Process: 646/2014-T

Date: March 2, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 646/2014-T) addresses critical issues regarding IUC (Vehicle Circulation Tax) subjective incidence when the registered owner is a dissolved company. A... SGPS, S.A., acting as liquidator of B... - Sociedade Imobiliária, S.A. (dissolved in 2006), challenged IUC assessments for 2013-2014 totaling €106.28, arguing the extinct company was never the vehicle owner and that registration records contained errors identifying a different legal entity at another address. The claimant contended that Article 3 of the IUC Code establishes a rebuttable presumption of ownership based on vehicle registration, which can be challenged under Article 73 of the General Tax Law (LGT). The Tax Authority countered that Article 3 creates an irrebuttable legal fiction, not a presumption, deliberately linking tax liability to registered ownership regardless of civil law ownership. The AT argued that challenges to registration data must proceed through proper Motor Vehicle Registration procedures, not tax arbitration. This case highlights fundamental tensions between formal registration requirements and substantive ownership for tax purposes, particularly when companies undergo dissolution. The dispute raises important questions about evidentiary burdens when registration databases contain potential errors, the extent to which taxpayers can rebut official registration records in tax proceedings, and how IUC liability attaches to dissolved entities. The case also addresses procedural issues regarding whether tax arbitration tribunals have competence to determine vehicle ownership disputes or whether such matters require prior resolution through administrative registration channels before tax liability can be properly contested.

Full Decision

ARBITRAL DECISION

Process No. 646/2014-T

I – Report

1.1. A..., SGPS, S.A., legal entity No. ..., with registered office in ..., Maia, (hereinafter referred to only as "claimant"), in the capacity of liquidator of the company B... – Sociedade Imobiliária, S.A. (extinct legal entity No. ...), having been notified of the acts of assessment of Vehicle Circulation Tax (IUC) relating to the years 2013 and 2014, in the global amount of €106.28, filed, on 1/9/2014, a request for constitution of an arbitral tribunal and for arbitral decision, pursuant to article 10, No. 1, para. a), of Decree-Law No. 10/2011, of 20/1 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as "RJAT"), requesting the Tax and Customs Authority (AT), with a view to having "annul[led] the assessments of IUC and IC relating to the year 2013 and 2014" and "condemn[ing] the Respondent to compensation to the Claimant for the expenses resulting from the litigation."

1.2. On 4/11/2014 the present Singular Arbitral Tribunal was constituted.

1.3. Pursuant to article 17, No. 1, of the RJAT, the AT was summoned, as respondent party, to submit a reply, pursuant to the aforementioned article. The AT submitted its reply on 5/12/2014, arguing in favour of the total dismissal of the claimant's request.

1.4. By order of 6/2/2015, the Tribunal considered, pursuant to article 16, para. c) and e), of the RJAT, that the hearing referred to in article 18 of the RJAT was dispensable and that the process was ready for decision. The date of 2/3/2015 was further fixed for the pronouncement of the arbitral decision.

1.5. The Arbitral Tribunal was regularly constituted, is materially competent, the process does not suffer from defects that would invalidate it, and the Parties have legal personality and capacity, being duly constituted.

II – Grounds: The Facts

2.1. The claimant alleges in its petition that: a) the "Claimant [demonstrated], at the prior hearing, that it was never the owner of the [...] vehicle with licence plate ..."; b) "B... was dissolved in 2006, so, as is obvious, in 2013 and 2014 it was not the owner of the said vehicle"; c) "the Claimant carried out some searches and discovered that there exists a ..., whose address is exactly the same as that appearing in the vehicle ownership register – that is, Av. ..."; d) "Now, B..., legal entity No. ..., had and always had its registered office in Lugar do ..., Maia, and not at the address that appears in the ownership register of the vehicle in question"; e) "Thus, the claimant assumes that, certainly due to oversight, the AT made these assessments to B... [...] when, otherwise, it should have made these assessments to that other company, located [...] in Madeira"; f) "in tax law irrebuttable presumptions are not admissible at the level of tax incidence"; g) "the presumption in No. 3 of CIUC is a rebuttable presumption, pursuant to the general rules and, in particular, by virtue of the provision in article 73 of the LGT, and [...] the means of proof presented have in their favour the presumption of truthfulness conferred upon them by article 73, No. 1, of the LGT [being] suitable to rebut the presumption on which the IUC assessments are based"; h) "in the case at hand, the AT for the purpose of making tax assessments uses the IMTT database and [...] in that database the Claimant appears as owner [...] and it is certain that, it is repeated, B... – Sociedade Imobiliária, S.A., was dissolved in 2006 and, furthermore, has no knowledge of this vehicle, nor was it ever the owner of any vehicle"; i) "in making the aforementioned assessments, the AT simultaneously incurred breach of law and error in the factual assumptions"; j) "the AT merely referred to its own databases, ignoring all that was invoked in the right of prior hearing, refraining itself, explicitly, from carrying out [the] steps that it could easily (should) have promoted – which leads to the annulability of the impugned acts"; l) "Thus, since there is not, nor was there ever, any tax outstanding, the assessment of compensatory interest in question does not comply with article 35 of the LGT, particularly as regards the verification of the requirements for its assessment."

2.2. The claimant now concludes that the "assessments of IUC and IC relating to the year 2013 and 2014" should be "annul[led]" and the "Respondent be condemn[ed] to compensation to the Claimant for the expenses resulting from the litigation."

2.3. For its part, the AT alleges in its defence: a) that "according to the history of the registration in question, the Lisbon Motor Vehicle Registry Conservatory informed that the entity with the legal entity number ..., had at the date of 1988/03/21 the corporate name of D… – Tourism and Travel Agency ..., S.A.", "such that, on the date of the assessments now in question, the vehicle is still registered in the name of the company that holds the NIPC ..."; b) that "the understanding advocated by the Claimant [de]rives not only from a distorted reading of the letter of the law, but also from the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and derives, furthermore, from an interpretation that ignores the ratio of the regime enshrined in the article in question and, likewise, throughout the CIUC"; c) that "article 3 of the CIUC does not contain any legal presumption"; d) that "if the Claimant intends to challenge the presumption of ownership attributed to it, then it will necessarily have to challenge it by the proper means provided for in the Motor Vehicle Registration Regulation and in the subsidiary applicable registration laws and against the very content of the motor vehicle register, since it is certainly not by means of impugning the IUC assessments that the registration information is rebutted"; e) that "even admitting that, from the point of view the rules of civil law and land registration, the absence of registration does not affect the acquisition of ownership and that registration is not a condition of validity of contracts with real effect, as provided for in the CIUC [...], the tax legislator intentionally and expressly desired that those considered as owners, financial lessees, buyers with reservation of ownership or holders of the right of purchase option in long-term lease, the persons in whose name (the vehicles) are registered"; f) that "it is the very ratio of the regime enshrined 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 trust 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 prove that the company now in liquidation did not receive the vehicle in question when the dissolution carried out in 2006 took place"; i) that "the Claimant should be condemned to the payment of arbitration costs arising from the present request for arbitral decision [...] the legal requirements conferring the right to indemnity interest are not [met]"; j) that "there is no provision in the RJAT for any compensation for expenses resulting from the litigation."

2.4. The AT concludes, in summary, that "the present request for arbitral decision must be judged unfounded, with the tax acts of assessment impugned remaining in the legal order and the Respondent entity being absolved, accordingly, from the request."

2.5. The following facts are considered proven:

i) The claimant received the assessments of IUC and compensatory interest, of 21/5/2014, relating to the years 2013 and 2014, in the global amount of €106.28, relating to the vehicle ... (see Doc. 1 appended to the initial petition).

ii) On 4/3/2014, the claimant was notified to exercise the right of prior hearing, due to the alleged failure to pay IUC relating to the years 2013 and 2014 and relating to the vehicle mentioned above. On 26/3/2014, the claimant exercised the said right, alleging not to be a debtor of any tax, as it was never the owner of the said vehicle (see Doc. No. 3).

iii) B... – Sociedade Imobiliária, S.A., was dissolved in 2006 (as per the General Assembly minutes of 28/11/2006 and respective permanent certificate of cancellation of registration: see Doc. No. 4), having ceased its activity on 29/12/2006, as per declaration submitted to the Maia Finance Office, on 10/1/2007 (see Doc. No. 5).

iv) Dissatisfied with the assessments referred to above, the claimant filed, on 1/9/2014, the present request for constitution of an arbitral tribunal and for arbitral decision.

2.6. There are no material unproven facts relevant to the decision of the case.

III – Grounds: The Law

In the present case, there are five disputed legal issues: 1) whether, as the AT concludes, "the understanding advocated by the Claimant [de]rives not only from a distorted reading of the letter of the law, but also from the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and derives, furthermore, from an interpretation that ignores the ratio of the regime enshrined in the article in question and, likewise, throughout the CIUC"; 2) whether, as the AT alleges, "article 3 of the CIUC does not contain any legal presumption"; 3) whether – admitting that the presumption exists – the claimant succeeded in rebutting it; 4) whether, as the AT alleges, "the interpretation conveyed by the Claimant is shown to be contrary to the Constitution"; 5) whether indemnity interest and compensation for expenses resulting from the litigation are owed to the claimant.

Let us then proceed.

  1. to 3) The three first legal issues 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 that 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 rebuttable) – whether the rebuttal of the same was made.

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 name the same are registered.

2 - Equivalent to owners are financial lessees, buyers with reservation of ownership, as well as other holders of purchase option rights by virtue of the long-term lease contract".

The interpretation of the cited legal text is, naturally, essential for the resolution of the case under analysis. In that regard, it is necessary to resort to article 11, No. 1, of the LGT, and, by remission thereof, to article 9 of the Civil Code (CC).

Now, pursuant to the aforementioned article 9 of the CC, interpretation departs from the letter of the law and aims, through it, to reconstruct 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 the said task.

The literal apprehension of the legal text in question does not generate – even though the separation of this from the ascertainment, even if minimal, of the respective meaning is very debatable – the notion that the expression "considering as such" means something different from "presuming as such". In fact, we would hardly find authors who, in a task of pre-understanding of the said legal 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 Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa point out, regarding that article of the CIRC: "beyond this rule showing that what is at issue in the taxation of capital gains is ascertaining the real value (the market value), the limitation to the ascertainment of the real value derived from the rules for determining the taxable value provided for in the CIS cannot fail to be considered as a presumption in the matter of incidence, whose rebuttal is permitted by article 73 of the LGT" (General Tax Law, Annotated and Commented, 4th ed., 2012, pp. 651-2).

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

If literal analysis is only the basis of the task, it is naturally necessary to evaluate the text in light of the other elements (or sub-elements of the so-called logical element). In fact, the AT also alleges that the interpretation of the claimant "ignores the ratio of the regime enshrined in the article in question and, likewise, throughout the CIUC".

It is therefore justified to ascertain whether the interpretation that considers the existence of a presumption in article 3 of the CIUC collides with the teleological element, that is, with the purposes (or with the sociological relevance) of what was intended with the rule in question. Now, such purposes are clearly identified at the beginning of the CIUC: "The single vehicle circulation tax follows the principle of equivalence, seeking to burden taxpayers in the measure 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? One can infer that the close link of IUC to the principle of equivalence (or principle of benefit) does not allow the exclusive association of the "taxpayers" referred to therein with the figure of owners but rather with the figure of users (or of economic owners). As was well noted in the Arbitral Decision relating to case No. 73/2013-T: "in truth, the ratio legis of the tax [IUC] rather points in the direction of users of vehicles being taxed, the «economic owner» in the words of Diogo Leite de Campos, the effective owners or financial lessees, since it is these who have the polluting potential causing environmental costs to the community."

In effect, if the said ratio legis were otherwise, how would one understand, for example, the obligation (on the part of entities that carry out vehicle leasing) – and for the purposes of the provision in article 3 of the CIUC and in article 3, No. 1, of Law No. 22-A/2007, of 29/6 – of providing the DGI with data relating to the tax identification of the users of the said vehicles (see article 19)? Should where it says "users", one instead read, disregarding the systematic element, "owners with registration in their name"...?

c) From the above it follows the conclusion that limiting the passive subjects of this tax only to the owners of vehicles in whose name the same are registered – ignoring situations where these no longer coincide with the real owners or the actual users of the same – constitutes a restriction which, in light of the purposes of IUC, finds no basis for support. And, even if one invokes article 6 of the CIUC, as the AT does, to allege "that only the legal situations object of registration [...] give rise to the birth of the tax obligation", it is necessary to keep in mind that such registration generates only a rebuttable presumption, that is, a presumption that can be overcome by 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 the imposition of 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 actually have been proven; and, on the other hand, [it would] avert the duty of the AT to comply with the principle of inquiry established in article 58 of the LGT, that is, the duty to carry out the steps necessary for a correct determination of the factual reality on which its decision must be based (which means, in the present case, the determination of the current and effective owner of the vehicle).

On this point, it is also worth noting that vehicle registration has no constitutive effect, functioning, as aforesaid, 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 Supreme Court of Justice 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 1984 Constitution of the Portuguese Republic and 350, No. 2, of the Civil Code) as well as of the respective ownership, all pursuant to its terms."

In the same sense, the Arbitral Decision relating to case No. 14/2013-T stated, in terms that are followed here: "the essential function of motor vehicle registration is to give publicity to the legal situation of vehicles with the registration not having constitutive effect, functioning (only) as a mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all pursuant to its terms. The presumption that the registered right belongs to the person in whose name it is entered can be rebutted by proof to the contrary."

Now, in the case under analysis here, it is verified that the rebuttal of the presumption (by way of "sufficient proof") was carried out. In effect, despite what the AT alleged in points 79 to 91 of its reply, the Tribunal sees no reason to question the documents that were presented by the claimant, given that the same clearly demonstrate that this was not, at the date of the tax, the owner of the vehicles.

According to information from the AT, present in its reply, at the date of the assessments, the vehicle here in question would still be registered in the name of the company with the legal entity number ..., which, according to information from the Lisbon Motor Vehicle Registry Conservatory, had, at the date of 21/3/1988, the corporate name of D ... –..., S.A..

For its part, the claimant raised the hypothesis that there had been confusion with the "..., whose address is exactly the same as that appearing in the property register of the vehicle – that is, Av. ...".

In one way or another, the fact is that it has been demonstrated in the present proceedings that the claimant was not, at the date of the tax, the owner of the vehicle here in question, having, as was said before, furnished sufficient proof to rebut the presumption based on the register.

In the present case, such rebuttal was not made, as often happens, through the presentation of invoices that prove the sale of the vehicles at a time prior to that of the tax obligation, but through another equally suitable means (see iii) of the proven factual matter): the presentation of documents that prove that B... – Sociedade Imobiliária, S.A., was dissolved in 2006 (see General Assembly minutes of 28/11/2006 and respective permanent certificate of cancellation of registration: see Doc. No. 4), having ceased its activity on 29/12/2006, as per declaration submitted to the Maia Finance Office, on 10/1/2007 (see Doc. No. 5).

Now, in this regard, and as was well noted in the Arbitral Decision relating to case No. 27/2013-T, dated 10/9/2013, "the documents presented, particularly the copies of the invoices supporting [the sales], [...] embody means of proof with sufficient force and suitable to rebut the presumption based on the register, as provided for in No. 1 of article 3 of the CIUC, documents that, moreover, enjoy the presumption of truthfulness provided for in No. 1 of article 75 of the LGT."

  1. It is concluded, in face of what was above stated [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.

  2. First of all, it should be noted that, despite the AT having referred, in its defence, to a supposed claim of the claimant to the recognition of the right to indemnity interest, such claim is not found in the initial petition. Thus, it remains to assess the request for "compensation to the Claimant for the expenses resulting from the litigation".

As to the said request, it is concluded that the same is unfounded, given that, as referred to, for example, in the recent decision of the Administrative Court of Appeal of 12/6/2014, case 6224/12, "the costs of the arbitral process (commonly called, arbitration fee), comprise the expenses resulting from the conduct of the arbitral process and the fees of the arbitrators, pursuant to article 2, No. 1, of the Regulation of Costs in Tax Arbitration Processes, but do not cover the compensation for other expenses resulting from the litigation, nor the fees of legal representatives."

In these terms, it is likewise concluded that there is no ground (nor could there be ground) for compensation for other expenses resulting from the litigation beyond those referred to in article 2, No. 1, of the Regulation of Costs in Tax Arbitration Processes.

IV – Decision

In face of the above stated, it is decided:

  • To judge the request for arbitral decision founded, with the consequent annulment, with all legal effects, of the impugned acts of assessment.
  • To judge unfounded the request insofar as it concerns the payment to the claimant of "expenses resulting from the litigation".

The value of the process is set at €106.28 (one hundred and six euros and twenty-eight cents), pursuant to article 32 of the Code of Administrative Procedure and article 97-A of the Code of Tax Procedure, applicable by virtue of the provision in article 29, No. 1, para. a) and b), of the RJAT, and article 3, No. 2, of the Regulation of Costs in Tax Arbitration Processes (RCPAT).

Costs charged to the respondent in the amount of €306.00 (three hundred and six euros), pursuant to Table I of the RCPAT, and in compliance with the provisions in articles 12, No. 2, and 22, No. 4, both of the RJAT, and the provision in article 4, No. 4, of the cited Regulation.

Notify.

Lisbon, 2 March 2015.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, pursuant to the provision in article 131, No. 5, of the Code of Civil Procedure, applicable by remission of article 29, No. 1, para. e), of the RJAT.

The drafting of the present decision is governed by the orthography prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Who is liable for IUC when the registered vehicle owner company has been dissolved before the tax year?
When a registered vehicle owner company has been dissolved before the tax year, IUC liability generally remains attached to the legal entity as registered, with the liquidator responsible for the extinct company's tax obligations. Under Article 3 of the IUC Code, tax liability follows registration records regardless of the company's dissolution status. The liquidator may challenge the assessment by proving the company never owned the vehicle or that registration records contain errors, but dissolution alone does not automatically terminate IUC obligations tied to vehicle registration in the company's name.
Can the presumption of vehicle ownership under Article 3 of the IUC Code be rebutted in tax arbitration?
The rebuttability of the Article 3 presumption is highly contested. The Tax Authority argues Article 3 establishes an irrebuttable legal fiction deliberately linking tax liability to registered ownership, requiring challenges through Motor Vehicle Registration procedures rather than tax arbitration. However, claimants argue it constitutes a rebuttable presumption under Article 73 of the LGT, allowing rebuttal through appropriate evidence in tax proceedings. The tax authority maintains that the legislator intentionally chose registration-based taxation for administrative efficiency, making the registered owner liable regardless of actual civil law ownership, and that accepting rebuttal in tax proceedings would undermine the registration system's certainty.
What happens to IUC liability when vehicle registration records contain errors about the taxpayer's identity?
When vehicle registration records contain errors about the taxpayer's identity, the situation creates significant liability issues. The registered entity remains prima facie liable for IUC even if registration data is incorrect. To challenge such liability, the taxpayer must provide substantial evidence proving: (1) they never owned the vehicle, (2) registration errors exist (such as incorrect addresses or confusion between similarly-named entities), and (3) another identifiable entity is the actual owner. The Tax Authority may argue that registration corrections must be pursued through administrative Motor Vehicle Registration channels before tax liability can be contested, though taxpayers contend they can rebut incorrect registrations directly in tax proceedings under general evidentiary rules.
How does CAAD arbitration handle IUC liquidation disputes involving extinct companies and their liquidators?
CAAD arbitration handles IUC disputes involving extinct companies by accepting jurisdiction over liquidators acting on behalf of dissolved entities challenging tax assessments. The tribunal examines whether: (1) the assessment was properly directed to the correct legal entity, (2) the extinct company had any connection to the vehicle during relevant tax periods, (3) registration records accurately identify the taxpayer, and (4) the liquidator has standing to contest assessments. Key issues include whether the tribunal has competence to determine vehicle ownership questions or whether such matters require prior resolution through registration authorities. Procedural questions arise regarding evidentiary burdens when dissolved companies lack complete historical records to prove non-ownership.
What evidence is required to challenge IUC subjective incidence based on incorrect vehicle registration data?
To challenge IUC subjective incidence based on incorrect vehicle registration data, taxpayers must provide robust evidence including: (1) official registration certificates showing discrepancies (addresses, corporate names, legal entity numbers), (2) corporate documentation proving the registered entity never held or transferred the vehicle, (3) evidence identifying the actual vehicle owner (such as registration history showing different entities with similar names), (4) dissolution records showing the company ceased operations before the tax period, and (5) searches demonstrating registration confusion between distinct legal entities. However, the Tax Authority argues such evidence may be insufficient in tax proceedings, insisting registration corrections must follow Motor Vehicle Registration Regulation procedures, with tax liability following official registration records until administratively corrected through proper channels.