Process: 647/2014-T

Date: May 12, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

Process 647/2014-T before CAAD (Centro de Arbitragem Administrativa) involved a financial credit company, A... Financial Credit Company, S.A., challenging multiple disallowances by the Portuguese Tax and Customs Authority regarding IUC (Imposto Único de Circulação - Single Circulation Tax) assessments from 2008 to 2012. The dispute centered on the subjective incidence of IUC in financial leasing arrangements, specifically whether the financial leasing company (lessor) could be held liable for IUC on vehicles under leasing contracts. The claimant contested eight express disallowances of hierarchical appeals and gracious claims for 2008, plus three deemed disallowances of gracious claims for 2009-2012, totaling significant amounts. Under Portuguese tax law, particularly the IUC Code (Law 22-A/2007 of June 29), the determination of who bears tax liability in financial leasing (locação financeira) arrangements is crucial. The general principle is that the IUC taxpayer is the person in whose name the vehicle is registered, but financial leasing creates a special situation where the lessor holds legal ownership while the lessee has possession and use. The case represents a common challenge for financial institutions engaged in vehicle leasing operations, as tax authorities sometimes attempt to assess IUC against lessors rather than lessees. The claimant utilized both hierarchical appeals and gracious claims (reclamação graciosa) as administrative remedies before resorting to tax arbitration, demonstrating the multi-layered challenge procedure available under Portuguese administrative tax law for contesting allegedly unlawful tax assessments.

Full Decision

ARBITRAL DECISION

CAAD: Tax Arbitration

Case No. 647/2014-T

I – REPORT

  1. On September 1, 2014, the Claimant, A… – … FINANCIAL CREDIT COMPANY, S.A., tax identification number …, with registered office in …, requested the establishment of an arbitral tribunal from CAAD, pursuant to Article 10 of Decree-Law No. 10/2011 of January 20 (Legal Framework for Arbitration in Tax Matters, hereinafter referred to only as RJAT), in which the Tax and Customs Authority is the Respondent, with a view to reviewing the legality of the disallowance acts that fell upon the processes hereinafter identified (which were conducted with the Tax Office of … 2):

i. Express Disallowance of Hierarchical Appeal No. ...2013... relating to 2008, notified to the claimant on April 28, 2014, in the amount of EUR 354.75, according to Table No. 1:

Registration Year Amount Document Case
…-…-… 2008 61.90 € 2008 … ...2013...
…-…-… 2008 61.90 € 2008 … ...2013...
…-…-… 2008 59.52 € 2008 … ...2013...
…-…-… 2008 151.19 € 2008 … ...2013...
…-…-… 2008 20.24 € 2008 … ...2013...

ii. Express Disallowance of Gracious Claim No. ...2013... relating to 2008, notified to the Claimant on August 4, 2014, in the amount of EUR 101.43, according to Table No. 2:

Registration Year Amount Document Case
…-…-… 2008 8.21 € 2008 … ...2013...
…-…-… 2008 5.87 € 2008 … ...2013...
…-…-… 2008 20.12 € 2008 … …2013…
…-…-… 2008 5.88 € 2008 … …2013…
…-…-… 2008 61.35 € 2008 … ...2013...

iii. Express Disallowance of Gracious Claim No. ...2013... relating to 2008, notified to the Claimant on August 4, 2014, in the amount of EUR 87.46, according to Table No. 3:

Registration Year Amount Document Case
…-…-… 2008 54.13 € 2008 … ...2013...
…-…-… 2008 33.33 € 2008 … ...2013...

iv. Express Disallowance of Gracious Claim No. ...2013..., relating to 2008, notified to the Claimant on August 4, 2014, in the amount of EUR 419.53, according to Table No. 4:

Registration Year Amount Document Case
…-…-… 2008 59.52 € 2008 … ...2013...
…-…-… 2008 54.76 € 2008 … ...2013...
…-…-… 2008 33.33 € 2008 … ...2013...
…-…-… 2008 147.28 € 2008 … ...2013...
…-…-… 2008 59.52 € 2008 … ...2013...
…-…-… 2008 5.92 € 2008 … ...2013...
…-…-… 2008 33.33 € 2008 … ...2013...
…-…-… 2008 20.00 € 2008 … ...2013...
…-…-… 2008 5.87 € 2008 … ...2013...

v. Express Disallowance of Hierarchical Appeal No. ...2013... relating to 2008 notified to the Claimant on April 28, 2014, in the amount of EUR 81.96, according to Table No. 5:

Registration Year Amount Document Case
…-…-… 2008 61.90 € 2008 … ...2013...
…-…-… 2008 20.06 € 2008 … ...2013...

vi. Express Disallowance of Gracious Claim No. ...2013... relating to 2008, notified to the Claimant on August 4, 2014, in the amount of EUR 40.12, according to Table No. 6:

Registration Year Amount Document Case
…-…-… 2008 20.00 € 2008 … ...2013...
…-…-… 2008 20.12 € 2008 … ...2013...

vii. Express Disallowance of Hierarchical Appeal No. …2013… relating to 2008, notified to the Claimant on April 28 and 2014, in the amount of EUR 1,655.01, according to Table No. 7:

[Table with 33 entries containing registration numbers, year 2008, various amounts in EUR, 2008 documents, and case references ...2013...]

viii. Express Disallowance of Hierarchical Appeal No. …2013… relating to 2008 notified to the Claimant on April 28 and 2014 in the amount of EUR 1,091.64, according to Table No. 8:

[Table with 22 entries containing registration numbers, year 2008, various amounts in EUR, 2008 documents, and case references ...2013...]

ix. Deemed Disallowance of Gracious Claim No. ...2014... relating to 2009/12, filed on April 4, 2014, in the amount of EUR 3,823.45, according to Table No. 9:

[Large table with entries for years 2009-2012, various amounts in EUR, documents from those years, and case references ...2014...]

x. Deemed Disallowance of Gracious Claim No. ...2014..., filed on April 4, 2014, relating to 2009/12 in the amount of EUR 19,145.72, according to Table No. 10:

[Large table with entries for years 2009-2012, various amounts in EUR, documents from those years, and case references ...2014...]

xi. Deemed Disallowance of Gracious Claim No. ...2014... relating to 2009/12, filed on April 4, 2014, in the amount of EUR 12,231.51, according to Table No. 11:

[Large table with entries for years 2009-2012, various amounts in EUR, documents from those years, and case references ...2014...]

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) on vehicles under a financial leasing agreement in Portugal?
Under Portuguese law, specifically Article 3 of the IUC Code (Law 22-A/2007), the person liable for IUC on vehicles under financial leasing is the lessee (the person who uses the vehicle), not the lessor (the financial leasing company). Despite the financial institution being the legal owner registered in the vehicle registry, the tax liability falls on the lessee who has possession and effective use of the vehicle during the leasing period. This principle reflects the economic reality that the lessee benefits from using the vehicle and should bear the associated circulation tax.
Can a financial leasing company be held responsible for paying IUC on leased vehicles?
Generally, a financial leasing company should not be held responsible for paying IUC on leased vehicles under Portuguese tax law. The IUC Code establishes that the taxpayer is the person who has the economic benefit and use of the vehicle, which in financial leasing arrangements is the lessee, not the financial institution providing the financing. However, tax authorities sometimes incorrectly assess IUC against leasing companies, leading to disputes like Process 647/2014-T, where the financial credit company challenged such assessments through hierarchical appeals and gracious claims before seeking arbitration at CAAD.
What does Portuguese tax law say about the subjective incidence of IUC in financial leasing (locação financeira)?
Portuguese tax law on IUC's subjective incidence in financial leasing (locação financeira) is governed by the IUC Code, which prioritizes the economic substance over legal form. While the financial leasing company may appear as the registered owner in vehicle documentation, the law recognizes that the lessee is the actual user and beneficiary of the vehicle's circulation. Therefore, the lessee is the proper IUC taxpayer. Article 3 of the IUC Code establishes the criteria for determining taxpayer status, focusing on who has the vehicle's availability and use rather than mere formal ownership.
How did CAAD rule on the tax liability dispute between a financial credit company and the Portuguese Tax Authority in Process 647/2014-T?
While the complete decision text is not provided in the excerpt, Process 647/2014-T shows that the financial credit company challenged numerous IUC assessments totaling thousands of euros for tax years 2008-2012. The company contested both express disallowances of hierarchical appeals and gracious claims, as well as deemed disallowances (tacit rejections after administrative silence). The dispute centered on whether the Tax and Customs Authority could lawfully assess IUC against the financial leasing company rather than the lessees who actually used the vehicles. CAAD arbitration was sought after administrative remedies were exhausted.
What is the procedure for challenging IUC tax assessments through hierarchical appeal and gracious complaint (reclamação graciosa) in Portugal?
The procedure for challenging IUC tax assessments in Portugal involves multiple stages: First, taxpayers may file a gracious claim (reclamação graciosa) directly with the Tax Authority within a specific deadline, requesting review of the assessment. Second, if dissatisfied with the initial decision, taxpayers can file a hierarchical appeal (recurso hierárquico) to a superior administrative authority. Third, if administrative remedies fail or result in deemed disallowance through administrative silence (typically after a statutory period without response), taxpayers can resort to tax arbitration at CAAD (Centro de Arbitragem Administrativa) under the RJAT framework (Decree-Law 10/2011), or alternatively pursue judicial review in administrative courts. Process 647/2014-T demonstrates this multi-tiered system, with the claimant having exhausted both gracious claims and hierarchical appeals before initiating arbitration proceedings.