Process: 600/2016-T

Date: December 10, 2019

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 600/2016-T), reformed in December 2019 for manifest error, addresses IUC (Imposto Único de Circulação - Portuguese road circulation tax) liability in vehicle leasing contexts. The central issue concerned whether vehicle ownership registration creates an irrebuttable presumption of tax liability or can be challenged through proof of leasing arrangements. The Tax Authority (AT) argued that registered ownership definitively determines the IUC taxpayer. The tribunal concluded that Article 3(1) of the IUC Code establishes an implicit legal presumption (juris tantum) linking tax liability to registered ownership, which aligns with Article 73 of the General Tax Law (LGT) stating that presumptions in tax incidence always admit contrary proof. However, the claimant failed to provide sufficient legal evidence to rebut this presumption. The AT successfully challenged the invoices and documents presented as proof of vehicle sale/leasing. Under Article 347 of the Civil Code, full legal proof is required to contradict a legal presumption. The decision emphasizes that while registration creates only a declarative (not constitutive) effect on ownership, taxpayers bear the burden of proving they were not the actual owners on IUC liability dates through robust documentation, which was not achieved in this case.

Full Decision

ical reasons of interpretation of the law, appealing not only to its literality, but also to the systematic and teleological elements.

Invocation full of meaning, insofar as, in accordance with the provision in Article 11º of the LGT, "in determining the meaning of tax rules and in qualifying the facts to which they apply, the general rules and principles of interpretation and application of laws are observed." As referred to by Diogo Leite Campos, Benjamim Rodrigues, J. Lopes de Sousa – LGT 4th ed., in annotation to that article, "... without departing from the letter of the law, which must be the principal reference and starting point for the interpreter, its automatic application is excluded, supposing that in laws there is an operating rationality which the interpreter should strive to reconstruct."

It is, thus, within this framework of interpretation of tax law, in this case Article 3º, No. 1 of the CIUC, that we must find the answer to the antagonism of positions between the claimant and the AT.

For the AT what is decisive for the determination of the tax subject of IUC is the ownership registration of the motor vehicle, so that he will be considered as such, in an irreversible manner, the one in whose name it is registered.

The registration of motor vehicle ownership is, in view of the provision in Article 5º, No. 1, a) and No. 2 of DL 54/75, of 12 February, mandatory, whereby any ownership right that affects the vehicle is subject to registration, with which it is intended to ensure the security of legal commerce, as well as the publicity of the legal situation thereof.

Such registration enjoys, under the terms of the provision in Article 7º of the Property Registration Code (applicable to motor vehicle registration by virtue of Article 29º of the aforementioned DL 54/75), the "... presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it."

We have, therefore, that the entry of motor vehicle ownership registration is, also it, a presumption that the ownership right over it exists in the terms contained in the registration.

That is to say, motor vehicle ownership registration does not constitute any condition of validity of the contracts subject to it, similarly to what occurs with land registration (whose regime, as we have already pointed out, is extensive to motor vehicle registration); registration has a merely declarative function.

However, Article 5º, No. 1 of the Property Registration Code imposes that "the facts subject to registration only produce effect against third parties after the date of their respective registration." From which it seems to result that such would be sufficient for the AT to invoke the absence of registration to immediately make Article 3º, No. 1 of the CIUC operative, demanding payment of the tax from the one in whose name the vehicle is registered, by being the tax subject.

It happens that No. 4 of Article 5º of the Property Registration Code restricts this understanding, by determining that "third parties, for registration purposes, are those who have acquired from a common author rights incompatible with each other." Wherefrom it results that, in this way, the AT would never be enabled to invoke the lack of registration, insofar as it does not meet the concept of third party.

Setting this forth in general terms, it must be determined whether, despite what has just been said, No. 1 of Article 3º of the CIUC contains, or does not contain, a legal presumption.

Everything rests, in summary, on determining whether the expression "being considered," used there, has the nature of a legal presumption.

It seems more or less evident that, whether from the systematic or teleological point of view, the expression "being considered," adopted in No. 1 of Article 3º of the CIUC contemplates a true presumption, with the apparent literality of the expression not opposing this, nor the tax system.

In this regard, Diogo Leite Campos, Benjamim Rodrigues, J. Lopes de Sousa – LGT 4th ed., in annotation to Article 73º, page 651, refer: "presumptions in matters of tax incidence can be explicit, revealed by the use of the expression 'it is presumed' or similar, as occurs, for example, in Nos. 1 to 5 of Article 6º, in paragraph a) of No. 3 of Article 10º, in Articles 19º and 40º, No. 1, of the CIRS. However, presumptions can also be implicit in rules of incidence, designedly of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations in which it is not impossible to ascertain the actual value...", enumerating thereafter a set of examples.

We understand that it is precisely that the case contemplated by Article 3º, No. 1 of the CIUC: an implicit presumption, in this case, a presumption of subjective incidence. A presumption, moreover, which has always existed in the domain of the motor vehicle circulation tax, albeit previously defined in explicit form.

Now, No. 2 of Article 350º of the Civil Code establishes that legal presumptions can be rebutted by means of proof to the contrary, except in cases expressly provided for in the law.

And, as regards the rebuttal of presumptions, we hold to be good the doctrine to which the STJ had recourse in the basis of Assento no. 1/91 of 03-04-1991 (DR no. 114, of 18 May) - to classify as juris tantum a presumption established in a labor code - defended by Vaz Serra [Proofs (material probatory law), BMJ 110-112, page 35], as well as by Mário de Brito (Annotated Civil Code, page 466) and Mota Pinto (General Theory of Civil Law, page 429): "... presumptions juris tantum constitute the rule, with presumptions jure et de jure being the exception. In doubt, the legal presumption is juris tantum, as it should not be considered, save reference by the law, that it was intended to prevent the production of contrary proof, imposing a formal truth to the detriment of what was actually proven."

For its part, within the scope of tax law, Article 73º of the LGT provides that "the presumptions enshrined in the rules of tax incidence always admit proof to the contrary." Which means that all presumptions in matters of tax incidence, such as that which No. 1 of Article 3º of the CIUC establishes, are juris tantum and, as such, rebuttable.

Indeed, as regards IUC, it would seem offensive to the unity of the legal-legal system – and even, with proper adjustments, in opposition to Nos. 2 and 3 of Article 11º of the LGT - that an individual should be considered as not the owner of a good for civil purposes and necessarily have to be so for tax purposes.

In this way, let us see, then, whether, in the case in question, the claimant managed to prove that it was not the owner of the vehicles to which the assessments in question refer, on the limit dates of their respective payments.

The answer is negative.

The Respondent challenges, as a guiding principle, that invoices evidencing sale and purchase contracts be fit to prove the effective transmission of vehicle ownership and, more than that, it impugned all documents – specifically invoices - joined by the Claimant.

It is known that Article 342º, No. 1 of the Civil Code establishes as a general probative rule that "it is incumbent on the one who invokes a right to prove the constitutive facts of the right alleged."

Now, as follows from what has been said above, we start here from a legal presumption (that which is established by Article 3º, No. 1 of the CIUC) which, as was concluded, is rebuttable. The rebuttal of the legal presumption is governed by the provision in Article 347º of the same CC, when it imposes that "full legal proof can only be contradicted by means of proof that shows the fact of which it is the object is not true."

For its part, as regards counter-proof, it results from Article 346º of the same code that if the opposing party manages to cast doubt on the facts as to which proof was presented, "the matter is decided against the party burdened with proof."

Concatenating the invoices joined to the case with the testimonies given by the witnesses, serious doubts remain as to the actual transmission of the vehicles to which the impugned assessments refer, on the dates of their respective exigibilities. Indeed, both witnesses were coincident and uniform in the sense that the invoices in question were issued automatically under the terms of the active contracts to which payment of the same succeeded, not being able to confirm whether the same were actually paid, which would be determinative to ascertain the transmission of ownership of the motor vehicles.

Thus, albeit we are inclined, in theory, to admit that sales invoices can constitute an apt means of proof (as we have already considered in other arbitral decisions), given the insufficient proof produced, we must consider as unproven the transmission of vehicles alleged by the Claimant. A conclusion which rests on the principle of freedom in the assessment of evidence on which the tribunal bases its conviction, formed from the examination and evaluation of the means of proof contained in the case file (Article 607º, No. 5 of the CPC).

That is, the Claimant did not manage to prove – either documentary or testimonial – that, having ended such contracts, it had already sold them to third parties.

In this way, not having the Claimant managed to overturn the legal presumption of subjective incidence of IUC that weighs upon it, in view of the provision in Article 3º, No. 1 of the CIUC, necessarily its claim fails, insofar as no judgment of censure can be pointed at the impugned assessments.

IV. DECISION

In view of the foregoing, the Arbitral Tribunal decides as follows:

a) To judge totally improcedent the petition for annulment of the tax acts which are the object of the arbitral claim, as well as of the dismissal of the administrative claim presented;

b) To condemn the claimant to payment of the case costs.

V. VALUE OF THE CASE

The value of the case is fixed at €24,535.19, under the terms of Article 97º-A, No. 1, a), of the Tax Procedure and Process Code, applicable by virtue of paragraphs a) and b) of No. 1 of Article 29º of the Legal Framework for Tax Arbitration and No. 2 of Article 3º of the Regulation of Costs in Tax Arbitration Proceedings.

VI. COSTS

The value of the arbitration fee is fixed at €1,530.00, under the terms of Table I of the Regulation of Costs in Tax Arbitration Proceedings, under the terms of Articles 12º, No. 2, and 22º, No. 4, both of the Legal Framework for Tax Arbitration, and Article 4º, No. 4, of the aforementioned Regulation.

Notify the parties.

Lisbon, 18 August 2017

The Arbitrator

(António Alberto Franco)

Frequently Asked Questions

Automatically Created

What is the IUC (Imposto Único de Circulação) and who is liable for it on leased vehicles in Portugal?
The IUC (Imposto Único de Circulação) is Portugal's annual road circulation tax levied on motor vehicles. For leased vehicles, Article 3(1) of the IUC Code creates a legal presumption that the registered owner is liable. However, this is a rebuttable presumption (juris tantum) under Article 73 of the LGT. In leasing arrangements, the actual lessee or lessor could be liable if they provide full legal proof demonstrating the vehicle ownership situation at the tax liability date, overcoming the registration presumption. The burden of proof rests entirely on the party challenging registered ownership.
Under what conditions can an arbitral tax decision be reformed for manifest error under Article 616(2) of the Portuguese CPC?
Under Article 616(2) of the Portuguese Code of Civil Procedure (CPC), arbitral tax decisions can be reformed for 'manifesto lapso' (manifest error), which includes clear calculation mistakes, material errors, omissions, or internal contradictions evident from the decision itself. The error must be objectively obvious and not require re-evaluation of facts or legal interpretation. This reformation mechanism allows correction of clerical or computational errors without reopening substantive issues. In Process 600/2016-T, the December 2019 decision reformed the August 2017 ruling specifically to correct such manifest error, substituting the original decision entirely.
Can CAAD arbitral decisions in tax matters be appealed or only reformed under Portuguese law?
CAAD (Centro de Arbitragem Administrativa) arbitral decisions in tax matters are generally final and not subject to ordinary appeal. Portuguese law establishes tax arbitration as a swift, definitive alternative to judicial proceedings. However, these decisions can be reformed under CPC Article 616 for manifest errors (calculation mistakes, contradictions, material errors). Annulment may be sought in exceptional circumstances for procedural violations or excess of powers. The arbitral system intentionally limits post-decision challenges to ensure efficiency and finality, distinguishing it from traditional court judgments which typically allow broader appellate review.
How does proof of active financial leasing contracts affect IUC tax liability on motor vehicles?
Proof of active financial leasing contracts can rebut the legal presumption that the registered vehicle owner is liable for IUC, but only if the taxpayer provides full legal proof under Article 347 of the Civil Code. This requires documentation conclusively demonstrating that ownership had transferred or that a leasing arrangement was in force on the specific IUC liability date. In Process 600/2016-T, the Tax Authority successfully challenged the invoices presented as insufficient proof. Mere commercial invoices or unverified contracts may not constitute the 'full legal proof' necessary to overcome the registration presumption, particularly when the opposing party impugns their authenticity or probative value.
What happens when a taxpayer fails to prove that vehicle leasing contracts were in force at the date of IUC tax liability?
When a taxpayer fails to prove that vehicle leasing contracts were active on the IUC tax liability date, the legal presumption established by vehicle registration remains in force. The registered owner continues to be considered the IUC taxpayer under Article 3(1) of the IUC Code. In Process 600/2016-T, the claimant's failure to provide sufficient evidence meant the tax assessments stood. The burden of proof rests on the party challenging registered ownership, and unsuccessful rebuttal results in tax liability attaching to the registration holder, regardless of claimed leasing arrangements. This protects tax collection certainty while requiring diligent documentation from those claiming alternative ownership structures.