Process: 580/2016-T

Date: January 29, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 580/2016-T) addresses the critical question of IUC subjective incidence: who is liable to pay the Single Motor Vehicle Tax when there is a discrepancy between vehicle registration and actual ownership or possession. The applicant, a financial institution specializing in financial leasing (locação financeira), long-term rental, and vehicle leasing operations, challenged IUC assessments totaling €14,021.53 for tax periods 2009 and 2012-2015. The company argued that despite being the registered owner, it should not be liable because the vehicles had either been sold to third parties or were subject to financial leasing contracts where it acted as lessor, with lessees having possession and use of the vehicles. The Tax Authority dismissed the gracious complaint, relying on Article 3 of CIUC, which establishes that the taxable person for IUC is determined by who appears as the vehicle owner in registration records on the date the tax becomes due. This case highlights a fundamental tension in Portuguese tax law between legal formalism (registration records) and economic substance (actual ownership and beneficial use). The decision has significant implications for financial institutions operating in the leasing sector, as it clarifies whether registration formalities prevail over contractual arrangements in determining IUC liability. The tribunal accepted jurisdiction under RJAT and joined multiple claims involving different vehicles and tax periods based on identity of legal issues. The case demonstrates that taxpayers can challenge IUC assessments on subjective incidence grounds through tax arbitration, seeking both annulment of assessments and recovery of amounts paid with indemnificatory interest.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A..., legal entity no. ..., with headquarters at Rua ..., Lot ..., Lisbon, in its capacity as incorporating company by merger of company B..., S.A., subsequently dissolved, requested the constitution of the arbitral tribunal in tax matters, raising a request for arbitral decision against the act of dismissal of a gracious complaint and, consequently, against the acts of assessment of Single Motor Vehicle Tax (IUC) and compensatory interest relating to the periods 2009 and 2012 to 2015 and the motor vehicles identified by their respective registration numbers in the document annexed to the request (Doc.4). As a consequence of the aforementioned annulment, it requests the condemnation of the Tax Administration to refund the amount that it considers to have been unduly paid, in the total amount of € 14,021.53, plus the corresponding indemnificatory interest calculated in accordance with the legal provisions.

  2. As the basis for the request, presented on 26-09-2016, the Applicant alleges, in summary, that, although the vehicles in question were registered in its name on the date to which the tax facts pertaining to the contested assessments relate, the same, in some cases, were no longer its property, having been subject to transfer to third parties or, in other cases, being assigned to third parties under financial leasing contracts, in which the present Applicant assumed the position of lessor.

  3. In response to what was requested, the Tax and Customs Authority (AT), pronounced itself in the sense that the present request for arbitral decision was without merit, maintaining in the legal order the contested tax acts and, in accordance, seeks the acquittal of the Respondent.

  4. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Respondent on 10-10-2016.

  5. Pursuant to the provisions of paragraph a) of section 2 of article 6 and paragraph b) of section 1 of article 11 of Decree-Law no. 10/2011, of 20/01, with the wording introduced by article 228 of Law no. 66-B/2012, of 31/12, the Ethics Committee designated as arbitrator of the singular arbitral tribunal the undersigned, who communicated acceptance of the assignment within the applicable period, and notified the parties of this designation on 22-11-2016.

  6. Duly notified of this designation, the parties did not express a wish to refuse the designation of the arbitrator, in accordance with the combined provisions of article 11, section 1, paragraphs a) and b) of RJAT and articles 6 and 7 of the Ethics Code.

  7. Thus, in accordance with the provisions of paragraph c) of section 1 of article 11 of RJAT, with the wording introduced by article 228 of Law no. 66-B/2012, of 31/12, the singular arbitral tribunal was constituted on 12-12-2016.

  8. Regularly constituted, the arbitral tribunal is materially competent, in light of the provisions of article 2, section 1, paragraph a), of RJAT.

  9. The parties possess legal capacity and standing (articles 4 and 10, section 2, of RJAT, and article 1 of Ordinance no. 112-A/2011, of 22/03).

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

  11. Considering the knowledge derived from the procedural documents submitted by the parties, which is deemed sufficient for the decision, the Tribunal decided to dispense with the meeting referred to in article 18 of RJAT.

II. FACTUAL MATTERS

  1. With relevance for the assessment of the issues raised, the following factual elements stand out which, based on the documentary evidence attached to the case file, are considered proven:

12.1. The Applicant is a financial institution which, within the scope of its corporate purpose, carries out all the operations and provision of all services permitted to banks, with the exception of the receipt of deposits;

12.2. Within the scope of its activity, it enters into contracts with its clients for long-term car rental (ALD), short-term rental (renting) and financial leasing (leasing) contracts for motor vehicles.

12.3. For this purpose, the Applicant acquires new vehicles from the respective national importers, whose ownership, upon termination of the aforementioned contracts, is subject to transfer to the corresponding lessees or to third parties.

12.4. Although contesting the IUC assessments relating to the periods of 2009 and 2012 to 2015 and vehicles identified by their respective registration numbers, the Applicant made full payment of the tax and compensatory interest contained therein, in the total amount of € 14,021.53.

12.5. However, it reacted against the aforementioned assessment acts through a gracious complaint filed on 29-12-2015 (Doc. 5) in which, essentially, it alleges that it is not the taxpayer of the tax obligation since, on the date of the occurrence of the respective taxable event, given that the vehicles to which they relate had already been subject to transfer to third parties or were assigned to the respective lessees under financial leasing contracts, long-term rental or operational leasing, these with promise of sale and purchase.

12.6. By order of 20-06-2016, the complaint was dismissed on the ground that, on the date of the exigibility of the tax, the vehicles to which it relates were registered in the name of the Applicant, whereby it was the taxpayer of the tax, in accordance with article 3 of CIUC (Doc. 2).

12.7. In the present request for arbitral decision, the Applicant manifests its disagreement with the aforementioned assessment acts, with the grounds already set forth in the gracious complaint proceedings, summarized above, seeking the annulment of the assessments in question, identified in the annex to the petition (Doc.4), as well as for the recognition of the right to indemnificatory interest.

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

III. JOINDER OF CLAIMS

  1. The present request for arbitral decision relates to several IUC assessments. However, given the identity of the tax facts, the tribunal competent to decide, and the substantive and procedural grounds invoked, the tribunal considers that nothing prevents, in light of the provisions of articles 3 of RJAT and 104 of CPPT, the joinder of claims.

IV. SUBSTANTIVE LAW

  1. In the request for arbitral decision, the Applicant submits to the appraisal of this Tribunal the act of express dismissal of the gracious complaint and, as a consequence, the legality of the acts of assessment of IUC, relating to the periods of 2009 and 2012 to 2015 and the vehicles that it identifies in the annex to the request (Doc.4), invoking the circumstance that, on the date to which the tax facts that gave rise to them relate, those had already been subject to transfer to third parties or were assigned to the lessees within the scope of financial leasing contracts or other leasing contracts, with purchase option for the respective lessees, and, consequently, did not assume the status of the taxpayer of the tax that was assessed against it.

  2. What is therefore at issue is determining whether the Applicant should or should not be considered a taxpayer of IUC with respect to the vehicles and periods to which the tax relates, duly identified in the annex to the request (Doc.4), by reason of the fact that, on the date of the exigibility of the tax, they had already been subject to sale to third parties or with respect to which leasing contracts, or other leasing contracts with purchase option, are in force, even though such contracts have not been subject to registration with the Motor Vehicle Registry, in which the lessor remains identified as the owner.

  3. With respect to this matter, article 3 of CIUC provides, in its sections 1 and 2, in the wording in force on the date of the facts under analysis, that:

"1 - The 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 the name of whom they are registered.

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

  2. According to the understanding of the Respondent, the aforementioned rule does not contain any legal presumption, considering that "The tax legislator in establishing in article 3, section 1, who are the taxpayers of IUC expressly and intentionally established that these are the owners (or in the situations provided for in section 2 the persons listed therein), being considered as such the persons in the name of whom they are registered.

  3. On the other hand, the Applicant contends that that rule establishes a legal presumption, rebuttable in accordance with general terms and, in particular, by virtue of the provisions of article 73 of the General Tax Law (LGT), according to which presumptions of tax incidence always admit proof to the contrary.

  4. This matter has been the subject of numerous decisions within the scope of the arbitral tribunals operating in CAAD, generally in the sense of the merit of the respective requests, on the ground that the rule in question, in the wording in force on the date of the facts to which the present request relates, contains a legal presumption that admits proof to the contrary.[i]

  5. Adhering, therefore, to the position referred to above, it is dispensed with, as unnecessary and tedious, the reproduction of the respective reasoning, since in the present case nothing new is put forward on this matter.

  6. However, the conclusion that the rule of subjective incidence of IUC establishes a rebuttable presumption does not preclude another question that, for the present case, is important to clarify, namely whether the verification of the circumstance provided for in section 2 of article 3 of CIUC excludes or not the rule of incidence established in section 1 of the same article, in the event that compliance has not been given to the provisions of article 19 of CIUC.

  7. This provision, in force on the date of the facts to which the present request relates, established that "For the purposes of the provisions of article 3 of the present code, as well as section 1 of article 3 of the law of its approval, the entities that carry out financial leasing, operational leasing or long-term rental of vehicles are obliged to provide to the General Tax Authority the data relating to the tax identification of the users of the leased vehicles."

  8. From the provision of section 2 of article 3 of CIUC, combined with the aforementioned article 19 of the same Code, there are no doubts that, where vehicles are assigned to third parties under a financial leasing arrangement or other leasing contracts with purchase option, the taxpayer of this tax will be the lessee and not the respective owner, thus excluding the rule of subjective incidence of section 1 of that article, provided that sufficient proof is made to rebut the presumption that it contains.

  9. However, this shall not be the understanding of the Respondent which, moreover, notes that "Notwithstanding that the Applicant alleges having entered into financial leasing contracts, it is certain that it is responsible for the payment of the respective IUC, since it did not communicate the existence of financial leasing to which article 19 of CIUC refers."

  10. It is noted that the relevance of the non-compliance with such obligation with respect to the incidence of the tax in question has been the subject of various arbitral decisions, recalling for this purpose the Arbitral Decision of 14-07-2014, in Proc. 136/2014-T:

"In fact, the provision of article 3, section 2, of CIUC is quite clear with respect to the subjective incidence of IUC, in the validity of financial leasing contracts, subjecting the lessee to that obligation, when it equates it to the owner for this purpose.

Thus, not attributing the law that obligation to the owner-lessor, there shall be no place for any exemption on the part of the latter, with the communication provided for in the aforementioned article 19 of CIUC, for the simple reason that the lessee was never subject to the payment of the tax.

The subjective incidence of IUC is established, in all its elements, in article 3 of CIUC and it will be through the application of this provision that the taxpayer will be determined, the failure to comply with the aforementioned accessory obligation being irrelevant for purposes of the incidence of the tax."[ii]

  1. It is, therefore, to this jurisprudential orientation, to which, without reservation, adherence is given, thus not following the understanding of the Respondent expressed above.

ON THE REBUTTAL OF THE PRESUMPTION

  1. Presumptions of tax incidence may be rebutted through the contradictory procedure proper provided for in article 64 of CPPT or, alternatively, through the means of gracious complaint or judicial challenge of the tax acts based on them.

  2. In the present case, the Applicant did not use that proper procedure, so the present request for arbitral decision, following the partial dismissal of the gracious complaint, is the proper means to rebut the presumption of subjective incidence of IUC that supports the tax assessments whose annulment is the object of the request, since this is a matter that falls within the scope of the material competence of this Arbitral Tribunal (articles 2 and 4 of RJAT).

  3. With the Applicant appearing in the Motor Vehicle Registry as the owner of the vehicles identified in the request in the taxation periods to which the contested assessments relate and alleging that the same had already been subject to transfer on the date of the exigibility of the tax or are assigned to third parties under leasing contracts without compliance having been given to the provisions of article 19 of CIUC, it remains to evaluate the evidence presented, in order to determine whether it is sufficient to rebut the presumption established in section 1 of article 3 of the same Code.

  4. With a view to rebutting the aforementioned presumption, derived from the registration of the motor vehicle registry, the Applicant presents, annexed to the present request, copies of the invoices for the sale of the vehicles as well as of the financial leasing contracts and other leasing contracts with purchase option, those issued and these entered into on a date prior to that of the occurrence of the taxable event and the exigibility of the tax.

  5. Pronouncing itself on the elements of evidence presented, the Respondent considers that they are not, in themselves, sufficient to effect conclusive proof of the transfer of the vehicles in question and that, with respect to the leased vehicles, the Respondent understands that the Applicant could only exempt itself from the tax if it had complied with the specific obligation provided for in article 19 of CIUC.

ON THE REBUTTAL OF THE PRESUMPTION BASED ON COMMERCIAL INVOICES

  1. With respect to the copies of invoices presented as proof of the transfer of the vehicles on a date prior to that of the exigibility of the tax, the Respondent alleges that invoices, in general, do not constitute documents fit to effect the proof sought in the sense that it is not the Applicant that is the owner of the vehicles in the taxation periods to which the assessments in question relate.

  2. In that sense, the Respondent contends that "Invoices are not apt to prove the conclusion of a synallagmatic contract such as the purchase and sale, since such documents do not by themselves reveal an essential and unequivocal declaration of will (i.e., acceptance) on the part of the purported buyers."

  3. Furthermore, according to the Respondent, "the rules of the motor vehicle registry have not reached the point where mere invoices unilaterally issued by the Applicant can replace the motor vehicle registration application, which is, moreover, a document approved by official form."

  4. What is therefore at issue is whether invoices that evidence commercial transactions constitute an element of proof for rebuttal of the presumption contained in article 3 of CIUC and, if this is admitted, whether the copies of invoices presented by the Applicant constitute sufficient proof for this purpose.

  5. To that end, it is important to bear in mind that, in the situation under analysis, we are dealing with purchase and sale contracts which, relating to movable property and not being subject to any special formalism (C.Civil, article 219), operate the corresponding transfer of real rights (C.Civil, article 408, section 1).

  6. Being contracts that involve the transfer of ownership of movable property, through the payment of a price, they have, as essential effects, among others, that of delivering the thing (C.Civil, articles 874 and 879).

  7. However, being contracts of purchase and sale that have motor vehicles as their object, in which registration is mandatory, their proper performance presupposes the issuance of a declaration of sale necessary for the inscription in the registry of the corresponding acquisition in favor of the buyer, as has been understood by the jurisprudence of the superior courts.[iii] Such declaration, relevant for purposes of registration, may constitute proof of the transaction, but is not the sole or exclusive means of proof of such fact.

  8. For registry purposes, no special formalism is also required, being sufficient the presentation to the competent entity of an application subscribed by the buyer and confirmed by the seller which, through a declaration of sale, confirms that the ownership of the vehicle was acquired by that party through a verbal contract of purchase and sale (see Motor Vehicle Registry Regulation, article 25, section 1, paragraph a).[iv]

  9. Notwithstanding these being the rules flowing from the provisions of civil law relating to the informality of the transfer of movable property and, where applicable, of its registration, it cannot fail to be borne in mind that, in the situation under analysis, we are dealing with commercial transactions effected by a company within the scope of its business activity.

  10. Within that scope, the selling company is bound by the compliance with specific accounting and tax rules, in which invoicing assumes particular relevance.

  11. Immediately, by force of tax rules, the entity transmitting the goods is obliged to issue an invoice with respect to each transfer of goods, whatever the status of the respective buyer, whether it be a company, a VAT taxpayer, or a final consumer (CIVA, article 29, section 1, paragraph b).

  12. Also in accordance with the provisions of tax rules, the invoice must comply with a certain form, detailed regulated in articles 36 of the VAT Code and 5 of Decree-Law no. 198/90, of 19/06.

  13. It is based on that document issued by the supplier of the goods that the buyer, when it is an economic operator, will deduct the VAT to which it is entitled (CIVA, article 19, section 2) - unless the tax borne in the acquisition of the vehicle, given its characteristics, is not deductible - and record the expense of the operation (CIRC, articles 23, section 6 and 123, section 2).

  14. On the other hand, it is also based on the invoicing issued that the supplier of the goods must record the respective income, as flows from the provisions of paragraph b) of section 2 of article 123 of CIRC.

  15. Provided they are issued in the legal form and constitute elements of support for the accounting entries in accounts organized in accordance with commercial and tax legislation, the data contained therein are covered by the presumption of truthfulness referred to in article 75, section 1, of LGT.

  16. Indeed, the said presumption covers not only the books and accounting records, but also their respective supporting documents, as is, moreover, a settled understanding of the tax administration itself[v] and the established jurisprudence of the superior courts[vi]

  17. The presumption of truthfulness of commercial invoices issued in accordance with the law may, however, be set aside whenever the operations to which they relate do not correspond to reality, it being sufficient for this that the Tax Administration collects and demonstrates founded indicia of that fact (LGT, article 75, section 2, paragraph a).[vii]

  18. In the present case, although the Respondent affirms, in general terms, the irrelevance of invoices as a means of sufficient proof to rebut the presumption of article 3 of the IUC Code, it does not raise any doubt as to the specific operations evidenced by the invoices presented by the Applicant.

  19. Considering, therefore, the relevance attributed by tax legislation to invoices issued, in accordance with the law, by commercial companies within the scope of their business activity and the presumption of truthfulness of the operations evidenced by them, it cannot fail to be considered that they may constitute, in themselves, sufficient proof of the transfers invoked by the Applicant.

  20. In the situation under analysis, it is noted that the invoices that evidence the transactions in question identify the selling company, the buyer and, through their respective registration number, the vehicle transacted and the sale price, as well as the date on which they were issued, meeting the formal requirements imposed by tax law.

  21. In these terms, it is considered that the invoices presented by the Applicant constitute sufficient proof of the facts alleged for purposes of rebuttal of the presumption in question, thus being rebutted the presumption of ownership derived from the motor vehicle registry contained in article 3 of CIUC, with respect to the vehicles to which they relate.

ON THE REBUTTAL OF THE PRESUMPTION BASED ON COPIES OF CONTRACTS

  1. With respect to financial leasing contracts or leases with purchase option, as proof capable of setting aside the presumption of article 3 of CIUC, it is noted that they are configured as private documents which, when duly signed by the intervening parties, have probative force. The legal requirement, relevant for purposes of giving them formal probative force, is satisfied with the signature of their author, this being considered genuine when acknowledged, or not contested, by the party against whom the document is presented (C.Civil, articles 373 and 374, section 1).

  2. In the present case, the documents offered by the Applicant as an element of evidence being duly signed and the signatures affixed thereto not having been contested nor having been objected to and evidence of falsity provided by the Respondent, they make full proof as to the declarations attributed to their author (C.Civil, article 376, section 1).

  3. Thus, the formal validity of the contracts submitted by the Applicant not being questioned, it is considered documentarily proven that, on the date of the exigibility of the tax, the vehicles to which they relate, although being the property of the Applicant, were being given by it under a regime of financial leasing or leasing with purchase option.

  4. As was concluded earlier, in situations where vehicles, on the date of the occurrence of the taxable event, are assigned to the lessees, under financial leasing contracts or other leases that involve purchase option, the taxpayer of the tax obligation is not the owner-lessor but, in accordance with section 2 of article 3 of CIUC, the respective lessee, by reason of being the one who enjoys the use of the vehicle. And this applies regardless of whether or not the provisions of article 19 of that Code have been complied with and the circumstance that the ownership registry remains in the name of the lessor, without the leasing contract having been registered therein.

  5. In light of the foregoing, it is concluded that there is no legal foundation for the acts of assessment of IUC and compensatory interest with respect to the vehicles and periods identified in the annex to the request for arbitral decision which, on the date of the exigibility of the tax, were assigned to the respective lessees under leasing contracts with purchase option.

  6. The facts alleged by the Applicant being documentarily proven, it is considered unnecessary to examine the witnesses listed by it, so their examination is dispensed with.

  7. In these terms, considering the presumption of ownership derived from the motor vehicle registry contained in article 3 of CIUC - in the wording in force on the date of the facts to which the assessments in question relate - to be rebutted, the assessments identified in the annex to the present request for arbitral decision (Doc.4) shall be annulled, in the total amount of € 14,021.53, on the ground of illegality and error in the premises on which they are based.

ON THE RIGHT TO INDEMNIFICATORY INTEREST

  1. Apart from the annulment of the assessments, and consequent refund of the amounts unduly paid, the Applicant further requests that it be recognized the right to indemnificatory interest, under article 43 of LGT.

  2. Indeed, in accordance with the provision of section 1 of the aforementioned article, indemnificatory interest shall be due "when it is determined, in gracious complaint or judicial challenge, that there was error attributable to the services from which payment of the tax debt in an amount greater than that legally due results." Apart from the means referred to in the provision that is transcribed, we understand that, as flows from section 5 of article 24 of RJAT, the right to the aforementioned interest may be recognized in the arbitral process and thus the request is known.

  3. The right to indemnificatory interest referred to in the aforementioned provision of LGT presupposes that tax has been paid in an amount greater than that due and that this derives from error, of fact or of law, attributable to the services of AT.

  4. In the present case, although it is recognized that the tax paid by the Applicant is not due, because it is not the taxpayer of the tax obligation, thus determining, in consequence, the respective refund, it is not discerned that, in its origin, there is the error attributable to the services that determines such right in favor of the taxpayer.

  5. Indeed, in promoting the ex officio assessment of IUC, considering the Applicant as the taxpayer of this tax, the Tax Administration could not proceed in any other way, merely giving compliance to the provision of section 1 of article 3 of CIUC, which, as extensively referred to above, attributes that status to the persons in whose name the vehicles are registered.

  6. On the other hand, also as was concluded, the aforementioned rule has the nature of a legal presumption, from which flows, for AT, the right to assess the tax and require it from those persons, without need to prove the facts that lead to it, as expressly provided in section 1 of article 350 of C. Civil.

  7. However, with respect to the assessments that are the object of the present request for arbitral decision, it is important to know whether the act of dismissal of the claim of the present Applicant, formulated in the gracious complaint duly filed, constitutes, or not, error attributable to the Tax Administration for purposes of the requirement of indemnificatory interest, under article 43, section 1, of LGT.

  8. In this matter, attention is paid to the orientation flowing from the jurisprudence of the Supreme Administrative Court, which goes in the sense of recognizing that a decision of the Tax Administration that dismisses a request for annulment of an assessment recognized as illegal and consequent restitution of tax unduly collected, constitutes error attributable to the services.

  9. According to the aforementioned jurisprudence – as set forth in a learned judgment of 28-10-2009, in Proc. 601/09 – indemnificatory interest shall be due from the date of the dismissal of the complaint until the date of processing of the respective credit note, in accordance with article 61 of CPPT.

V. DECISION

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

a) To declare the request for arbitral decision well-founded, with respect to the illegality of the assessments relating to the vehicles and periods identified in the annex to the request for arbitral decision (Doc.4), determining their annulment and consequent refund of the amounts unduly paid;

b) To declare the request for recognition of the right to indemnificatory interest well-founded, calculated from the date of the dismissal of the gracious complaint until the date of the effective refund of the taxes and compensatory interest unduly collected.

Value of the case: € 14,021.13

Costs: Pursuant to article 22, section 4, of RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, I hereby fix the amount of costs at € 918.00, charged to the Respondent (AT).

Lisbon, 29 January 2017,

The arbitrator, Álvaro Caneira.

[i] By way of mere example, see Procs.14/2013-T, 26/2013-T, 27/2013-T, 73/2013-T, 170/2013-T, 217/2013--T, 256/2013-T, 289/2013-T, 294/2013-T, 21/2014-T, 42/2014-T, 43/2014-T, 50/2014-T, 52/2014-T, 67/2014-T, 68/2014-T, 77/2014-T, 108/2014-T, 115/2014-T, 117/2014-T, 118/2014-T, 120/2014-T, 121/2014-T, 128/2014-T, 140/2014-T, 141/2014-T, 152/2014-T, 154/2014-T, 173/2014-T, 174/2014-T, 175/2014-T, 182/2014-T, 191/2014-T, 214/2014-T, 219/2014-T, 221/2014-T, 222/2014-T, 227/2014-T, 228/2014-T, 229/2014-T, 230/2014-T, 233/2014-T, 246/2014-T, 247/2014-T, 250/2014-T, 262/2014-T, 302/2014-T, 333/2014-T, 414/2014-T, 646/2014-T, all available at www.caad.org.pt.

[ii] See, among others, Procs. 128/2014-T, 134/2014-T, 136/2014-T, 137/2014-T, 224/2014-T, 228/2014-T, 232/2014-T, 233/2014-T and 341/2014-T

[iii] See STJ, Judgments of 23.3.2006 and of 12.10.2006, Procs. 06B722 and 06B2620.

[iv] It is noted that, within the scope of the special procedure for the registration of ownership of vehicles acquired through verbal contracts of purchase and sale, approved by Decree-Law no. 177/2014, of 15 December, the invoice constitutes, among others, a document that evidences the actual purchase and sale of the vehicle, provided that it contains the vehicle's registration number as well as the name of the seller and the buyer.

[v] See Opinion of the Tax Studies Center, endorsed by order of the General Tax Director, of 2 January 1992, published in Science and Tax Technique no. 365.

[vi] See STA, Judgment of 27.10.2004, Proc. 0810/04, TCAS, Judgment of 4.6.2013, Proc. 6478/13 and TCAN, Judgment of 15.11.2013, Proc. 00201/06.8BEPNF, among others.

[vii] See STA, Judgments of 24.4.2002, Proc. 102/02, of 23.10.2002, Proc. 1152/02, of 9.10.2002, Proc. 871/02, of 20.11.2002, Proc. 1428/02, of 14.1.2004, Proc. 1480/03, among many others.

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when a vehicle has been sold but remains registered to the previous owner?
According to Article 3 of CIUC, the taxable person for IUC is determined by who appears as the vehicle owner in registration records on the date the tax becomes due. Therefore, even if a vehicle has been sold to a third party, if the registration has not been updated to reflect the new owner, the person still registered remains liable for IUC payment. This emphasizes the critical importance of promptly updating vehicle registration records upon any transfer of ownership to avoid continued tax liability.
Does a financial leasing (locação financeira) contract transfer IUC tax liability from the lessor to the lessee?
Under the general rule of Article 3 of CIUC, financial leasing (locação financeira) contracts do not automatically transfer IUC liability from the lessor to the lessee. The lessor, as the registered owner of the vehicle, remains the taxable person for IUC purposes according to registration records. This applies even though the lessee has physical possession and economic use of the vehicle under the leasing contract. The registration record is determinative for tax purposes, not the contractual arrangements between parties or economic reality.
Can a taxpayer challenge IUC assessments through arbitration at CAAD based on subjective incidence grounds?
Yes, taxpayers can challenge IUC assessments at CAAD (Centro de Arbitragem Administrativa) on grounds of subjective incidence, as demonstrated in Process 580/2016-T. The arbitral tribunal has material competence under Article 2(1)(a) of RJAT to decide disputes concerning who should be considered the taxable person for IUC purposes, including situations involving financial leasing contracts, vehicle transfers, or discrepancies between registration and actual ownership. Taxpayers can request annulment of assessments and recovery of amounts paid.
What is the role of vehicle registration in determining the taxable person for IUC purposes in Portugal?
Vehicle registration plays a determinative and formal role in identifying the IUC taxable person under Portuguese law. Article 3 of CIUC establishes that the person registered as the vehicle owner in the Motor Vehicle Registry on the date the tax becomes due is liable for payment. This creates a bright-line rule based on registration formalities rather than actual ownership, possession, or beneficial use, providing legal certainty and administrative efficiency but potentially creating liability for those who have transferred vehicles without promptly updating registration records.
Is the Tax Authority required to refund IUC payments and pay compensatory interest if assessments are annulled?
Yes, when IUC assessments are annulled by arbitration decision or court judgment, the Tax Authority is legally required to refund amounts that were unduly paid by the taxpayer. Additionally, pursuant to general principles of Portuguese tax law, the taxpayer is entitled to indemnificatory interest (juros indemnizatórios) calculated according to applicable legal provisions, which compensates the taxpayer for the period during which they were deprived of funds that were improperly collected by the Tax Authority.