manifest application of the mentioned norms, since as a consequence of the illegality of the assessment acts referenced in this proceeding, there must, by force of these norms, be a reimbursement of the amounts paid, whether as title of the tax paid (see documents nos. 1 to 59 contained in the table of Annex A), whether of the corresponding compensatory interest, as a way to achieve the restitution of the situation that would have existed if the illegality had not been committed.

10 THE RIGHT TO INDEMNIFICATORY INTEREST

- The declaration of illegality and consequent annulment of an administrative act confers on the recipient of the act the right to reintegration of the situation in which it would have been before the execution of the annulled act.

- In the context of tax assessment, its annulment confers on the taxpayer the right to restitution of the tax paid, plus the corresponding compensatory interest, and, as a rule, the right to indemnificatory interest, pursuant to no. 1 of article 43 of the LGT and article 61 of the CPPT.

- Therefore, the Requesting Party has the right to indemnificatory interest on the amount of tax paid relating to the annulled assessments.

11 DECISION

Given the foregoing, this Arbitral Tribunal decides:

- To judge well-founded the request for declaration of illegality of the assessment of IUC relating to the years: 2013 and 2014, regarding the motor vehicles identified in this proceeding, consequently annulling the corresponding tax acts;

- To judge well-founded the request for condemnation of the Tax Administration to reimburse the amount unduly paid, in the amount of €5,787.23 (five thousand, seven hundred and eighty-seven euros and twenty-three cents) condemning the Tax and Customs Authority to make these payments;

- The AT must also make the payment corresponding to the amount owed to indemnificatory interest on the tax paid relating to the annulled assessments, pursuant to no. 1 of article 43 of the LGT, by virtue of no. 2 of article 61 of the CPPT (Text of Law no. 55-A/2010, of 31-12, which entered into force on 2011-01-01.

CASE VALUE: In accordance with the provision of articles 306 no. 2 of the CPC and 97-A, no. 1 of the CPPT and article 3, no. 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned the value of € 5,787.23.

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

Let the parties be notified.

Lisbon, 2017-07-06

The Arbitrator

Maria de Fátima Alves

(the text of this decision was prepared by computer, pursuant to article 131, no. 5 of the Code of Civil Procedure, applicable by referral of article 29, no. 1 subparagraph e) of Decree-Law 10/2011, of January 20 (RJAT), governed by its wording by current spelling)

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when a vehicle is under a financial leasing (locação financeira) contract?
Under Article 3 of the CIUC, IUC liability follows vehicle registration records. The Tax Authority argues that financial lessors appearing in registration remain liable even under locação financeira contracts. However, Article 3(2) CIUC and the rebuttable presumption in Article 73 LGT suggest that lessees who exercise purchase options and become actual owners may assume liability. The claimant institution argued it ceased being liable once ownership transferred to lessees through exercise of purchase options, but the AT maintained that registration-based presumptions control absent formal rebuttal.
Can legal presumptions of vehicle ownership be rebutted for IUC subjective incidence purposes?
Yes, Article 73 of the LGT expressly provides that presumptions established in tax incidence norms always admit proof to the contrary (prova em contrário). For IUC subjective incidence, this means the legal presumption in Article 3 CIUC that registered owners are liable can theoretically be rebutted. However, the Tax Authority in this case argued that merely entering financial leasing contracts is insufficient to rebut the presumption. Taxpayers must present compelling evidence that they are not the actual owners on the tax assessment date, such as definitive transfer documentation, purchase invoices showing completed sales, and proof of registration changes.
What is the procedure to challenge IUC tax assessments through CAAD arbitration in Portugal?
To challenge IUC assessments through CAAD (Centro de Arbitragem Administrativa), taxpayers must: (1) First exhaust administrative remedies by filing a reclamação graciosa (voluntary reclamation) and, if denied, a recurso hierárquico (hierarchical appeal); (2) Invoke Articles 10(1) and 10(2) of RJAT (Decree-Law 10/2011), Article 99 CPPT, and Article 95(1) LGT as legal basis; (3) File the arbitration request with CAAD within the statutory deadline following dismissal of administrative appeals; (4) Pay any assessed amounts before challenging (as self-assessments were paid in this case); (5) Specify the contested acts, amounts, and legal grounds for annulment; (6) Request both annulment of assessments and reimbursement of amounts paid with interest.
Are financial institutions entitled to a refund and indemnity interest after annulment of improper IUC assessments?
Under Articles 43 LGT and 61 CPPT, as incorporated by Article 29 RJAT, financial institutions are entitled to both compensatory interest (juros compensatórios) on amounts unduly paid and indemnity interest (juros indemnizatórios) following annulment of improper tax assessments. Compensatory interest covers the period from payment until refund, while indemnity interest compensates for delays attributable to the Tax Authority. In this case, the claimant sought reimbursement of €5,787.23 plus corresponding compensatory interest, and asserted entitlement to indemnity interest. The right to interest is automatic upon successful annulment and does not require separate proof of damages, as it is a legal consequence of the State's unjust enrichment from improper tax collection.
How does Portuguese tax law define subjective incidence for Imposto Único de Circulação (IUC) on leased vehicles?
Portuguese tax law defines IUC subjective incidence primarily through Article 3 of the CIUC, which establishes that persons appearing in vehicle registration records are presumed to be owners and thus liable for IUC. For leased vehicles under locação financeira, Article 3(2) CIUC creates ambiguity: while lessors typically appear in registration during the lease term, the economic substance suggests lessees are the actual users and beneficiaries. The principle of equivalence and the polluter-payer doctrine (Article 1 CIUC) support imposing liability on actual vehicle operators who cause road and environmental damage. However, the Tax Authority interprets the CIUC systemically to prioritize registration-based presumptions over economic substance, requiring formal proof to shift liability from registered lessors to lessees, particularly after purchase option exercise.