Process: 595/2014-T

Date: February 27, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

Process 595/2014-T concerns IUC (Single Vehicle Tax) liability for an automobile importer who registered vehicles in Portugal but subsequently exported them or transferred them to dealers before the tax became due. The central legal issue involves whether the registered owner can rebut the legal presumption of tax liability established in Article 3(1) of the IUC Code, which presumes that the person identified in the vehicle registry is the owner and therefore the taxable person. The applicant, A... Automobiles S.A., challenged IUC self-assessments totaling €14,599.43 for 2012, arguing that: (1) 46 vehicles were registered but exported to other EU Member States or third countries within the 60-day registration period; (2) 35 vehicles were transferred and exported before the tax payment deadline; and (3) 36 vehicles were sold to concessionaire companies before the registration period ended. The applicant invoked Article 73 of the General Tax Law, asserting that the presumption in Article 3(1) is rebuttable, and presented invoices and export documentation as proof. The Tax Authority rejected the administrative appeal, maintaining that registration triggers tax liability regardless of subsequent disposition. The case proceeded to CAAD arbitration under the RJAT framework (Decree-Law 10/2011). The Tax Authority raised a procedural exception for illegal joinder of claims and requested dismissal. The arbitral tribunal, constituted on 2 October 2014, dispensed with testimonial evidence under Articles 16 and 19 of RJAT, finding documentary evidence sufficient for decision. The applicant sought annulment of the self-assessments and reimbursement of amounts paid plus compensatory interest. While the case theme references financial leasing (locação financeira), this excerpt focuses primarily on import-export scenarios and the rebuttability of ownership presumptions for IUC purposes, emphasizing the principle of equivalence under Article 1 of the IUC Code, which suggests the tax should be borne by those who actually benefit from vehicle use rather than merely by registered importers in the course of commercial activity.

Full Decision

CAAD ARBITRAL DECISION – ENGLISH TRANSLATION

Process No. 595/2014-T

I – Report

1.1. A... Automobiles, S.A., legal entity no. ..., with registered office at Av. ... Lisbon (hereinafter referred to as "applicant"), having been notified of the decision of the Head of the Administrative Justice Division of the Financial Directorate of ..., dated 30/4/2014, which rejected the administrative appeal lodged against the self-assessments of IUC for the year 2012, in the total amount of €14,599.43, filed, on 31/7/2014, a request for constitution of an arbitral tribunal and arbitral ruling, in accordance with the terms set out in paragraph a) of no. 1 of art. 2 and paragraph a) of no. 1 of art. 10, both of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as "RJAT"), in which the Tax and Customs Authority (AT) is requested to "declare the illegality and annul the self-assessment acts for Single Vehicle Tax for the year 2012, and likewise annul the decision of the Head of the Administrative Justice Division of the Financial Directorate of ... of 30 April 2014", and the AT be "condemned to reimburse the tax unduly paid, plus compensatory interest".

1.2. On 2/10/2014, this Single Arbitral Tribunal was constituted.

1.3. In accordance with art. 17, no. 1, of the RJAT, the AT was cited as the respondent party to submit a response, in accordance with the said article, on 2/10/2014. The AT submitted its response on 17/11/2014, arguing for the complete dismissal of the applicant's request. It also alleged an exception for "illegal joinder of claims" and requested the dispensation of the production of testimonial evidence indicated by the applicant in the initial petition. The administrative proceedings were attached to the case file on 15/12/2014.

1.4. By petition of 26/12/2014, the present applicant pronounced on the exception invoked by the AT, requesting that the same be considered unfounded.

1.5. By order of 6/2/2015, the Tribunal considered that, as the present applicant had already pronounced on the exception invoked by the AT – thus fulfilling the terms set out in art. 18, no. 1, para. b), of the RJAT –, it was dispensable, in accordance with articles 16, paras. c) and e), and 19, no. 1, of the RJAT, the holding of the meeting of art. 18 of the RJAT, as well as the production of testimonial evidence indicated by the applicant, and that the case was ready for decision. A date of 27/2/2015 was also set for the pronouncement of the arbitral decision.

1.6. On 20/2/2015, the present applicant requested, once again, the examination of witnesses. By order of 25/2/2015, it was reaffirmed that the same was dispensable, under and in accordance with articles 16, paras. c) and e), and 19, no. 1, of the RJAT, since the documentary evidence of the facts alleged by the present applicant is contained in the present case file, being the same sufficient for a pronouncement on the merits regarding the claims formulated.

1.7. The Arbitral Tribunal was regularly constituted, is materially competent, the case does not suffer from vices that invalidate it, and the Parties have standing and legal capacity, being legitimate.

II – Grounds: Factual Matters

2.1. The present applicant alleges, in its initial petition, that: a) "the legal presumption contained in article 3, no. 1, of the Code [of Single Vehicle Tax] that the person identified as such in the vehicle registry is the owner of the vehicle, being therefore the subject liable for Single Vehicle Tax and being responsible for payment of the tax, cannot be qualified as a presumption of irrebuttable subjective incidence"; b) "under the provisions of art. 73 of the General Tax Law, the person identified in the registry as the owner of the vehicle may always rebut the presumption provided for in article 3 of the Code of Single Vehicle Tax, that is, the presumption that he is the owner of the vehicle and, consequently, the subject liable for Single Vehicle Tax"; c) "regarding the year 2012, the present applicant imported, in the exercise of its commercial activity, 46 vehicles that were registered and subsequently invoiced by the end of the legally granted term for registration and dispatched/exported to other Member States of the European Union/third States (cfr. Docs. 10 and 11)"; d) "although registered in Portugal, the vehicles in question did not have as their final destination the Portuguese market, since they were dispatched/exported to other Member States of the European Union/third States, being invoiced before the moment when the tax became due, that is, before the end of the legally granted period for registration"; e) "against the foregoing, the understanding according to which the taxable event and the exigibility of Single Vehicle Tax occur with the issuance of the Vehicle Customs Declaration in the name of the importer and with the subsequent request for issuance of the vehicle registration certificate in the name of the importer cannot be accepted [because] such understanding obscures the provisions of art. 17, no. 1, and 18, no. 1, para. a), both of the Code of Single Vehicle Tax"; f) "the completion and transmission of the Vehicle Customs Declaration by the Registered Operator and the presentation of the request for the registration certificate does not create nor is confused with the taxable event of Single Vehicle Tax"; g) "the understanding of the Tax Administration that the tax is due is also manifestly illegal by violation of the principle of equivalence provided for in article 1 of the Code of Single Vehicle Tax"; h) "having the present applicant succeeded in proving, through the attachment of the respective invoices, that the vehicles in question were sold, invoiced and dispatched/exported to other Member States of the European Union/third States within the 60-day period for registration, it should be concluded that the present applicant succeeded in rebutting the presumption arising from the registry and provided for in article 3, no. 1, of the Code of Single Vehicle Tax, wherefore the annulment of the Single Vehicle Tax self-assessments in question should be ordered, on the ground of their illegality"; i) "the present applicant also imported 35 vehicles that were transferred and invoiced within the period for calculation and payment of Single Vehicle Tax and exported/dispatched to third States or to another Member State of the European Union (cfr. Docs. 13 and 14) [and] although in these residual situations the vehicles were not sold and exported/dispatched within the legally granted period for registration, that is, within the 60-day period after registration, the present applicant considers that the tax is also not due [because] the vehicles in question were transferred before the end of the period for calculation and voluntary payment of the tax"; j) "the understanding of the Tax Administration regarding the exigibility of Single Vehicle Tax in these situations would imply that, in the year of registration, the tax would be borne not by the one who actually benefited from the use of the vehicle, but by the Registered Operator who, in the normal development of his economic activity, sold the vehicle to its final purchaser, who benefited from its use and who, for that reason, should bear the payment of the tax"; l) "in the exercise of its commercial activity, the present applicant, in the year 2012, sold and transferred 36 vehicles to its concessionaire companies (cfr. Doc. 15) [and as for the same] no Single Vehicle Tax is due from the present applicant [since it invoiced] the vehicles to its concessionaire companies before the end of the legally granted period for registration and, consequently, before the tax became due". The applicant also alleges that – having promoted the payment of the self-assessments (see Doc. 5) with which it disagrees, invoking the illegality of the same –, it should be reimbursed the "amount of tax unduly paid", "plus compensatory interest at the legal rate, in accordance with article 43, no. 2, of the General Tax Law."

2.2. The applicant concludes that it should be "declared the illegality and annulled the Single Vehicle Tax self-assessment acts for the year 2012, and likewise annulled the decision of the Head of the Administrative Justice Division of the Financial Directorate of ... of 30 April 2014", and the AT be "condemned to reimburse the tax unduly paid, plus compensatory interest".

2.3. For its part, the AT alleges, in summary, in its response, that: a) "Although the Applicant proceeds to the subdivision of the questions to be reviewed within the scope of the present arbitral ruling request (vehicles dispatched/exported up to 60 days, counted from the date of assignment of the registration, vehicles that were dispatched/exported between the 61st and 90th day after the assignment of registration and vehicles that were sold within 60 days from the assignment of registration), taking into account that the questions are transversal to the applicable legal rules, it will proceed to review the Applicant's arguments as a whole, and not individually"; b) "Under Art. 17 of the Vehicle Tax Code (hereinafter CISV), the introduction into consumption and taxation of vehicles that do not possess a national registration is titled by the issuance of a Vehicle Customs Declaration (DAV), [this issuance of which] constitutes the taxable event under the terms and for the purposes provided in Art. 5 of the CISV"; c) "In the context of IUC, article 3, no. 1, of the CIUC establishes that «The subjects liable for 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» [and] with regard to the taxable event and the exigibility of the tax, Art. 6 of the CIUC provides that «1 - The taxable event of the tax is constituted by the ownership of the vehicle, as evidenced by the registration or entry in the national territory»"; d) "From the articulation between the scope of the subjective incidence of IUC and the constitutive fact of the corresponding tax obligation result unequivocally from Art. 6 of the CIUC, the legal situations that generate the arising of the tax obligation, namely the registration or entry in the national territory"; e) "[...] by virtue of the combination of the express rules and in particular attention to the provisions of Art. 24 of the Vehicle Registration Regulations (RRA), approved by Decree-Law 55/75 of 12 February, and in the wording given by Decree-Law 178-A/2005 of 28 October, it follows that the initial registration of ownership of vehicles admitted (as is the case in the proceedings), is based on the respective request and proof of compliance with the tax obligations relating to the vehicle"; f) "That is, the issuance of registration certificate implies the presentation of a DAV by the Applicant and the payment of the corresponding ISV tax, and automatically creates the registration of the ownership of the vehicle under Art. 24 of the RRA in the name of the entity that proceeded to import the vehicle and requested registration, namely the Applicant"; g) " [...] it is peremptory that, under Art. 24 of the RRA, the importer appears in the registry as the first owner of the vehicle and in that sense is, in accordance with the provisions of Art. 3 and Art. 6, both of the CIUC, the subject liable for the tax"; h) "[...] the taxable event in the context of IUC is determined under the terms of Art. 6 of the CIUC by the registration or entry in the national territory. That is, the taxable event ceased to be operated as in the previous statutes (extinct Municipal Vehicle Tax, Vehicle Circulation Tax and Haulage Tax), through the use or enjoyment"; i) "[...] the tax legislator in Art. 6 of the CIUC clearly established the premises as to the taxable event of the tax, as well as its exigibility, stating unequivocally that such event is constituted by the ownership of the vehicle, as evidenced by the registration or entry in the national territory. Now, the understanding that the Applicant puts forward that taxation could be avoided in the event that, within a period of 60 days, the vehicle is exported to another country, or in cases that occur between the 61st and 90th day, does not find support in the letter of the law, that is, does not find in the letter of the law the minimum of verbal correspondence"; j) "[...] the tax legislator did not provide that the legal presumption of ownership could be rebutted even within the 60 days referred to in no. 2 of art. 42 of the RRA, which would be paid in the 30 days thereafter under the terms of Art. 17 of the CIUC. And even less did it provide that importers, despite appearing as first owners of the imported vehicles, could avoid taxation in the context of IUC, if within 60 days the vehicle is registered in the name of another owner, who calculates and pays the IUC within the period of 30 days under the terms of Art. 17 of the CIUC"; l) "[...] it is the Applicant that, as the importer of the vehicles – which completes the DAV, pays the ISV and requests registration – fills the taxable event of IUC and, at the same time, the subjective incidence of the tax"; m) "[...] although the Applicant alleges that it sold within the period for registration or [between the] 60th and 90th [days] for calculation and payment, such fact is irrelevant for purposes of applying the provisions of Art. 6 of the CIUC"; n) "[...] the tax legislator intentionally and expressly wanted those considered as subjects liable for the tax to be the owners in whose name the vehicles are registered"; o) "[...] the vexata questio resides in the vehicle registration for purposes of tax incidence, particularly as it relates to the exigibility of IUC, provided for in Arts. 6 and 3, both of the CIUC. Now, with the vehicles registered in the name of the Applicant, the tax is required of it under the terms of Arts. 6 and 3 of the CIUC, it being impossible to avoid the subjective incidence of the tax"; p) "[...] taking as an example the understanding given by the Applicant that it should not bear the IUC on the vehicles, since it sold them without thereby benefiting from their use - in light of the principle of equivalence – would lead to the holder of a vehicle that does not use it being entitled not to pay the IUC, because it did not benefit from the vehicle. Surely, that was not the legislator's intention"; q) "[...] the interpretation conveyed by the Applicant is shown to be contrary to fundamental law [by considering that the] understanding advocated by the Applicant to avoid the subjective incidence and taxation of IUC does not find legal accommodation and violates the constitutional principles of legality and tax justice, of contributory capacity, of equality, of certainty and of legal security"; r) "[...] if the Applicant wishes to react against the presumption of ownership attributed to it, then it must necessarily react through the proper means provided for in the Vehicle Registration Regulations and in the registration laws subsidiarily applicable and against the vehicle registry itself, for it is surely not through the challenge of IUC assessments that the registry information is rebutted"; s) "[for purposes of the] (supposed) legal presumption established in article 3 of the CIUC", an "invoice is not apt to prove the celebration of a synallagmatic contract such as the purchase and sale, since that document does not reveal in itself an essential and unequivocal declaration of intent (i.e., acceptance) by the purported purchaser"; t) "the Applicant should be condemned to payment of the arbitral costs arising from the present arbitral ruling request"; u) "there did not occur, in this case, any error attributable to the [services] by which the legal requirements that confer the right to compensatory interest are not met". The AT finally requested "the dispensation of the production of testimonial evidence".

The AT concludes that "the exception invoked [exception for alleged "illegal joinder of claims"] should proceed, absolving the Respondent of the case. Or, should this not be understood, the present request for arbitral ruling should be judged unfounded, with the tax assessment acts challenged remaining in the legal order and the Respondent entity being accordingly absolved of the request."

2.4. The following facts are considered proven:

i) The present request concerns the self-assessments of IUC for the year 2012, in the total amount alleged of €14,599.43 (more correctly: €14,593.42 = €10,379.49 + €4,213.93), made by the present applicant (see Doc. 2 attached to the present case file and table at point 5 of the initial petition).

ii) Not satisfied with the said IUC self-assessments and with the understanding contained in Office no. ..., of 18/11/2013, of the SF of Lisbon ..., the present applicant lodged an administrative appeal against the same (see Doc. 3 attached to the case file).

iii) By Office no. ..., dated 30/4/2014, of the Justice Division of the Financial Directorate of Lisbon, the present applicant was notified, on 5/5/2014, of the Order of the Head of the Administrative Justice Division that determined the rejection of the administrative appeal presented against the said assessments (see Doc. 1 attached to the case file).

iv) In the course of its activity, the present applicant imports vehicles which, for contractual and commercial reasons established with the manufacturers, are sometimes registered in Portugal but subsequently sold and dispatched to other Member States of the European Union or, in other cases, exported to third States. Similarly, the present applicant, in the course of its commercial activity, also imports vehicles which, in certain cases, are registered and subsequently sold to its concessionaire companies.

v) As can be seen from the summary table in point 13 of the initial petition, the situations with respect to which the present applicant self-assessed IUC for the year 2012 concerned, in summary, 117 vehicles (of which 81 for export and 36 for concessionaries). In no case was the applicant the actual user of the vehicles.

vi) All situations relating to the vehicles above mentioned are documented by invoice prior to the end of the period for registration or within the period granted for calculation and payment of IUC: 1.1) 46 vehicles that the present applicant imported and that were registered and invoiced by the end of the legal period to be registered and dispatched to other Member States of the European Union/third States (see Docs. 10 and 11; in certain cases, the proforma invoice is identified in the dispatch document and, with respect to invoice 12M0023, there is a clerical error, since in the annexes to that invoice, invoice 12M0021 is indicated, as noted at point 37 of the initial petition); 1.2) those 46 vehicles were sold and invoiced before the end of the registration period, as defined by art. 42, nos. 1 and 2, of the Vehicle Registration Regulations (RRA), i.e., within the 60-day period after the assignment of registration (see Docs. 10 and 11); 2) 35 vehicles that the present applicant imported and that were not sold and exported within the legal period for registration but that were transferred and invoiced within the 30-day period (subsequent to the 60-day period) granted for calculation and payment of the tax, having been registered and invoiced within the period for calculation and dispatched to other Member States of the European Union/third States (see Docs. 13 and 14); 3) 36 vehicles that the applicant, also in the exercise of its commercial activity, sold and transferred, in the year 2012, to its concessionaire companies (see Doc. 15), within the 60-day period from the moment of assignment of registration.

vii) With respect to the vehicles with registrations ...-...-... and ...-...-..., to which correspond invoices no. 0502441, of 26/7/2005, and no. 1100786, of 28/4/2011, in both cases the applicant proved, through Docs. 16 and 17, that such vehicles were transferred in year(s) prior to the taxable event of IUC in 2012.

viii) The joinder of claims is not, contrary to what the AT alleged, illegal, considering the identity of the tax facts and their grounds. The circumstantial situation of fact and law is basically the same, which was also admitted in the context of the administrative appeal (where the joinder was not refused) and, implicitly, in the AT's response, when it states that "the questions [of the various «groups» of vehicles] are transversal to the applicable legal rules, [reason why it will review the] arguments of the Applicant as a whole, and not individually".

2.5. There are no proven facts relevant to the decision of the case that are not proven.

III – Preliminary Issue: Joinder of Claims

Given the identity of the tax facts, of the tribunal competent to decide and of the grounds of fact and law invoked, nothing stands in the way, in light of the provisions of art. 104 of the CPPT and 3 of the RJAT, of the joinder in question (see point viii) of the proven factual matters).

IV – Grounds: Legal Matters

In the present case, there are three fundamental disputed legal questions: 1) whether, as was alleged by the AT, the sale, evidenced by invoice, "within the period for registration or [between the] 60th and 90th [days] for calculation and payment, [...] is irrelevant for purposes of applying the provisions of Art. 6 of the CIUC"; 2) whether article 3 of the CIUC contains a presumption and whether it can be rebutted and, further, whether, as the AT understands, an "invoice is not apt to prove the celebration of a synallagmatic contract such as the purchase and sale"; 3) whether, in the present case, compensatory interest is due to the applicant.

Let us then see.

  1. For the AT, the sale, although evidenced by invoice, if carried out "within the period for registration or [between the] 60th and 90th [days] for calculation and payment, [...] is irrelevant for purposes of applying the provisions of Art. 6 of the CIUC"; for its part, for the applicant, such interpretation – which associates the taxable event of IUC with the issuance of the DAV – disregards what is provided for in articles 17, no. 1, and 18, no. 1, para. a), both of the CIUC, and what is stated in art. 42, no. 2, of the RRA, so that the sale within the period for registration (up to the 60th day after the assignment of registration) or within the period granted for calculation and payment of the tax (61st to 90th day) allow it to be considered "rebutted the presumption provided for in article 3, no. 1, of the Code of Single Vehicle Tax, with the consequent removal of the responsibility for payment of Single Vehicle Tax".

Considering what is provided for in article 6, no. 1, of the CIUC, it is verified that the taxable event of the tax obligation is constituted by the ownership of the vehicle, as evidenced by the respective registration in the national territory.

However, as is stated, in a similar case, in the Arbitral Decision regarding process no. 43/2014-T, of 14/7/2014, which is here reproduced, for agreeing with it:

"[As] article 3, no. 1, of the Code of Single Vehicle Tax establishes a rebuttable presumption, it is necessary to further analyse whether this presumption has actually been rebutted by the Applicant, as results from the provisions of article 73, of the General Tax Law which «the presumptions established in the rules of tax incidence always admit contrary proof, whereby they are rebuttable». Thus, the person who is registered in the registry as owner of the vehicle and, in that sense, who was considered by the Respondent as the subject liable for the tax, must demonstrate by means of available evidence that he is not the actual owner of the vehicle and, likewise, that the ownership was transferred to another. Now, in the case in question, the Applicant produced documentary evidence [...] that demonstr[ates] that at the date of the assessments it did not consider itself the owner of the vehicles in question. [...]. [...] we understand that the sale invoices presented [...] enjoy the presumption of truthfulness and, in this sense, of suitability and sufficient force to rebut the presumption resulting from the assessments, in accordance with the provisions of article 75 of the General Tax Law. In this sense, it is considered that the Respondent, by not having taken into account the documentary evidence submitted by the Applicant, is in error as to the presuppositions of fact and law, which determines the annulment of the corresponding assessment acts. On the other hand, in the matter of calculation and payment of the tax, article 17, no. 1, of the IUC Code establishes that, in the year of registration or entry of the vehicle in the national territory, the tax is calculated by the subject liable for the tax within 30 days after the end of the period legally required for its registration. Being that, in accordance with article 42, no. 2, of the Vehicle Registration Regulations, in the case of initial registration of ownership, the vehicle should be registered within 60 days from the date of assignment of registration. That is, in the year of registration, it is only possible to determine the subject liable for Single Vehicle Tax after the period for registration ends, that is, the 60-day period, counted from registration, whereby only at that moment does the tax become due. Corroborating this same understanding, the Code of Single Vehicle Tax establishes in its article 18, no. 1, para. a), («Official Assessment») that, «In the absence of registration of ownership of the vehicle carried out within the legal period, the tax due in the year of registration of the vehicle is calculated and required: a) From the subject liable for the tax on vehicles based on the vehicle customs declaration, or based on the supplementary vehicle declaration on which the calculation of that tax is based, even though it is not due». That is, in accordance with this legal provision, only in situations in which the ownership of the vehicle is not registered within the legal period of 60 days (article 42, no. 2, of the Vehicle Registration Regulations) is the tax required from the subject liable for the Vehicle Tax. However, the subject liable for Vehicle Tax (in this case the Registered Operator) cannot be confused with the subject liable for Single Vehicle Tax. In truth, the Law is clear, the subject liable for Vehicle Tax only becomes responsible for payment of the tax if it is not possible to determine the subject liable for Single Vehicle Tax after the period legally established for registration. In this way, in situations in which the subject liable for Vehicle Tax succeeds in demonstrating that it transferred the vehicles in question to third parties before the end of the period for registration, it should be concluded that it succeeded in rebutting the presumption established in article 3, no. 1, of the Code of Single Vehicle Tax. Having arrived here, it is necessary to conclude that the Applicant [...] succeeded in demonstrating, through the attachment of the means of evidence identified [...] that within the 60-day period for registration it transferred the vehicles to third parties. That is, the Applicant succeeded in demonstrating that the vehicles in question were transferred within the 60-day period for registration and, consequently, before the tax became due. In view of the foregoing, and with respect to the exigibility of the tax, it is concluded that the ownership of the vehicles in question was transferred by means of a purchase and sale contract and, likewise, that on the date when IUC became due the Applicant was no longer the owner, as results from the documentary evidence submitted by it." (Italics ours.)

In these terms, with which we agree, it is concluded, in the same way, that:

1.a) In the case of the situations referred to in points vi), 1.1) (46 vehicles), and vi), 3) (36), of the proven factual matters, the applicant having brought to the case file invoices or proforma invoices (which constitute suitable means of evidence in light of art. 75 of the LGT) – see Docs. 10, 11 and 15 to 17 – to demonstrate that, within the 60-day period, it had transferred the said vehicles to third parties, it is concluded that it succeeded in proving that it was no longer, on the date when IUC in question became due, the owner of the same, having, through this avenue, validly removed the presumption that fell upon it. This conclusion encompasses 82 vehicles (IUC of €10,379.49 = €128.43 × 48 + €160.78 × 21 + €50.00 × 7 + €96.57 × 5 + €17.25 + €5.62 of interest), in which are also included those discriminated in the situations referred to in point vii) of the proven factual matters.

1.b) In the case of the situations referred to in point vi), 2) (35 vehicles: IUC of €4,213.93 = €128.43 × 26 + €96.57 × 9 + €5.62 of interest), of the proven factual matters, the conclusion will be different because, as the present applicant acknowledges, in these there was only transfer of the vehicles after the mentioned 60-day period. Although there was no actual use of the same by the applicant (and they were transferred within the 30 days after registration), it is certain that, at the moment of exigibility of the tax – which is that of registration –, the present applicant was the owner, being, in that measure, responsible for payment of the tax.

  1. In reinforcement of the conclusion withdrawn above in 1.a), it is appropriate to determine the interpretation of art. 3 of the CIUC, in order to: i) know whether the rule of subjective incidence, contained in the said art. 3, establishes a presumption; ii) know whether, considering that this rule establishes a presumption, this violates the unity of the legal regime or disregards the systematic element and the teleological element; iii) know – admitting that the presumption exists (and that it is iuris tantum) – whether, in the case being analysed here, the rebuttal of the same has been made.

i) Article 3, nos. 1 and 2, of the CIUC, has the following wording, which is here reproduced:

"Article 3 – Subjective Incidence

1 - The subjects liable for 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.

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

The interpretation of the legal text cited is, naturally, essential for the resolution of the case being analysed. In that measure, it is necessary to resort to art. 11, no. 1, of the LGT, and, by reference to it, to art. 9 of the Civil Code (CC).

Now, in accordance with the said art. 9 of the CC, the interpretation departs from the letter of the law and aims, through it, to reconstruct the "legislative thought". That is to say (regardless of the objectivism-subjectivism dispute) that literal analysis is the basis of the interpretive task and the systematic, historical or teleological elements are guides for guidance of the said task.

The literal apprehension of the legal text in question does not generate - although the separation of this from the determination, even if minimal, of its meaning is very debatable - the notion that the expression "considered as such" means something other than "presumed as such". In fact, it would be very difficult to find authors who, in a task of pre-understanding of the said legal text, would reject, "instinctively", the identity between the two expressions.

Confirming the indistinction (both literal and in meaning) of the words "considering" and "presuming" (presumption), see, for example, the following articles of the Civil Code: 314, 369, no. 2, 374, no. 1, 376, no. 2, and 1629. And, with particular interest, the case of the expression "is considered", contained in art. 21, no. 2, of the CIRC. As noted by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, with regard to that article of the CIRC: "beyond this rule showing that what is at issue in the taxation of capital gains is to determine the real value (the market value), the limitation to the determination of the real value derived from the rules for determining the taxable value provided for in the CIS cannot fail to be considered as a presumption in the matter of incidence, whose rebuttal is permitted by article 73 of the LGT" (see General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

ii) These are just a few examples that allow us to conclude that it is precisely for reasons related to the "unity of the legal system" (the systematic element) that one cannot assert that only when the verb "presume" is used is one faced with a presumption, since the use of other terms or expressions (literally similar) can also serve as the basis for presumptions. And, among these, the expressions "is considered as" or "considering as" assume, as was seen, prominence.

If the literal analysis is only the basis of the task, it is, naturally, essential to evaluate the text in light of the other elements (or subelements of the so-called logical element). In fact, the AT also alleges that the applicant's interpretation "ignores the teleological element of interpretation of the law: the ratio of the regime established in the article in question and, likewise, throughout the CIUC".

It is therefore appropriate to ascertain whether the interpretation that considers the existence of a presumption in art. 3 of the CIUC collides with the teleological element, that is, with the purposes (or with the sociological relevance) of what was intended with the rule in question. Now, such purposes are clearly identified at the beginning of the CIUC: "The single vehicle tax complies with the principle of equivalence, seeking to burden the taxpayers in proportion to the environmental and road cost that they cause, in implementation of a general rule of tax equality" (see art. 1 of the CIUC).

What can be inferred from this article 1? It can be inferred that the close connection of IUC to the principle of equivalence (or the principle of benefit) does not allow the exclusive association of the "taxpayers" mentioned there to the figure of the owners but rather to the figure of the users (or of the economic owners). As was well noted in the Arbitral Decision delivered in process no. 73/2013-T, of 5/12/2013: "in truth, the ratio legis of the tax [IUC] rather points toward the taxation of the users of vehicles, the «economic owner» in the words of Diogo Leite de Campos, the actual owners or the financial lessees, for it is these who have the polluting potential causing the environmental costs to the community."

iii) From the foregoing it is concluded that limiting the subjects liable for this tax only to the owners of the vehicles in whose name the same are registered – ignoring the situations in which these no longer coincide with the actual owners or the actual users – constitutes a restriction which, in light of the purposes of IUC, does not find a basis for sustenance.

The registry creates, therefore, only a rebuttable presumption, that is, a presumption that can be removed by means of contrary proof (proof that the registry no longer reflects, at the moment of the tax obligation, the material truth that would have given rise to it).

It would, moreover, be unjustified to impose a kind of irrebuttable presumption, since, without an apparent reason, one would be imposing a (admittedly debatable) formal truth at the expense of what could actually be proved; and, on the other hand, be removing the AT's duty to comply with the inquisitorial principle established in art. 58 of the LGT, that is, the duty to carry out the necessary steps for a correct determination of the factual reality on which its decision must be based (which means the determination of the current and actual owner of the vehicle).

In this regard, it is also worth noting that vehicle registration does not have constitutive effect, functioning, as was said before, as a rebuttable presumption that the holder of the registry is, effectively, the owner of the vehicle. In this sense, see, e.g., the Decision of the Supreme Court of Justice of 19/2/2004, proc. 03B4639: "The registry does not have constitutive effect, as it is intended to give publicity to the registered act, functioning (only) as a mere presumption, rebuttable, (presumption «juris tantum») of the existence of the right (arts. 1, no. 1 and 7, of the CRP84 and 350, no. 2, of the C.Civil) as well as of its respective ownership, all in accordance with the terms thereof."

In the same sense, the Arbitral Decision relating to process no. 14/2013-T, of 15/10/2014, stated, in terms that we here accompany: "the essential function of the vehicle registry is to give publicity to the legal situation of the vehicles, the registry not having constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of its respective ownership, all in accordance with the terms thereof. The presumption that the registered right belongs to the person in whose name it is registered can be rebutted by contrary proof. Not meeting the AT the requirements of the notion of third party for purposes of registration [a circumstance that could prevent the full effectiveness of purchase and sale contracts celebrated], it cannot avail itself of the failure to update the registration of the property right to question the full effectiveness of the purchase and sale contract and to require the seller (previous owner) to pay the IUC due by the purchaser (new owner) as long as the presumption of respective ownership is rebutted through sufficient proof of the sale."

Now, in the case being analysed here, it is verified that the rebuttal of the presumption (by means of "sufficient proof" of the alleged transfers) was carried out by the presentation of invoices or proforma invoices (see points vi) and vii) of the proven factual matters), which demonstrate that, on the date of the tax, the applicant was no longer the owner of the vehicles (see Docs. 10, 11 and 15 to 17).

On the other hand, the Tribunal also sees no reason to question such documents (nor have elements been presented that would allow, on a well-founded basis, to doubt their truthfulness), and understands that the same constitute sufficient evidence to demonstrate that the applicant was not, on the date of the tax, the owner of the vehicles in question.

In this regard, see, for example, the Arbitral Decision delivered in the context of process no. 27/2013-T, of 10/9/2013: "the documents presented, particularly the copies of invoices that support, from the outset, the sales [of the vehicles referenced], [...] embody means of evidence with sufficient force and suitable to rebut the presumption based on the registry, as provided for in no. 1 of art. 3 of the CIUC, documents, those, which enjoy, moreover, the presumption of truthfulness provided for in no. 1 of art. 75 of the LGT."

  1. A final note to review, under the provisions of article 24, no. 5, of the RJAT, the request for payment of compensatory interest in favor of the applicant (art. 43 of the LGT and 61 of the CPPT).

In this regard, the Arbitral Decision delivered in process no. 26/2013-T, of 19/7/2013 (which dealt with a situation similar to the one now being reviewed) notes: "The right to compensatory interest referred to in the LGT rule above 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 AT services. [...] although it is acknowledged that the tax paid by the applicant is not due, since the applicant is not the subject liable for the tax obligation, determining, in consequence, the respective reimbursement, it is not seen that, at its origin, there is the error attributable to the services, which determines such right [to compensatory interest] in favor of the taxpayer. In fact, by promoting the official assessment of IUC considering the applicant as the subject liable for this tax, the AT merely complied with the rule of no. 1 of art. 3 of the CIUC, which, as abundantly stated above, imputes such quality to the persons in whose name the vehicles are registered." In the same sense, see the Arbitral Decisions delivered in processes: no. 170/2013-T, of 14/2/2014; no. 136/2014-T, of 14/7/2014; no. 230/2014-T, of 22/7/2014; and no. 140/2014-T, of 29/8/2014.

Considering the justification cited, and with which we agree, it is concluded, also in the present case, that the said request for payment of compensatory interest is unfounded.

V – Decision

In view of the foregoing, it is decided:

  • To judge partially well-founded the request for arbitral ruling, with the consequent annulment, with all legal effects, of the assessment acts relating to the 82 vehicles above identified, and the reimbursement of the respective amounts unduly paid.

  • To judge partially unfounded the request for arbitral ruling, maintaining in the legal order the tax assessment acts relating to the remaining 35 vehicles, also above identified, absolving the respondent entity of the request as to the same.

  • To judge unfounded the request for arbitral ruling regarding the recognition of the right to compensatory interest in favor of the applicant.

The value of the case is set at €14,593.42 (fourteen thousand five hundred and ninety-three euros and forty-two cents), in accordance with the provisions of art. 32 of the CPTA and art. 97-A of the CPPT, applicable by virtue of the provisions of art. 29, no. 1, paras. a) and b), of the RJAT, and art. 3, no. 2, of the Regulations for Costs in Tax Arbitration Proceedings (RCPAT).

Under the Table I attached to the RCPAT, the costs are in the amount of €918.00 (nine hundred and eighteen euros), to be paid by the applicant and the respondent in the proportion of the default, which is set at ⅓ and ⅔, respectively, in accordance with the provisions of articles 12, no. 2, and 22, no. 4, of the RJAT, and art. 4, no. 4, of the RCPAT.

Notify.

Lisbon, 27 February 2015.

The Arbitrator,

Miguel Patrício

Document drawn up by computer, in accordance with the provisions of article 131, no. 5, of the CPC, applicable by reference of art. 29, no. 1, para. e), of the RJAT.

The wording of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

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Who is liable for IUC payment on vehicles under a financial leasing agreement in Portugal?
Under Article 3(1) of the IUC Code, the person identified in the vehicle registry is presumed to be the owner and liable for IUC payment. However, this presumption is rebuttable under Article 73 of the General Tax Law. In financial leasing arrangements, while the lessor (typically a financial institution) may be the registered owner, liability can shift based on who has beneficial ownership and actual use of the vehicle. The principle of equivalence in Article 1 of the IUC Code suggests that tax should be borne by those who actually benefit from vehicle use. Therefore, depending on the leasing contract terms and evidence presented, either the lessor or lessee may be liable, with the registered owner able to rebut the presumption by demonstrating they are not the true economic beneficiary.
Can a lessee challenge IUC self-assessments through tax arbitration under the RJAT?
Yes, any party subject to IUC self-assessments can challenge them through CAAD (Centro de Arbitragem Administrativa) arbitration under the RJAT framework established by Decree-Law 10/2011 of 20 January. Process 595/2014-T demonstrates that taxpayers can file a request for constitution of an arbitral tribunal under Articles 2(1)(a) and 10(1)(a) of RJAT after exhausting administrative appeals. The arbitral tribunal has jurisdiction to declare illegality and annul IUC self-assessments, order reimbursement of unduly paid tax, and award compensatory interest. This remedy is available to registered owners, lessees, or any party with legal interest in challenging the tax assessment, regardless of their specific relationship to the vehicle.
What is the legal basis for subjective incidence of IUC in financial leasing contracts?
The subjective incidence of IUC is governed primarily by Article 3(1) of the IUC Code, which creates a legal presumption that the registered vehicle owner is the taxable person. However, Article 73 of the General Tax Law establishes that this presumption is rebuttable, not irrebuttable. The taxable event and tax exigibility rules are found in Articles 17(1) and 18(1)(a) of the IUC Code. In financial leasing contexts, while the lessor may appear in the registry, the actual tax liability depends on who has beneficial ownership and use of the vehicle, in accordance with the principle of equivalence under Article 1 of the IUC Code. Evidence showing that the lessee is the actual user and economic beneficiary can rebut the presumption and establish that the lessee, rather than the registered lessor, should bear the tax obligation.
How does the CAAD arbitral tribunal handle claims for reimbursement of unduly paid IUC and compensatory interest?
The CAAD arbitral tribunal handles reimbursement claims as part of the main arbitration proceeding under RJAT. In Process 595/2014-T, the applicant requested both annulment of IUC self-assessments and reimbursement of tax unduly paid plus compensatory interest. The tribunal evaluates the legality of the tax assessment based on documentary evidence and, when necessary, testimonial evidence, though Articles 16(c)(e) and 19(1) of RJAT allow the tribunal to dispense with witness testimony if documentary proof is sufficient. The tribunal determines whether the tax was legally due, considering whether the claimant successfully rebutted the ownership presumption through invoices, export documentation, or transfer records. If the tribunal finds the assessment illegal, it orders the Tax Authority to reimburse the amount paid with applicable compensatory interest calculated from the payment date.
What constitutes illegal accumulation of claims (cumulação ilegal de pedidos) in Portuguese tax arbitration proceedings?
Illegal accumulation of claims (cumulação ilegal de pedidos) in Portuguese tax arbitration occurs when incompatible claims are joined in a single proceeding or when procedural requirements for joinder are not met. In Process 595/2014-T, the Tax Authority raised this exception, though the specific grounds are not detailed in the excerpt. Under Article 18(1)(b) of RJAT, the opposing party must respond to exceptions raised. The tribunal has discretion under Articles 16 and 19 of RJAT to decide whether a hearing under Article 18 is necessary to resolve procedural exceptions. In this case, after the applicant responded to the exception, the tribunal found it dispensable to hold a meeting, suggesting that written submissions were sufficient. The exception may arise when a claimant attempts to join multiple tax years, different tax types, or substantive and procedural claims that should be addressed separately under arbitration rules.