Process: 624/2014-T

Date: March 2, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (624/2014-T) addresses who bears IUC liability when a vehicle is sold but registration remains unchanged. The claimant challenged IUC assessments for 2009-2011 (€1,561.34) after allegedly selling the vehicle in September 2008 to B… Lda., which resold it to a Bolivian citizen. The central legal dispute concerns whether Article 3(1) of the IUC Code establishes a rebuttable presumption (juris tantum) or an irrebuttable legal determination that the registered owner is the taxpayer. The claimant argued the presumption can be rebutted under Article 73 of the General Tax Law and Article 350(2) of the Civil Code through proof of sale (invoices, contracts). He invoked constitutional violations under Articles 9(b), 12(1), 13, 22, and 62(1) of the Portuguese Constitution, arguing that taxing a non-owner violates fundamental rights and legal certainty. The Tax Authority countered that Article 3 contains no presumption but an express legislative choice to base IUC liability on motor vehicle registration for administrative efficiency and legal certainty. The AT argued that challenges to registered ownership must proceed through the motor vehicle registry system, not tax arbitration. The AT further contended that accepting the claimant's interpretation would undermine the entire IUC system's coherence and violate constitutional principles of confidence, legal certainty, efficiency, and proportionality. The case illustrates the tension between civil law property concepts and tax law's administrative reliance on public registries, raising fundamental questions about the nature of tax liability when formal registration diverges from economic reality.

Full Decision

ARBITRATION DECISION

Case no. 624/2014-T

I – Report

1.1. A…, NIF …, resident at Rua …, municipality of Guimarães (hereinafter referred to only as "claimant"), having been notified of the vehicle circulation tax (IUC) assessment acts relating to the years 2009, 2010 and 2011, in the total amount of €1561.34 (€1401.00 + interest), filed, on 21/8/2014, a petition for constitution of an arbitral tribunal and for arbitral determination, in accordance with the provisions of Article 10, no. 1, letter a), of Decree-Law no. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), in which the Tax and Customs Authority (AT) is required, with a view to the "declaration of illegality, and consequent annulment, of the tax assessment acts for the IUC" referred to above.

1.2. On 18/11/2014 the present Sole Arbitral Tribunal was constituted.

1.3. In accordance with Article 17, no. 1, of the RJAT, the AT was cited, as the respondent party, to submit a reply, in accordance with the said article. The AT submitted its reply on 5/1/2015, having argued in favour of the total lack of merit of the claimant's petition.

1.4. By order of 6/2/2015, the Tribunal considered, in accordance with Article 16, letters c) and e), of the RJAT, that the meeting provided for in Article 18 of the RJAT was dispensable and that the case was ready for decision. The date of 2/3/2015 was also fixed for the pronouncement of the arbitral decision.

1.5. The Arbitral Tribunal was regularly constituted, is materially competent, the case is not affected by defects that would invalidate it and the Parties have personality and judicial capacity, and are duly legitimated.

II – Grounds: Matter of Fact

2.1. The claimant alleges, in its petition, that: a) "[the vehicle in question] ceased to be, effectively, the property of the Claimant from, at least, 28.09.2008, the date from which it ceased to have the respective possession and effective control, following its sale"; b) "[having the vehicle in question ceased to be his property from 28.09.2008, no IUC allegedly still owed by the vehicle in question can be imputed to him, under penalty of such understanding suffering from unconstitutionality, by violation of the provisions of Articles 9, letter b), 12, no. 1, 13, 22 and 62, no. 1, all of the Constitution of the Portuguese Republic"; c) "the claimant is not a passive subject of the IUC for the years 2009, 2010 and 2011 because the requirements for the subjective incidence of the tax provided for in Article 3 of the CIUC are not satisfied, combined with Articles 4 and 6 of the said Code"; d) "[the] Article 3, no. 1, of the CIUC establishes a legal presumption «juris tantum», which, by force of the provisions of Article 73 of the LGT and Article 350, no. 2, of the Civil Code, is rebuttable. That is, the passive subject of the IUC is the owner of the vehicle, its effective holder and possessor, even if the registration of that quality of owner does not appear in the motor vehicle register, provided that sufficient proof is presented to rebut the presumption arising from the motor vehicle register"; e) "[although], in the specific case, [...] the Claimant acquired the vehicle in question on 14.08.2008, with its respective Certificate of Registration, in his favour, issued on 2008-08-18 – in payment of amounts (salaries) that were owed to him by its previous owner – sold it to the company «B…, Lda.» [...], which, in turn, sold it, on 29.09.2008, in favour of the Bolivian citizen C… [...], for which purpose it issued the respective invoice no. …, of 29.09.2008"; f) "the documents attached to the Gracious Complaint regarding the IUC assessments in question evidence a purchase and sale contract, and should be considered as sufficient documents to prove the property and possession of the vehicle … in the tax periods in question (December 2009, 2010 and 2011) by a third party".

2.2. The claimant now concludes that the "present petition for annulment of the tax acts covered by this case" should be judged to have merit and, "as a consequence, [...] the AT should be ordered to annul those tax assessment acts for the IUC, on the grounds of error as to the factual premises and insufficient reasoning, all under penalty of the above-mentioned unconstitutionality and with costs at the charge of the Respondent."

2.3. For its part, the AT alleges, in its reply: a) that "the understanding advocated by the Claimant derives not only from a skewed reading of the letter of the law, but also from the adoption of an interpretation that does not take into account the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and further derives from an interpretation that ignores the ratio of the regime established in the article at issue, and as well, throughout the entire CIUC"; b) "it is imperative to conclude that, in the case of the present arbitral determination proceedings, the legislator established [, in Article 3, no. 1, of the CIUC,] expressly and intentionally that persons in whose names the same [vehicles] are registered should be considered as such [as owners or in the situations provided for in no. 2, the persons there listed], because this is the interpretation that preserves the unity of the legal-fiscal system. To understand that the legislator established here a presumption would be unequivocally to carry out an interpretation contra legem"; c) "Article 3 of the CIUC contains no legal presumption whatsoever"; d) that, "if the Claimant wishes to react against the presumption of ownership attributed to him, then he must necessarily react through the proper means provided for in the Motor Vehicle Registry Regulations and in the supplementary registration laws and against the very content of the motor vehicle register, since it is certainly not through the challenge of the IUC assessments that the registration information is rebutted"; e) that, "even admitting that, from the point of view of the rules of civil law and property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition for the validity of contracts with real effect, as established in the CIUC [...], the tax legislator intentionally and expressly wished that persons in whose names (the vehicles) are registered should be considered as owners, lessees, purchasers with reservation of ownership or holders of the right to purchase option in long-term leasing"; f) that "it is the very ratio of the regime established in the CIUC that constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle register"; g) that "the interpretation conveyed by the Claimant is shown to be contrary to the Constitution, in that it violates the principle of confidence and legal certainty, the principle of efficiency of the tax system and the principle of proportionality"; h) that the documents attached by the Claimant do not constitute "sufficient proof to undermine the (alleged) legal presumption established in Article 3 of the CIUC"; i) that "the Respondent should be condemned to pay the arbitral costs arising from this petition for arbitral determination"; j) that "the tax acts at issue are valid and legal, because in conformity with the legal regime in force at the date of the tax facts, so that there was no, in this case, any error imputable to the services."

2.4. The AT concludes, in summary, that "the present petition for arbitral determination should be judged to lack merit, the tax assessment acts challenged remaining in the legal order and the Respondent entity being absolved in accordance from the petition."

2.5. The following facts are considered to be proved:

i) The claimant now seeks the declaration of illegality, and consequent annulment, of the tax assessment acts for the IUC relating to the vehicle of category C and registration number …, and for the years 2009, 2010 and 2011, namely: the ex officio assessment of the IUC for the year 2009, in the amount of €461.00, plus compensatory interest, in the amount of €71.39; the ex officio assessment of the IUC for the year 2010, in the amount of €465.00, plus compensatory interest, in the amount of €53.40; and the ex officio assessment of the IUC for the year 2011, in the amount of €475.00, plus compensatory interest, in the amount of €35.55.

ii) Although the registration of the vehicle in question is still registered in the name of the claimant, in the IRN, as of the date relating to the taxation for the years 2009 to 2011, he has provided sufficient proof that, as of the date of the tax for those years, he was no longer the owner of that vehicle, as can be seen from the Documents attached to these proceedings under numbers 3 to 5, 10 and 11.

iii) Having regard to the documents mentioned above, the claimant acquired the vehicle in question on 14/8/2008 and, subsequently, the respective certificate of registration was issued in his favour on 18/8/2008 (see Doc. no. 10).

iv) On 28/9/2008, the claimant now sold the said vehicle to the company "B…, Lda.", with registered office at Rua , Barcelos, in accordance with a declaration of sale – Single Motor Vehicle Document (see Doc. no. 3). This company, in turn, sold the said vehicle, on 29/9/2008, to the Bolivian citizen C… (see Doc. no. 11), as is proved by photocopies of the respective invoice no. …, of 29/9/2008, and of the customs document of the dispatch of the vehicle to Colombia, via Vigo, on 18/11/2008 (see Docs. nos. 4 and 5).

v) The gracious complaint submitted by the claimant (relating to the IUC for 2008) was completely dismissed by order of 5/8/2013 (see Doc. no. 12). In that order it is concluded, in particular, that the vehicle "remained registered in the name of the claimant [here claimant], in the period between 14/8/2008 and 26/9/2012" (the latter date refers to the moment of cancellation of the registration at the request of the claimant: see Doc. no. 6).

vi) The claimant was notified of the assessments now in question on 22/10/2013 (see Doc. no. 14). Faced with these, he submitted a gracious complaint on 14/2/2014 (see Doc. no. 15), which was dismissed, in its entirety, by order of 17/6/2014, in the same terms and with the same grounds that formed the basis of the dismissal decision regarding the IUC for 2008 (see Doc. no. 16). This dismissal was notified to the claimant, by way of official letter of 17/6/2014, on 20/6/2014 (see page 25 of the administrative file attached to these proceedings).

vii) Dissatisfied with the assessments referred to above, the claimant now presented, on 21/8/2014, this petition for constitution of an arbitral tribunal and for arbitral determination.

2.6. There are no material facts not proved relevant to the decision of the case.

III – Grounds: Matter of Law

In this case, there are four disputed legal questions: 1) to determine whether, as the AT concluded, "the understanding advocated by the Claimant derives not only from a skewed reading of the letter of the law, but also from the adoption of an interpretation that does not take into account the systematic element violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and further derives from an interpretation that ignores the ratio of the regime established in the article at issue and, as well, throughout the entire CIUC"; 2) to determine whether, as alleged by the AT, "Article 3 of the CIUC contains no legal presumption whatsoever"; 3) to determine whether – admitting that the presumption exists – the claimant succeeded in rebutting it; 4) to determine whether, as also alleged by the AT, "the interpretation conveyed by the Claimant is shown to be contrary to the Constitution".

Let us see, then.

  1. to 3) The first three legal questions converge in the direction of the interpretation of Article 3 of the CIUC, so it is necessary: a) to determine whether the rule of subjective incidence, contained in the said Article 3, establishes or not a presumption; b) to determine whether, when considering that this rule establishes a presumption, this violates the "unity of the regime", or disregards the systematic element and the teleological element; c) to determine – admitting that the presumption exists (and that it is juris tantum) – whether the rebuttal of it was effected.

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

"Article 3 – Subjective Incidence

1 - The passive subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names the same are registered.

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

The interpretation of the cited legal text is, naturally, indispensable for the resolution of the case under analysis. In that measure, it is necessary to resort to Article 11, no. 1, of the LGT, and, by referral from it, to Article 9 of the Civil Code (CC).

Now, in accordance with Article 9 of the CC, interpretation starts from the letter of the law and aims, through it, to reconstitute the "legislative thought". This is to say (regardless of the objectivism-subjectivism debate) that literal analysis is the basis of the interpretive task and the systematic, historical or teleological elements are guides for the orientation of said task.

The literal apprehension of the legal text in question does not generate – even if the separation of this from the ascertainment, even if minimal, of the respective sense is very debatable – the notion that the expression "being considered as such" means something different from "being presumed as such". In fact, we would hardly find authors who, in a task of pre-understanding of the text, would instinctively reject 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 Article 21, no. 2, of the CIRC. As noted by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, regarding that article of the CIRC: "beyond this rule showing that what is at stake in the taxation of capital gains is to ascertain the real value (the market value), the limitation to the ascertainment of real value derived from the rules for determining the taxable value provided for in the CIS cannot fail to be considered as a presumption regarding incidence, whose rebuttal is permitted by Article 73 of the LGT" (General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

b) These are just some 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, given that 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 "being considered as" assume, as we have seen, prominence.

If literal analysis is only the basis of the task, it is naturally necessary to assess the text in light of the other elements (or sub-elements of the so-called logical element). Indeed, the AT also alleges that the claimant's interpretation "ignores the ratio of the regime established in the article at issue and, as well, throughout the entire CIUC".

It is justified, therefore, to ascertain whether the interpretation that considers the existence of a presumption in Article 3 of the CIUC collides with the teleological element, i.e., 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 vehicle circulation tax obeys the principle of equivalence, seeking to burden the contributors to the extent of the environmental and road cost that they cause, in implementation of a general rule of tax equality" (see Article 1 of the CIUC).

What can be inferred from this Article 1? It can be inferred that the close link of the IUC to the principle of equivalence (or benefit principle) does not allow the exclusive association of the "contributors" referred to there with the figure of owners but rather with the figure of users (or of economic owners). As was well noted in the DA relating to Case no. 73/2013-T: "in fact, the ratio legis of the tax [IUC] rather points in the direction of taxing the users of the vehicles, the «economic owner» in the words of Diogo Leite de Campos, the actual owners or financial lessees, since these are the ones who have the polluting potential causing environmental costs to the community."

Indeed, if the said ratio legis were otherwise, how would one understand, for example, the obligation (on the part of the entities that proceed to lease vehicles) - and for the purposes of the provisions of Article 3 of the CIUC and Article 3, no. 1, of Law no. 22-A/2007, of 29/6 - to supply to the DGI the data concerning the fiscal identification of the users of the said vehicles (see Article 19)? Would it be that where it reads "users", should one instead read, disregarding the systematic element, "owners with registration in their names"...?

c) From the foregoing it can be concluded that limiting the passive subjects of this tax only to owners of vehicles in whose names the same are registered - ignoring situations in which these no longer coincide with the actual owners or actual users of the same - constitutes a restriction that, in light of the purposes of the IUC, does not find a basis of support. And, even if Article 6 of the CIUC is invoked, as the AT does, to argue "that only the legal situations object of registration [...] give rise to the birth of the tax obligation", it is necessary to bear in mind that such registration gives rise only to a rebuttable presumption, i.e., a presumption that can be set aside by means of proof to the contrary (proof that the registration no longer reflects, at the moment of the tax obligation, the material truth that would have given it origin).

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 to the detriment of what could really have been proved; and, on the other hand, to set aside the duty of the AT to comply with the inquisitorial principle established in Article 58 of the LGT, i.e., the duty to carry out the necessary steps for a correct determination of the factual reality on which its decision should be based (which means, in this case, the determination of the current and effective owner of the vehicle).

On this point, it is also worth noting that vehicle registration does not have constitutive effect, functioning, as stated before, as a rebuttable presumption that the holder of the registration is, effectively, the owner of the vehicle. In this sense, see, for example, the Decision of the STJ of 19/2/2004, Case 03B4639: "Registration does not have constitutive effect, since 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 (Articles 1, no. 1 and 7, of the CRP84 and 350, no. 2, of the Civil Code) as well as of the respective ownership, all in accordance with its contents."

In the same sense, the DA relating to Case no. 14/2013-T referred, in this regard, in terms that are here endorsed: "the essential function of the motor vehicle register is to give publicity to the legal situation of vehicles not having the registration constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all in accordance with its contents. The presumption that the registered right belongs to the person in whose name it is recorded can be rebutted by proof to the contrary."

Now, in the case under analysis here, it appears that the rebuttal of the presumption (by means of "sufficient proof") was carried out. Indeed, despite what the AT alleged in points 79 to 94 of its reply, the Tribunal does not see reason to question the documents presented by the claimant, given that the same clearly demonstrate that he was not, on the dates of the tax, the owner of the vehicle identified above (see points i), ii) and iv) of the proved factual matter).

On the other hand, and as was well noted, on this point, in the DA relating to Case no. 27/2013-T, dated 10/9/2013, "the documents presented, particularly the copies of the invoices that support [the sales], [...] embody means of proof with sufficient strength and adequate to rebut the presumption based on the registration, as established in no. 1 of Article 3 of the CIUC, documents which, moreover, enjoy the presumption of truthfulness provided for in no. 1 of Article 75 of the LGT."

  1. It is concluded, in view of what was exposed above [in 1) to 3)], that there is no "interpretation [...] contrary to the Constitution", contrary to what is alleged by the respondent in points 72 to 78 of its reply.

IV – Decision

In view of the foregoing, it is decided:

  • The petition for arbitral determination is judged to have merit, with the consequent annulment, with all legal effects, of the challenged assessment acts.

The value of the case is fixed at €1561.34 (one thousand five hundred and sixty-one euros and thirty-four cents), in accordance with Article 32 of the CPTA and Article 97-A of the CPPT, applicable by force of the provision in Article 29, no. 1, letters a) and b), of the RJAT, and Article 3, no. 2, of the Regulation of Costs in Tax Arbitration Proceedings (RCPAT).

Costs at the charge of the respondent, in the amount of €306.00 (three hundred and six euros), in accordance with Table I of the RCPAT, and in compliance with the provisions of Articles 12, no. 2, and 22, no. 4, both of the RJAT, and with the provision in Article 4, no. 4, of the cited Regulation.

Notify.

Lisbon, 2 March 2015.

The Arbitrator

(Miguel Patrício)

Text prepared on computer, in accordance with the provision in Article 131, no. 5, of the CPC, applicable by referral from Article 29, no. 1, letter e), of the RJAT.

The wording of this decision follows the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Who is the IUC taxpayer when a vehicle is sold but the registration is not transferred to the new owner?
According to Article 3 of the IUC Code (CIUC), the person in whose name the vehicle is registered in the motor vehicle register is considered the IUC taxpayer, even after selling the vehicle if registration is not transferred. The Tax Authority argues this is an express legal determination, not a rebuttable presumption, meaning the registered owner remains liable regardless of actual ownership. However, the claimant's position is that this constitutes a juris tantum presumption that can be rebutted with sufficient proof of sale, such as purchase contracts and invoices showing transfer of possession and control to a third party.
Can the legal presumption of IUC liability based on vehicle registration be rebutted under Article 3 of CIUC?
The central legal dispute in this case is whether Article 3(1) of CIUC creates a rebuttable presumption. The claimant argues it establishes a juris tantum presumption that can be rebutted under Article 73 of the General Tax Law (LGT) and Article 350(2) of the Civil Code by presenting sufficient proof of actual ownership transfer, such as sale contracts and invoices. Conversely, the Tax Authority maintains that Article 3 contains no presumption whatsoever but rather an intentional legislative determination that makes the registered owner liable for IUC. The AT argues this interpretation preserves the unity and efficiency of the tax system, and that challenges to registered ownership must be pursued through motor vehicle registry procedures, not through tax arbitration proceedings.
What are the constitutional grounds for challenging IUC assessments on a former vehicle owner in Portugal?
The claimant invoked multiple constitutional provisions to challenge the IUC assessments: Articles 9(b) (principle of legality and legal certainty), 12(1) (principle of universality and equality), 13 (principle of equality), 22 (state liability), and 62(1) (right to private property). The argument is that taxing someone who is no longer the actual owner, possessor, or controller of the vehicle violates these fundamental constitutional principles. However, the Tax Authority counter-argues that the claimant's interpretation itself would violate constitutional principles of confidence and legal certainty, efficiency of the tax system (as the state needs reliable administrative mechanisms), and proportionality, because the tax system must rely on public registries for workability.
How does CAAD arbitration process work for contesting IUC tax assessments under RJAT?
Under the Legal Framework for Arbitration in Tax Matters (RJAT - Decree-Law 10/2011), the claimant filed a petition under Article 10(1)(a) on August 21, 2014, seeking annulment of IUC assessments. The sole arbitral tribunal was constituted on November 18, 2014. The Tax Authority was formally cited to submit a reply under Article 17(1) of RJAT, which it did on January 5, 2015. The tribunal then determined under Article 16(c) and (e) that the oral hearing under Article 18 was dispensable and that the case was ready for decision. The decision date was set for March 2, 2015. This process demonstrates CAAD's streamlined arbitration procedure for tax disputes, providing an alternative to judicial courts.
What happens when IUC is charged for multiple years after a vehicle sale without updated registration?
When IUC is charged for multiple years after a vehicle sale without updated registration, the registered owner continues to receive tax assessments and accumulates liability. In this case, the claimant was assessed IUC for three consecutive years (2009, 2010, and 2011) despite allegedly selling the vehicle in September 2008, resulting in a total liability of €1,561.34 (€1,401.00 in principal tax plus interest). The registered owner must either: (1) pay the assessments and seek recovery from the actual owner; (2) challenge the assessments through administrative complaint (reclamação graciosa) or arbitration/judicial proceedings arguing they are not the proper taxpayer; or (3) ensure timely registration transfer at the time of sale to avoid such situations. The case highlights the critical importance of completing vehicle registration transfers immediately upon sale.