Process: 62/2015-T

Date: October 14, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This Portuguese tax arbitration case addresses IUC (Imposto Único de Circulação - Single Vehicle Circulation Tax) liability for financial leasing companies, focusing on vehicles sold before tax maturity dates and vehicles under active leasing contracts, alongside procedural issues of claim extension (ampliação do pedido) and statute of limitations (caducidade). A financial institution challenged €6,573.90 in IUC assessments for 2013-2014 covering 43 vehicles: 25 sold before the IUC maturity date and 18 under active leasing contracts. The claimant argued that Article 3 of the IUC Code establishes a rebuttable presumption making actual owners (buyers) liable for sold vehicles, and financial lessees (not lessors) liable for leased vehicles under Article 3(2) SCVT. The Tax Authority countered that Article 3(1) creates an irrebuttable rule - registered owners are definitively "considered to be" proprietors, not merely "presumed to be." The Authority emphasized it cannot assess tax based on non-registered elements, that registry update obligations fall on taxpayers under Article 42 of Motor Vehicle Registry Regulations, and that the claimant's invoices were insufficient unilateral proof. For leased vehicles, the Authority argued the claimant failed to demonstrate compliance with Article 19 SCVT ancillary obligations. Procedurally, the Tax Authority invoked caducidade, arguing the arbitration request filed 3 February 2015 exceeded the 90-day deadline under Article 10(1)(a) LRTAT running from the 18 July 2014 voluntary payment deadline. The claimant countered the deadline runs from notification of its dismissed plea in equity (3 December 2014), making filing timely. Subsidiarily, it requested ampliação do pedido to include the dismissal decision. The tribunal confirmed its proper constitution and material competence, though the excerpt does not reveal the final ruling on lapse or substantive liability issues.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, S.A., a company with registered office at Building …, Avenue …, lot …, … floor, Lisbon, holder of the single registration and identification number for legal persons …, hereinafter simply designated as the Claimant, filed a request for the establishment of an arbitral tribunal in tax matters and a request for arbitral pronouncement, pursuant to the provisions of paragraph a) of section 1 of Article 2 and paragraph a) of section 1 of Article 10, both of Decree-Law no. 10/2011, of 20 January (Legal Regime of Arbitration in Tax Matters, hereinafter abbreviated as LRTAT), petitioning for the annulment of the acts assessing the Single Vehicle Circulation Tax (SVC) and respective compensatory interest identified in the Table attached to the initial request, relating to the fiscal years 2013 and 2014, in the total amount of € 6,573.90, as well as the condemnation of the TA to reimburse the amount paid, increased by indemnity interest.

To support its request, it alleges, in summary:

a) The Claimant is a financial credit institution that pursues its activity in the automotive financing branch;

b) In the scope of its activity, the Claimant grants loans for the acquisition of vehicles or enters into financial leasing contracts;

c) The Claimant was notified of various assessments of SVC on the vehicles related to the aforementioned activity;

d) The SVC assessment acts challenged concern vehicles already sold by the Claimant and vehicles whose leasing contract remained in force;

e) Of the total assessments challenged, twenty-five correspond to vehicles that were sold by the Claimant on a date prior to the SVC maturity date;

f) Pursuant to the combined provisions of section 3 of Article 6 and section 2 of Article 4, both of the SCVT, the tax is considered due to the proprietor on the first day of the taxation period of the vehicle, that is, on the date of registration;

g) On the maturity date of the SVC in question in the present proceedings, the Claimant was no longer the proprietor of the vehicles in question, wherefore the taxpayer in respect of the tax should be the new proprietor of each vehicle;

h) Even if the transfer of the proprietorship of the vehicles was not registered by the acquirers of the vehicles, this does not prevent the SVC from applying to the actual proprietors of the vehicles;

i) Pursuant to Article 3 of the SCVT, the taxpayers in respect of the tax are the proprietors of the vehicles, being considered as such the persons in whose names the same are registered;

j) Section 1 of Article 3 of the SCVT contains a rebuttable presumption;

k) The remaining 18 assessments challenged concern vehicles that, on the date of the tax event, were subject to leasing;

l) Pursuant to section 2 of Article 3 of the SCVT, "financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are treated as proprietors";

m) From the foregoing it follows that, should the vehicle have been subject to leasing, the taxpayer in respect of the tax should be the financial lessee;

n) The assessments that are the subject of the request for arbitral pronouncement should not be attributed to the Claimant, and are thus illegal.

The Claimant submitted 30 documents and did not call any witnesses.

In the request for arbitral pronouncement, the Claimant opted not to appoint an arbitrator, wherefore, pursuant to the provisions of Article 6, section 1 of the LRTAT, the undersigned was appointed by the Deontological Council of the Centre for Administrative Arbitration, the appointment being accepted as legally provided.

The arbitral tribunal was constituted on 17 April 2015.

Notified pursuant to and for the purposes of the provisions of Article 17 of the LRTAT, the Respondent submitted its reply, alleging, in summary, the following:

a) The legislator expressly and intentionally established that the taxpayers in respect of the SVC are the proprietors, being considered as such the persons in whose names the vehicles are registered;

b) Article 3 of the SCVT does not establish any presumption of ownership – the legislator does not say that they are presumed to be proprietors, but rather that they are considered to be proprietors;

c) The failure to register the changes of ownership in the registry has the consequence that the obligation to pay the SVC falls upon the registered proprietor, and the TA cannot assess the tax on the basis of elements not registered;

d) The SVC is due by the persons registered as proprietors of the vehicles;

e) In the absence of updating of the registry, the registered proprietor shall be notified to comply with the corresponding tax obligation, the TA not being required to assess tax on the basis of elements not appearing in the registry;

f) The failure to update the registry shall be imputable in the legal sphere of the taxpayer in respect of the SVC and not in that of the State – cf. Article 42 of the Motor Vehicle Registry Regulations;

g) The invoices submitted by the Claimant are not suitable to prove the conclusion of the sales and purchase contract, as they are documents unilaterally issued;

h) The Claimant did not prove receipt of the price nor submitted copies of the official form for registration of motor vehicle ownership;

i) Even if the vehicles in question were subject to financial leasing contracts, it was the responsibility of the Claimant to demonstrate having complied with the ancillary obligation imposed by Article 19 of the SCVT;

j) The failure to comply with the obligation to update the registries places upon the Claimant the responsibility for the arbitration costs.

The Respondent submitted one document, a copy of the administrative file, and did not call any witnesses.

Following notification for that purpose, the Claimant submitted to the proceedings the SVC assessments challenged, in which appears the payment of the respective tax.

In light of the submission of these documents, the TA, by request submitted on 05/08/2015, invoked the exception of lapse of the right of arbitral action, founded on the following:

a) The immediate object of the proceeding should be the dismissal of the plea in equity presented by the Claimant, dismissed by decision notified on 3/12/2014;

b) Notwithstanding, the object of the request for arbitral pronouncement is the SVC assessment acts and not the decision dismissing the plea in equity;

c) Pursuant to the provisions of paragraph a) of section 1 of Article 10 of the LRTAT, the request for establishment of the arbitral tribunal should have been submitted within 90 days from the expiry of the period for voluntary payment;

d) The deadline for payment of the SVC assessment notices challenged was 18 July 2014;

e) On the date of submission of the request for establishment of the arbitral tribunal – 03/02/2015 – the legally defined period for challenging in arbitration had already been exceeded;

f) The request for arbitral pronouncement should be declared inadmissible as untimely.

In response to the exception raised by the TA, the Claimant alleged that the request for arbitral pronouncement is timely, as it was submitted within 90 days from the date of notification of the decision dismissing the plea in equity.

Subsidiarily, in the event that this should not be understood as such, it requested the extension of the object of the request for arbitral pronouncement, so that it should expressly include the request for annulment of the decision dismissing the plea in equity presented.

In view of the position taken by the parties and there being no need for the holding of the meeting referred to in Article 18 of the LRTAT, the same was dispensed with, and the parties submitted written submissions, in which they maintained the positions initially defended.

II. PROCEDURAL SANCTION

The Arbitral Tribunal is regularly constituted and is materially competent.

The parties have legal capacity and standing, are legitimate, and are regularly represented.

The proceeding does not suffer from defects affecting its validity.

III. ISSUES TO BE DECIDED

In view of the positions taken by the Parties, set forth in the arguments advanced, it is necessary:

a. To determine the admissibility of the requested extension of the object of the request for arbitral pronouncement;

b. To determine the exception of lapse of the right of arbitral action invoked by the TA; and

c. To ascertain who is the taxpayer in respect of the SVC when, on the date of the occurrence of the tax event, the motor vehicles have been alienated or have been subject to financial leasing.

IV. FACTUAL MATTER

a. Facts Proven

With relevance for the decision to be rendered in the present proceedings, the following facts were proven:

  1. The Claimant was notified of 43 SVC assessments and respective compensatory interest relating to the fiscal years 2013 and 2014, concerning the vehicles identified in the Table attached to the initial request, which is here deemed fully reproduced, in the total amount of € 6,573.90;

  2. The deadline for payment of the SVC and respective compensatory interest was 18/07/2014;

  3. The Claimant presented a plea in equity against each of the SVC assessments on 17/10/2014;

  4. To the various pleas in equity presented was attributed the number … 2014 …;

  5. By official communication dated 06/11/2014, the Claimant was notified to exercise the right of prior hearing, with respect to the draft decision rendered on the plea in equity no. … 2014 …;

  6. On 03/12/2014, the Claimant was notified of the decision dismissing the plea in equity presented;

  7. The request for establishment of the arbitral tribunal in tax matters and request for arbitral pronouncement was submitted on 03/02/2015;

  8. None of the 30 vehicles to which the assessments now in question refer belong to categories F or G, referred to in Article 4 of the SCVT;

  9. On the date of the tax event, the Claimant had issued invoices of sale of the vehicles with registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-..., …-…-…, …-…-…, ...-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…,...-…-…, …-…-…, …-…-… and …-…-…;

  10. The Claimant entered into financial leasing contracts concerning the vehicles with registration numbers …-…-…,. ..-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-…;

  11. The Claimant paid the taxes and compensatory interest assessed by the Respondent and reflected in the assessments now challenged, in the total amount of € 6,573.90.

b. Facts Not Proven

With relevance for the decision, it was not proven that an invoice of sale of the vehicle with registration number …-…-.. was issued by the Claimant on a date prior to the date of the tax event, nor that on that date the vehicles with registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… were subject to financial leasing.

c. Grounds for the Factual Matter

The conviction regarding the facts deemed proven was formed on the basis of the documentary evidence submitted by the Claimant, indicated with respect to each of the points, and whose conformity with reality was not questioned, as well as the matter alleged and not contested appearing in the requests submitted to the proceedings.

With respect to the factual matter not proven, the same was based on the complete absence of evidence in that regard.

V. ON THE LAW

a. On the Admissibility of the Requested Extension of the Object of the Request for Arbitral Pronouncement:

In response to the exception of lapse of the arbitral action invoked by the TA, the Claimant petitioned for the extension of the object of the request for arbitral pronouncement, so that it should expressly include the request for annulment of the decision dismissing the plea in equity presented.

Thus, it is necessary to determine:

Pursuant to the provisions of section 2 of Article 265 of the Code of Civil Procedure, applicable ex vi paragraph e) of section 1 of Article 29 of the LRTAT, "the plaintiff may, at any time, reduce the claim and may extend it until the close of discussion in first instance if the extension is the development or consequence of the original claim."

In the present case, it is verified that the extension of the object of the request for arbitral pronouncement was petitioned by the Claimant until the close of discussion in first instance, in that it occurred prior to the dispensation of the meeting referred to in Article 18 of the LRTAT and, consequently, prior to the submission of final submissions.

Indeed, the last possible moment to permit any extension of the claim is that of the final hearing, wherefore, having the request for extension been formulated prior to the meeting referred to in Article 18 of the LRTAT, it appears clear that it meets the temporal requirements provided for in Article 265, section 2 of the Code of Civil Procedure.

Accordingly, it is verified that the request for arbitral pronouncement was timely formulated by the Claimant.

Let us see, however, whether the same should be judged procedurally admissible, in light of the legally established prerequisites for that purpose, in particular in light of the provisions of section 2 of Article 265 of the Code of Civil Procedure, as constituting the development or consequence of the original claim.

Now, "as Professor Castro Mendes stated, in Civil Procedural Law, 1980, vol. II, p. 347, for there to be an extension of the claim in development or as a consequence of the original claim, there must be a common origin, that is, the same basis of claim or for both bases of claim to be integrated in the same complex of facts"[1].

The issue to be decided is thus reduced to knowing whether the requests for revocation of the decision dismissing the plea in equity and for challenging the assessments have the same basis of claim or whether both bases of claim are integrated in the same complex of facts.

Now the answer to this question cannot be other than in the negative.

Indeed, the basis of claim underlying the request for revocation of the decision dismissing the plea in equity is the plea in equity itself, whereas the basis of claim underlying the request for challenging the tax assessment acts are these tax acts themselves.

In the same way, and for the same reasons, it does not appear that both bases of claim can be integrated in the same complex of facts.

For this purpose, it is necessary to distinguish here between the immediate object of the proceeding and the mediate object, knowing that the latter is integrated in the former.

In the case of a challenge aimed at the declaration of illegality of the decision dismissing the plea in equity (immediate object), it is verified that its declaration necessarily determines the declaration of illegality of the tax assessment act (mediate object).

But the converse proposition is not true, in that the challenge aimed at the declaration of illegality of the tax assessment act (immediate object) does not have as its consequence the annulment of the decision dismissing the plea in equity (mediate object).

This is because, as the plea in equity has as its object the assessment, the annulment of the former determines as a logical corollary the annulment of the assessment which serves as its basis.

On the other hand, the assessment does not have as its object the plea in equity, wherefore it could never be maintained that the annulment of the assessment would determine the annulment of the dismissal of the plea in equity.

In these terms, it cannot be maintained that the annulment of the decision dismissing the plea in equity constitutes the development or consequence of the original claim formulated in the present proceedings, that is, of the request for annulment of the assessments.

Wherefore it is verified that the requested extension of the claim formulated by the Claimant is inadmissible.

b. On the Exception of Lapse of the Right of Arbitral Action:

Established that the extension of the claim is inadmissible, let us see whether the invoked lapse of the right of arbitral action formulated by the TA is verified.

In this regard, the TA invokes that, having the Claimant limited itself to challenging solely and exclusively the SVC assessment acts and not the decision dismissing the plea in equity, the request for arbitral pronouncement is untimely, inasmuch as it was submitted already after the expiry of the 90-day period legally provided for that purpose counted from the expiry of the period for voluntary payment of the assessments challenged.

In reply to the exception raised, the Claimant contended, invoking that, having been notified of the decision dismissing the plea in equity presented, it is this moment from which the 90-day period for submission of the request for arbitral pronouncement begins to run.

It is necessary to decide:

As it appears from the initial request submitted, the Claimant petitions for the annulment of the assessment of the SVC and compensatory interest, saying nothing in relation to the annulment of the decision dismissing the plea in equity.

It results from the facts proven – cf. point 2 – that the deadline for payment of the SVC and compensatory interest was 18/07/2014.

For its part, it is proven that the Claimant submitted the request for establishment of the arbitral tribunal on 03/02/2015 – cf. point 6.

Pursuant to the provisions of Article 10, section 1 of the LRTAT, the period for submission of the request for establishment of the arbitral tribunal is 90 days, calculated from the facts provided for in sections 1 and 2 of Article 102 of the CTPT, among which is included the expiry of the period for voluntary payment of the tax obligations legally notified to the taxpayer.

Wherefore it is verified that, having the Claimant confined its request to the annulment of the tax assessment acts of SVC and compensatory interest, it had for that purpose a period of 90 days calculated from the deadline for voluntary payment of those assessments.

A period which, on the date of submission of the request for establishment of the arbitral tribunal, had already been exceeded.

Having the respective period been exceeded, the right of the Claimant to challenge by means of the submission of the request for establishment of the arbitral tribunal the assessments in question has lapsed.

Wherefore the invoked exception of lapse of the right of action of the Claimant is upheld, and the examination of the merits is thus prejudiced.

VI. OPERATIVE PART:

In view of the foregoing, it is decided:

a) to uphold the exception of lapse of the right of arbitral action and, by virtue thereof,

b) to dismiss the claim.

The amount of the case is fixed at € 6,573.90, pursuant to paragraph a) of section 1 of Article 97-A of the Tax Procedural and Process Code, applicable by virtue of paragraphs a) and b) of section 1 of Article 29 of the LRTAT and section 2 of Article 3 of the Regulations on Costs in Tax Arbitration Proceedings.

The amount of the arbitration fee is fixed at € 612.00, pursuant to Table I of the Regulations on Costs in Tax Arbitration Proceedings, as well as the provisions of section 2 of Article 12 and section 4 of Article 22, both of the LRTAT, and section 3 of Article 4 of the aforementioned Regulations, to be paid by the Claimant, as the defeated party.

Register and notify.

Lisbon, 14 October 2015.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, pursuant to section 5 of Article 131 of the Code of Civil Procedure, applicable by reference of paragraph e) of section 1 of Decree-Law no. 10/2011, of 20/01.

[1] In Judgment of the Court of Appeal of Lisbon, case no. 5202/2007-1, of 06JUN2007, available at www.dgsi.pt.

Frequently Asked Questions

Automatically Created

Who is liable for IUC tax on vehicles sold before the tax due date under Portuguese law?
Under Article 3(1) of the IUC Code (SCVT), registered owners are liable for IUC tax. The Tax Authority maintains this creates an irrebuttable rule making the registered owner liable regardless of actual ownership transfers, while financial institutions argue it establishes a rebuttable presumption. When vehicles are sold before the IUC maturity date (the first day of the taxation period per Article 6(3) SCVT), the Tax Authority contends liability remains with the registered owner until the vehicle registry is officially updated. The Tax Authority argues it cannot assess tax based on non-registered elements and that Article 42 of the Motor Vehicle Registry Regulations places the burden of updating registries on taxpayers, not the State. Therefore, even if a vehicle is sold before the tax due date, the registered owner remains liable unless proper registry transfers are completed. Invoices and sales documentation alone are considered insufficient unilateral evidence to shift tax liability.
Can the registered owner presumption under Article 3 of the IUC Code be rebutted by financial leasing companies?
This is a central legal dispute in Portuguese tax law. Financial leasing companies argue that Article 3(1) of the IUC Code creates a rebuttable presumption of ownership that can be overcome by proving actual ownership has transferred. However, the Tax Authority strongly contests this interpretation, arguing the provision does not establish a presumption but rather a definitive legal rule. The Tax Authority emphasizes critical legislative language: the law states registered owners "are considered to be" (são havidos como) proprietors, not that they "are presumed to be" owners. This distinction is legally significant because it makes registration determinative rather than merely evidential. Under the Tax Authority's interpretation, the registered owner presumption cannot be rebutted by financial leasing companies or other parties - registration is conclusive for IUC purposes. The Tax Authority further argues it is legally unable to assess tax based on unregistered ownership information, and that the legislative framework deliberately places registry update obligations on taxpayers.
What are the rules for extending arbitral claims (ampliação do pedido) in Portuguese tax arbitration proceedings?
Portuguese tax arbitration law permits ampliação do pedido (extension of arbitral claims) as a procedural mechanism allowing parties to broaden the scope of their claims during proceedings. In this case, when the Tax Authority raised a statute of limitations defense (caducidade), the claimant subsidiarily requested to extend the object of the arbitral claim to expressly include the administrative decision dismissing their plea in equity, in addition to the original IUC assessment acts. This strategic procedural move attempted to cure potential defects by ensuring both the underlying tax assessments and the administrative dismissal decision were properly before the tribunal. The extension request demonstrates the flexibility within the LRJAT (Legal Regime of Arbitration in Tax Matters) framework, allowing parties to adapt their claims in response to defenses raised. However, such extensions must be requested timely and are subject to tribunal discretion and applicable procedural rules governing the scope and timing of claim modifications during arbitral proceedings.
When does the right to file a tax arbitration action expire (caducidade) under the RJAT framework?
Under Article 10(1)(a) of the LRJAT (Legal Regime of Arbitration in Tax Matters), taxpayers must file arbitration requests within 90 days from the expiry of the voluntary payment period. This deadline is strict, and failure to comply results in caducidade (lapse of the right to arbitral action). In this case, the voluntary payment deadline was 18 July 2014, meaning the 90-day arbitration filing period would expire in mid-October 2014. The claimant filed on 3 February 2015, well beyond this deadline. However, a critical question arose: does filing an administrative remedy (such as a plea in equity) interrupt, suspend, or reset the arbitration deadline? The claimant argued the 90-day period should run from notification of the decision dismissing their plea in equity (3 December 2014), which would make the filing timely. The Tax Authority rejected this, maintaining the statutory 90-day period runs exclusively from the voluntary payment deadline regardless of intervening administrative proceedings. This raises important questions about whether taxpayers must choose between administrative and arbitral remedies within the original deadline or whether administrative procedures can extend arbitration filing timeframes.
Are financial leasing companies subject to IUC on vehicles held under active leasing contracts?
Article 3(2) of the IUC Code (SCVT) states that "financial lessees, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract are treated as proprietors" for IUC purposes. Financial leasing companies argue this provision makes the financial lessee (the customer using the vehicle), not the financial lessor (the leasing company providing financing), liable for IUC on vehicles under active leasing contracts. Therefore, lessors contend they should not be subject to IUC assessments on leased vehicles. However, the Tax Authority counters with two arguments: first, even if this interpretation is correct, leasing companies must demonstrate compliance with Article 19 of the SCVT, which imposes ancillary obligations regarding notification and proper registration of leasing arrangements. Second, the Tax Authority argues that failure to ensure proper registry updates showing the lessee as the responsible party means liability remains with the registered owner (the lessor) under Article 3(1). Thus, while the law may contemplate lessee liability, practical compliance with registration and notification requirements determines actual tax responsibility.