Process: 626/2015-T

Date: April 20, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 626/2015-T) addresses the critical issue of IUC (Single Motor Vehicle Tax) liability when vehicles have been sold but remain registered in the seller's name. A vehicle rental company challenged IUC assessments totaling €838.87 for 2015, arguing that the vehicles had been transferred to third parties through purchase and sale contracts before the tax became due. The central legal question concerned Article 3(1) of the IUC Code, which establishes that liable persons are vehicle owners, 'considering as such' those in whose names vehicles are registered. The Tax Authority argued this provision directly establishes liability based on registration, while the company maintained it creates a rebuttable legal presumption. The arbitral tribunal followed established CAAD case law, ruling that Article 3(1) does contain a rebuttable presumption of ownership. This means registered owners can prove they are not the actual owners and therefore not liable for IUC by presenting sufficient evidence of vehicle transfer. The company offered duplicate invoices evidencing the sales and copies of accounting records as proof. The decision confirms that companies can successfully challenge IUC assessments when vehicles were sold before the tax due date, provided they present adequate documentation. This ruling has significant implications for vehicle fleet operators, rental companies, and anyone who sells vehicles, establishing that registration alone does not create absolute liability if actual ownership has changed through valid sale contracts prior to the tax incidence date.

Full Decision

ARBITRAL DECISION

I. REPORT

  1. A..., LDA., legal entity no. ..., with registered address at Avenue..., Plot..., second floor, requested the constitution of an arbitral tribunal in tax matters by filing an application for arbitral pronouncement against the acts of assessment of Single Motor Vehicle Tax (IUC), plus compensatory interest, relating to the tax period of 2015 and the motor vehicles identified in documents attached to the application through their respective registration numbers, in the total amount of € 838.87.

  2. As the basis for the application, filed on 1 October 2015, the Applicant alleges, in summary, that the vehicles in question were no longer in its possession during the period in question because they had already been transferred to third parties by purchase and sale contracts concluded prior to the date on which the tax to which the questioned assessments pertain became due.

  3. In response to the matters submitted, the Tax and Customs Authority (AT) ruled in the sense of the inadmissibility of the present application for arbitral pronouncement, maintaining in the legal order the tax acts challenged and, accordingly, by acquittal of the Respondent entity.

  4. The request for constitution of the arbitral tribunal was accepted by the President of CAAD and automatically notified to the Tax and Customs Authority on 9 October 2015.

  5. Pursuant to the provisions of paragraph a) of subsection 2 of article 6 and paragraph b) of subsection 1 of article 11 of Decree-Law no. 10/2011, of 20/01, as amended by article 228 of Law no. 66-B/2012, of 31/12, the Deontological Council appointed the undersigned as arbitrator of the singular arbitral tribunal, who communicated acceptance of the appointment within the applicable period, and notified the parties of that appointment on 23-11-2015.

  6. Having been duly notified of that appointment, the parties did not express their will to refuse the appointment of the arbitrator, pursuant to the combined provisions of article 11, subsection 1, paragraphs a) and b) of the RJAT and articles 6 and 7 of the Deontological Code.

  7. Thus, in accordance with the provision of paragraph c) of subsection 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31/12, the singular arbitral tribunal was constituted on 09-12-2015.

  8. Regularly constituted, the arbitral tribunal is materially competent pursuant to the provision of articles 2, subsection 1, paragraph a), of the RJAT.

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

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

II. STATEMENT OF FACTS

  1. With relevance for the assessment of the application for arbitral pronouncement, the following factual elements are highlighted which, based on the documentary evidence attached to the case file, are considered proven:

11.1. The Applicant carries on its business activities in the areas of motor vehicle rental and provision of services associated with fleet management.

11.2. The Applicant was the recipient of ex officio assessments of IUC, carried out by the Tax and Customs Authority under the provisions of article 18 of the IUC Code, relating to the period of 2015 and the vehicles identified in the assessment notices attached to the case file.

11.3. The motor vehicles to which the aforementioned assessments refer constitute, in all cases, the subject matter of the aforementioned business activity.

11.4. The tax to which the assessments in question refer, in the total amount of € 838.87, was duly paid, as confirmed by the head of the competent Tax Service.

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

III. CUMULATION OF APPLICATIONS

  1. The present application for arbitral pronouncement relates to several IUC assessments. However, given the identity of the tax facts, the tribunal competent to decide, and the grounds of fact and law invoked, the tribunal considers that nothing prevents, pursuant to the provisions of article 3 of the RJAT and article 104 of the CPPT, the cumulation of applications.

IV. MATTER OF LAW

  1. In the application for arbitral pronouncement, the Applicant submits to the assessment of this tribunal the legality of the acts of assessment of IUC, and compensatory interest associated therewith, relating to the tax period of 2015 and the vehicles identified in the documents attached to the application, invoking the circumstance that at the date to which the tax facts that originated them refer, the vehicles to which they relate had already been transferred to third parties, and therefore the Applicant does not assume the status of liable person for the assessed tax.

  2. The issue is, therefore, to determine whether or not the Applicant should be considered a liable person for IUC with respect to the vehicles and period to which the tax relates, considering that the same, although still registered in its name at that time, had already been transferred by purchase and sale contract.

  3. With regard to this matter, article 3 of the IUC Code provides, in its subsection 1, that: "1 - The liable persons for the tax are the owners of the vehicles, considering as such the natural or legal persons, of public or private law, in whose names the same are registered."

  4. According to the understanding of the Respondent, the aforementioned rule does not contain any legal presumption, considering that "the tax legislator... expressly and intentionally established that these (the liable persons of IUC) are the owners (or in the situations provided for in subsection 2, the persons stated therein), considering as such the persons in whose names the same are registered."

  5. On the other hand, the Applicant maintains that that rule enshrines a legal presumption, rebuttable by proof to the contrary on the part of the transferor, considering that, for such purpose, the present application appears to be a suitable means.

  6. This matter has been the subject of numerous decisions within the scope of arbitral tribunals functioning in CAAD, generally in the sense of the admissibility of the respective applications, on the basis that the rule in question contains a legal presumption that admits proof to the contrary [i].

  7. Adhering without reservation to the position referred to above, it is dispensed with, as unnecessary and tedious, the reproduction of the respective reasoning, insofar as in the present case nothing new is put forward on that matter.

ON THE MERITS OF THE APPLICATION

  1. Concluding, in line with the guidance that has invariably been followed by arbitral case law, that the rule regarding the subjective scope of IUC contains a rebuttable presumption, it is necessary to analyze the documentation offered by the Applicant in order to determine whether or not it constitutes sufficient proof for its rebuttal.

  2. As referred to above, in terms of factual matters, in the situation to which the present application refers, at issue is the taxation in IUC of motor vehicles which, at the date the tax became due, would already be the property of third parties, following and as a result of purchase and sale contracts concluded with the Applicant or, in some cases, transferred as "salvage" to insurers due to total loss of vehicles as a result of incidents.

  3. With regard to the situation referred to, duplicate invoices that evidenced the transfers are presented as proof, accompanied by copies of the respective accounting records.

ON THE REBUTTAL OF THE PRESUMPTION

  1. The presumptions regarding tax scope always admit proof to the contrary, as expressly provided in article 73 of the General Tax Law, and may be rebutted through the specific contradictory procedure provided for in article 64 of the Tax Procedure Code or, alternatively, by way of administrative claim or judicial challenge of the tax acts based on them.

  2. In the present case, the Applicant did not use that specific procedure, so that the present application for arbitral pronouncement is the appropriate means to rebut the presumption of subjective scope of IUC that supports the tax assessments whose annulment is the subject of the application, since it is a matter that falls within the material competence of this arbitral tribunal (articles 2 and 4 of the RJAT).

  3. The Applicant appearing in the Motor Vehicle Register as the owner of the vehicles identified in the documents attached to the application in the tax period to which the questioned assessments relate, and the vehicles in question having already passed into the ownership of third parties as at the date the tax became due by purchase and sale contract, it remains to evaluate the proof presented in order to determine whether it is sufficient to rebut the presumption established in subsection 1 of article 3 of the IUC Code.

  4. To rebut the aforementioned presumption, derived from the entry in the motor vehicle register, the Applicant offers duplicate invoices of sales, all issued on a date prior to that on which the tax relating to the tax period to which the assessments pertain became due.

ON THE REBUTTAL OF THE PRESUMPTION BASED ON COMMERCIAL INVOICES

  1. Ruling on the documentary evidence presented, the Respondent alleges that invoices, in general, do not constitute suitable documents to provide the proof sought in the sense that the Applicant is not the owner of the vehicles in the tax periods to which the assessments in question relate.

  2. In this sense, the Respondent maintains that invoices do not constitute documents with probative force "sufficient to undermine the (supposed) legal presumption established in article 3 of the IUC Code."

  3. Furthermore, according to the Respondent, "...the rules of the motor vehicle register (have still) not reached the point where mere invoices unilaterally issued can replace the transfer of motor vehicle ownership which, as is known, is a fact subject to mandatory registration"... "The unequivocal transfer of ownership to the alleged buyers could be indicated by the attachment of a copy of the official form for registration of motor vehicle ownership, as it is a document signed by the intervening parties."

  4. The issue is, therefore, to know whether the invoices that evidence commercial transactions constitute an element of proof for rebutting the presumption contained in article 3 of the IUC Code and, if such is admitted, whether the duplicate invoices presented by the Applicant, associated with copies of the corresponding accounting records, constitute sufficient proof for that purpose.

  5. For that purpose, it is important to bear in mind that, in the situation under analysis, we are faced with purchase and sale contracts which, relating to movable property and not being subject to any special formalism (Civil Code, article 219), effect the corresponding transfer of real rights (Civil Code, article 408, subsection 1).

  6. Being contracts that involve the transfer of ownership of movable property by means of the payment of a price, such contracts have, as essential effects, among others, that of delivering the property (Civil Code, articles 874 and 879).

  7. However, being purchase and sale contracts that have motor vehicles as their subject matter, in which registration is mandatory, their timely performance presupposes the issuance of the declaration of sale necessary for the registration of the corresponding acquisition in favor of the buyer, as has been understood by the case law of the superior courts.[ii] Such declaration, relevant for registration purposes, may constitute proof of the transaction, but does not constitute the sole or exclusive means of proof of the transaction.

  8. For registration purposes, no special formalism is required, it being sufficient to submit to the competent entity a request subscribed to by the buyer and confirmed by the seller, which, through a declaration of sale, confirms that the ownership of the vehicle was acquired by the latter by a verbal purchase and sale contract (see Motor Vehicle Register Regulation, article 25, subsection 1, paragraph a).[iii]

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

  10. In that context, the selling company is bound by compliance with specific accounting and tax rules, in which invoicing assumes special relevance.

  11. In the first place, by virtue of tax rules, the entity transferring the goods is obliged to issue an invoice with respect to each transfer of goods, whatever the status of the respective purchaser, whether it be a company, a liable person for VAT, or a final consumer (VAT Code, article 29, subsection 1, paragraph b).

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

  13. It is on the basis of that document issued by the supplier of the goods that the purchaser, when it is an economic operator, will deduct the VAT to which it is entitled (VAT Code, article 19, subsection 2) - unless the tax supported in the acquisition of the vehicle, by its characteristics, is not deductible - and account for the expense of the operation (Corporation Tax Code, articles 23, subsection 6 and 123, subsection 2).

  14. On the other hand, it is also on the basis of the invoices issued that the supplier of the goods should account for the respective revenues, as follows from the provision of paragraph b) of subsection 2 of article 123 of the Corporation Tax Code.

  15. Provided they are issued in the legal form and constitute elements supporting the accounting entries in accounting organized in accordance with commercial and tax legislation, the data contained therein are covered by the presumption of accuracy to which article 75, subsection 1, of the General Tax Law refers.

  16. Considering, therefore, the relevance attributed by tax legislation to invoices issued, in accordance with the law, by commercial companies within the scope of their business activity and the presumption of accuracy of the operations evidenced by them, it cannot but be considered that the same can constitute, by themselves, sufficient proof of the transfers claimed by the Applicant.

  17. In the present case, it is found that the invoices that evidence the transactions in question identify the selling company, the buyer and, by their respective registration number, the vehicle transacted and the price of the sale, as well as the date on which they were issued. Comparing the invoices with the corresponding accounting records, it is also found that the price of the transaction - in general residual values determined in accordance with the legal regime of financial leasing - was duly paid.

  18. In these terms, it is considered that the invoices presented by the Applicant, accompanied by copies of the corresponding accounting records, constitute sufficient proof of the facts alleged for the purpose of rebutting the presumption in question.

  19. Thus, considering the presumption of ownership derived from the motor vehicle register enshrined in subsection 1 of article 3 of the IUC Code to be rebutted, the assessments subject to the present application should be annulled, on the basis of illegality and error in the premises on which they are based.

REQUEST FOR INDEMNIFICATORY INTEREST

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

  2. Indeed, pursuant to the provision of subsection 1 of the aforementioned article, indemnificatory interest is due "when it is determined, in administrative claim or judicial challenge, that there was error attributable to the services as a result of payment of the tax debt in an amount greater than that legally due." In addition to the means referred to in the rule that is transcribed, we understand that, as follows from subsection 5 of article 24 of the RJAT, the right to the aforementioned interest can be recognized in the arbitral process and, thus, the application is heard.

  3. The right to indemnificatory interest referred to in the provision of the General Tax Law mentioned above presupposes that tax has been paid in an amount greater than that due and that such arises from error, of fact or of law, attributable to the services of the AT.

  4. In the present case, although it is recognized that the tax paid by the Applicant is not due, because it is not the liable person of the tax obligation, determining, as a consequence, the respective reimbursement, it is not apparent that, in its origin, there is error attributable to the services, which determines such right in favor of the taxpayer.

  5. In this way, in promoting the ex officio assessment of IUC considering the Applicant as the liable person for this tax, the AT merely complied with the provision of subsection 1 of article 3 of the IUC Code, which, as extensively referred to above, imputes such status to the persons in whose names the vehicles are registered.

  6. As has also been concluded, the aforementioned rule is of the nature of a legal presumption, from which there arises, for the AT, the right to assess the tax and demand it from such persons, without need to prove the facts that lead to it, as expressly provided in subsection 1 of article 350 of the Civil Code.

  7. The Applicant did not raise, with the AT, any procedure intended to rebut that presumption, in particular by activating the special procedure provided for in article 64 of the Tax Procedure Code or by filing an administrative claim.

V. DECISION

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

a) To find the application for arbitral pronouncement admissible, insofar as it concerns the illegality of the IUC assessments and compensatory interest relating to the period and vehicles identified in the documents attached to the present application for arbitral pronouncement, determining their annulment and the consequent reimbursement of the amounts unduly charged;

b) To find the application inadmissible insofar as it concerns the recognition of the right to indemnificatory interest in favor of the Applicant.

c) To condemn the Respondent to payment of costs.

Value of the case: € 838.87.

Costs: Under article 22, subsection 4, of the RJAT, and in accordance with Table I attached to the Costs Regulation in Tax Arbitration Proceedings, I fix the amount of costs at € 306.00, to be borne by the Respondent (AT).

Lisbon, 20 April 2016

The Arbitrator, Álvaro Caneira.

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

[ii] See decisions of the Supreme Court of Justice of 23.3.2006 and 12.10.2006, Cases 06B722 and 06B2620.

[iii] It is noted that, within the scope of the special procedure for the registration of ownership of vehicles acquired by verbal purchase and sale contract, approved by Decree-Law no. 177/2014, of 15/12, the invoice constitutes, among others, a document that indicates the actual purchase and sale of the vehicle, provided that it contains the registration number of the vehicle as well as the names of the seller and the buyer.

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) when a vehicle has been sold but registration was not updated?
Under Portuguese law, while Article 3(1) of the IUC Code establishes that persons in whose names vehicles are registered are considered liable for the tax, the CAAD arbitral tribunal has consistently ruled that this creates a rebuttable legal presumption rather than absolute liability. This means that if a vehicle has been sold but registration has not yet been updated, the registered owner (seller) is initially presumed liable for IUC. However, the seller can rebut this presumption by proving that actual ownership had already transferred to the buyer through a valid purchase and sale contract before the tax due date. The key factor is not registration status but actual ownership at the moment the tax becomes due.
Can a company challenge IUC tax assessments if the vehicles were already sold before the tax due date?
Yes, a company can successfully challenge IUC tax assessments even when vehicles were already sold before the tax due date but remained registered in the company's name. According to this arbitral decision and consistent CAAD case law, Article 3(1) of the IUC Code contains a rebuttable presumption linking registration to tax liability. Companies can overcome this presumption by presenting evidence that proves the vehicles were transferred to third parties before the tax incidence date. Acceptable evidence includes duplicate invoices documenting the sales, purchase and sale contracts, accounting records showing the transfers, and in cases of total loss, documentation of transfer to insurance companies as salvage. The arbitration process before CAAD provides an effective legal mechanism for companies, particularly those in vehicle rental or fleet management sectors, to contest improper IUC assessments.
What is subjective incidence (incidência subjetiva) in Portuguese vehicle circulation tax (IUC)?
Subjective incidence (incidência subjetiva) in Portuguese IUC refers to the determination of who is the liable taxpayer - the person subject to the tax obligation. While objective incidence defines what is taxed (the vehicle itself), subjective incidence identifies who must pay the tax. Article 3(1) of the IUC Code addresses subjective incidence by stating that liable persons are vehicle owners, 'considering as such' those in whose names vehicles are registered. The CAAD has interpreted this provision as creating a rebuttable legal presumption: registration creates a presumption of ownership and thus tax liability, but this presumption can be overcome with proof that actual ownership differs from registered ownership. This interpretation is crucial because it allows the real economic situation to prevail over mere administrative registration, ensuring that only actual vehicle owners bear the tax burden.
How does the CAAD arbitral tribunal handle disputes over IUC liability after vehicle transfer?
The CAAD (Centro de Arbitragem Administrativa) arbitral tribunal handles IUC liability disputes after vehicle transfer by applying a consistent legal framework that recognizes Article 3(1) of the IUC Code as containing a rebuttable presumption. When companies or individuals challenge IUC assessments claiming they sold vehicles before the tax due date, CAAD tribunals examine the evidence presented to determine whether the presumption of ownership based on registration has been successfully rebutted. The tribunal accepts applications for cumulation when multiple IUC assessments share identical tax facts, the same competent tribunal, and common legal grounds. Article 73 of the General Tax Law supports this approach by providing that tax presumptions always admit proof to the contrary. CAAD tribunals evaluate documentation such as sale contracts, invoices, and accounting records to determine actual ownership at the tax incidence date, prioritizing economic reality over administrative registration status.
What evidence is required to prove vehicle ownership transfer for IUC tax exemption in Portugal?
To successfully prove vehicle ownership transfer and rebut IUC tax liability in Portugal, taxpayers must present documentary evidence demonstrating that vehicles were effectively transferred to third parties before the tax due date. According to this CAAD decision, acceptable evidence includes: (1) duplicate invoices that document the vehicle sales and transfers; (2) copies of purchase and sale contracts establishing the date and terms of transfer; (3) accounting records showing the transactions and removal of vehicles from the seller's asset registry; and (4) in cases of total loss, documentation proving transfer to insurance companies as salvage. The evidence must clearly establish that actual ownership changed hands before the IUC tax became due for the relevant period. While the vehicle may still be registered in the seller's name due to delays in updating registration, the documentation must be sufficient to overcome the legal presumption created by registration under Article 3(1) of the IUC Code and prove that the seller was no longer the actual owner when the tax obligation arose.