Process: 648/2016-T

Date: May 27, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration decision (Process 648/2016-T) addresses the subjective incidence of IUC (Vehicle Circulation Tax) when a vehicle importer registers vehicles that were already sold to dealers before registration. The applicant, an exclusive brand importer, contested 76 IUC self-assessments totaling €10,331.54 for 2013-2014, arguing that Article 3 of CIUC establishes owners as IUC taxpayers, not mere registrants. The importer demonstrated through sales invoices that ownership had transferred to dealers before the registration dates, seeking to rebut the legal presumption that registered persons are owners. The case illustrates the procedural requirement to exhaust administrative remedies (reclamação graciosa) before accessing tax arbitration under RJAT (Decree-Law 10/2011). The applicant invoked established CAAD jurisprudence holding that registration creates only a rebuttable presumption of ownership, which can be overcome with documentary evidence such as sales invoices proving prior transmission of ownership. The tribunal found sufficient elements to decide without hearing testimony, emphasizing that vehicle ownership transfers by mere contract effect under Portuguese civil law, independent of registration or physical delivery. The decision clarifies that IUC liability follows actual ownership and vehicle use (the polluter-pays principle under Article 1 CIUC), not merely formal registration. This ruling is significant for importers and dealers in understanding IUC subjective incidence and the evidentiary standards for rebutting ownership presumptions in tax arbitration proceedings.

Full Decision

ARBITRAL DECISION

I – REPORT

1.1. A…, S.A. – Branch in Portugal, Collective Person No. …, with registered office at …, …, … (hereinafter referred to as the "applicant"), hereby contests the dismissal dispatch dated 7/7/2016 from the Large Taxpayers Unit (AT), which dismissed the administrative claim filed against 76 Vehicle Circulation Tax (IUC) self-assessments and compensatory interest relating to the years 2013 and 2014, in the total amount of €10,331.54, having, for this purpose, filed, on 28/10/2016, a petition for establishment of an arbitral tribunal and arbitral decision, pursuant to the provisions of articles 2.º, no. 1, paragraph a), and 10.º, no. 1, paragraph a), of Decree-Law no. 10/2011, of 20/1 (Legal Regime of Arbitration in Tax Matters, hereinafter referred to simply as "LRAT"), in which the Tax and Customs Authority (AT) is named as respondent, with the purpose of seeking: "a) the annulment, on grounds of illegality, of the dismissal dispatch of the Administrative Claim; b) the annulment of the IUC and CI self-assessments contested herein, with the consequent restitution of the entire IUC/CI unduly paid, Euro 10,331.54; c) the recognition of the Applicant's right to compensatory interest, in accordance with legal terms; d) the condemnation of the Respondent to payment of the arbitral fee and other costs, if any."

1.2. On 16/1/2017 the present Singular Arbitral Tribunal was constituted.

1.3. Pursuant to art. 17.º, no. 1, of the LRAT, the AT was summoned, as respondent party, to file its answer, on the terms and for the purposes of the aforementioned article. The AT filed its answer on 15/2/2017, having argued, in summary, the total lack of merit of the Applicant's petition.

1.4. By virtue of the provisions of art. 16.º, paragraph c), of the LRAT, the present Tribunal considered it unnecessary to hold the hearing provided for in art. 18.º of the LRAT and that the proceedings should proceed to decision. Pursuant to the provisions of arts. 16.º, paragraphs c) and e), and 19.º, of the LRAT, the Tribunal also considered, in its dispatch of 13/3/2017, that the production of testimonial evidence was unnecessary, understanding that there were in the file sufficient elements, both factual and legal, to render the decision. On these terms, the date of 27/3/2017 was set, by arbitral dispatch of 16/3/2017, for the rendering of the arbitral decision.

1.5. The Arbitral Tribunal has been regularly constituted, is materially competent, the proceedings do not suffer from defects that would invalidate it, and the Parties have standing and legal capacity, being duly legitimate.

II – ALLEGATIONS OF THE PARTIES

2.1. The Applicant alleges, in its petition, that: a) "the dismissal dispatch of the administrative claim contested herein, as well as those IUC and CI self-assessments, suffer from error in the factual premises and from the vice of breach of law - whereby the illegality of that dispatch and those self-assessments should be declared"; b) "the Applicant is the exclusive importing company of all motor vehicles of brand B… for the national market"; c) "all imported vehicles are imported upon prior request from dealers, submitted electronically (via webpage) to the Applicant – and consequently, by C… to the factory. Once imported, all vehicles are immediately sold to dealers of the brand, who in turn sell them to end customers. That is, when a vehicle is imported, it already has a buyer. Once they arrive in Portugal, the vehicles are immediately invoiced by the Applicant to the dealers and immediately delivered at the dealers' premises - either for immediate delivery to the end customer, or simply to remain in the showroom, in the dealer's stand, for purely exhibition purposes (cases of launching new models) and/or awaiting an interested customer. […]. When vehicles are sent from dealers to customers, the ownership registration is changed to the name of the end customer. […]. […] on the date of the registration request the vehicles in question had already been invoiced/sold by the Applicant to the dealers"; d) "thus, once imported, all vehicles are immediately sold to dealers of the brand, some of which are part of the same economic group, who in turn sell them to end customers - who will be the users of the vehicles and in whose interest they are put into road traffic"; e) "pursuant to article 3.º of the CIUC (Subjective Scope), in the version applicable to 2013 and 2014, [...] the taxpayers subject to IUC are the owners of the vehicles, to whom are equated financial lessees, purchasers with reservation of ownership in favor of the seller. It being certain that, after selling them to third parties, the Applicant never resumes ownership of the vehicles - since it is not a mere automobile dealer, but rather the national importer of the brand"; f) "for purposes of IUC, having the vehicles in question been sold by the Applicant before the date of their respective registration, it is evident that the Applicant was not the owner thereof on the dates of the registrations – whereby it is not subject to IUC and respective CI. It should be noted that the Applicant's sales to dealers occur precisely on the date of issuance of invoices by the Applicant to the dealers – which, therefore, document those same sales. And here are attached the sales invoices for the vehicles to the dealers, which document and demonstrate precisely the sale of the vehicles to the dealers at a time prior to their registration"; g) "from the above it follows that the Applicant is not the user of the vehicles that the IUC sought to burden – the Applicant, in its activity as importer of the vehicles, does not produce any "environmental and road cost" or "wear of public goods", not being the "polluter-payer" that the IUC legislator intended to tax (see article 1.º of the CIUC)"; h) "as mentioned above, the vehicles in question, listed in the document attached hereto as doc. 5 (whose contents, for brevity of exposition, are hereby considered fully reproduced for all legal purposes), were not the property of the Applicant on the dates of their respective registrations, contrary to what is presumed by the AT. In fact, on the dates of registration of these vehicles the Applicant had already sold them to third parties (to the aforementioned dealers), as is demonstrated from copies of their respective sales invoices (and subsequent Vehicle Tax debits, as explained and exemplified above), attached hereto collectively as doc. 6 - whose contents, for brevity of exposition, are also hereby considered fully reproduced for all legal purposes"; i) "the self-assessments contested herein, relating to these vehicles, are illegal, either by error in the factual premises or by the vice of breach of law, namely the provisions of articles 1.º, 2.º no. 1 a) and d), 3.º, 4.º, 6.º and 11.º of the CIUC"; j) "although the IUC is due by owners of vehicles – in this case, on the date of registration, as it concerns the IUC relating to the registration year - it is unanimous jurisprudence of the CAAD that the persons in whose name vehicles are registered or recorded can rebut the (mere) legal presumption of ownership arising from that registration or motor vehicle record"; l) "the transmission of motor vehicle ownership takes place by mere effect of the purchase and sale agreement, not being dependent on any subsequent act for its constitution or for it to become effective, legal and juridical, such as the delivery of the thing or registration"; m) "the same CAAD jurisprudence further stresses that 'The documents presented, particularly copies of the invoices that support, from the outset, the sales relating to the thirty-seven vehicles aforementioned, that is, the vehicles whose ownership was transferred to the ex-lessees on dates prior to those on which the IUC was due, embody means of proof with sufficient force and adequate to rebut the presumption founded on the register, such as established in no. 1 of art. 3.º of the CIUC, documents which, moreover, enjoy the presumption of truthfulness provided for in no. 1 of art. 75.º of the LGT.' In fact, the Applicant benefits from the presumption of truthfulness and good faith enjoyed by the documents presented to prove the transmission of ownership of the vehicles – as is the case with the sales invoices for the vehicles attached hereto (see article 75.º, no. 1, of the LGT)"; n) "by means of the sales invoices attached hereto, the Applicant demonstrates that it sold the vehicles in question before the date of their registration – which, on the terms referred to, constitutes factual impediment to the AT's right of taxation (legally presumed), since the IUC, in the year of registration, falls upon the owner (or equivalent) on the date of registration"; o) "not being tax due, for the reasons aforesaid, nor are any CI equally due, being ancillary to the main tax, on the basis of which they are levied and on which they depend. […]. […] the compensatory interest, in this specific case, suffer from the vice of breach of the provisions of articles 94.º of the CIRC and 35.º of the LGT"; p) "given that the self-assessments contested herein have been paid, beyond the refund of the IUC and CI unduly paid, the Applicant has the right to compensatory interest, due to error of fact and law by the AT in demanding this IUC and CI, pursuant to articles 43.º and 100.º of the LGT."

2.2. The Applicant requests, in light of the above: "a) the annulment, on grounds of illegality, of the dismissal dispatch of the Administrative Claim; b) the annulment of the IUC and CI self-assessments contested herein, with the consequent restitution of the entire IUC/CI unduly paid, Euro 10,331.54; c) the recognition of the Applicant's right to compensatory interest, in accordance with legal terms; and d) the condemnation of the Respondent to payment of the arbitral fee and other costs, if any."

2.3. For its part, the AT alleges, in its answer, that: a) "the arguments invoked by the Applicant cannot possibly proceed, insofar as it makes an erroneous interpretation and application of the legal norms applicable to the case sub judice, notoriously erroneous"; b) "from the articulation between the scope of the subjective scope of the IUC and the constitutive fact of the corresponding tax obligation, it follows unequivocally from article 6.º of the CIUC the legal situations that generate the birth of the tax obligation, namely registration or registration in national territory"; c) "it is peremptory that, pursuant to article 24.º of the RRA, the importer appears in the register as the first owner of the vehicle and in that sense is, in accordance with what is established in articles 3.º and 6.º of the CIUC, a taxpayer subject to tax"; d) "the taxable event is assessed by registration or by record, expressly establishing article 24.º of the RRA that, once the Vehicle Tax has been paid and the registration requested, the vehicle is automatically registered in the name of the importer, that is, of the Applicant. Therefore, having the Applicant requested, completed the DAV, paid the Vehicle Tax and requested the registration certificate, it inevitably fulfills the constitutive fact of the tax (objective/subjective scope), and the tax is exigible in accordance with article 3.º of the CIUC. That is, regardless of whether the Applicant proceeds to sell the vehicle to its customers, such fact, in light of the constitutive fact established in article 6.º of the CIUC, is manifestly inoperative, insofar as the legislator expressly established that the constitutive fact is attested by the attribution of registration"; e) "it is unequivocal that, with the emergence of the tax event upon attribution of registration pursuant to article 6.º of the CIUC and being the Applicant as importer of the vehicles requesting the attribution of registration, it fulfills the scope of incidence, being subject to tax. Even though, despite the Applicant alleging that on the date of attribution of registration it had already proceeded to sell the vehicles to its customers, such fact is irrelevant for purposes of application of article 6.º of the CIUC"; f) "establishing article 6.º of the CIUC registration as the constitutive fact of the tax, this is exigible with its issuance independently of whether registration occurs in the name of another owner"; g) "the understanding advocated by the Applicant not only incurs an skewed reading of the letter of the law, but also the adoption of an interpretation that does not heed the systematic element, violating the unity of the regime established throughout the CIUC and, more broadly, throughout the entire legal-fiscal system and also stems from an interpretation that ignores the ratio of the regime established in the article at issue, and equally, throughout the CIUC"; h) "it is imperative to conclude that, in the case of the present arbitration proceedings, the legislator expressly and intentionally established that the following are to be considered as such [as owners or in the situations provided for in no. 2, the persons therein stated] the persons in whose name the same [the vehicles] are registered, 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. In light of this wording it is manifestly not possible to claim that this is a presumption, as the Applicant contends"; i) "article 3.º of the CIUC does not contain any legal presumption"; j) "also the systematic element of interpretation of the law demonstrates that the solution advocated by the Applicant is untenable, finding the understanding supported by the latter no support in the law"; l) "in light of a teleological interpretation of the regime established throughout the CIUC, the interpretation advocated by the Applicant, in the sense that the taxpayer of the tax is the effective owner, independently of not appearing in the motor vehicle register the registration of that quality, is manifestly erroneous"; m) "the tax acts in question do not suffer from any vice of breach of law, insofar as in light of the provisions of article 3.º, nos. 1 and 2, of the CIUC and article 6.º of the same code, it was the Applicant, in the capacity of owner, the taxpayer subject to the IUC"; n) "the alleged invoices are not capable of proving the celebration of a synallagmatic contract such as purchase and sale, as such documents do not by themselves reveal an indispensable and unequivocal declaration of intent (i.e., acceptance) by the supposed acquirers"; o) "all invoices supplied by the Applicant do not demonstrate, expressly and unequivocally in themselves (in light of what is stated therein), the supposed transmission of motor vehicle ownership"; p) "not containing the invoices relating to the supposed sales any registration numbers, then obviously there is no computer system which, through the crossing of the information contained in those invoices with information from the Property Transfer Tax and the National Registry Institute, can determine transfers of ownership"; q) "analyzing the liquidations placed in question it is apparent that all elements relating to the liquidation of compensatory interest were notified to the Applicant, namely: the applicable legal provisions, the nature and quantification of the tax act, the taxation period, calculation period, base amount, rate and amount of interest calculated. […]. Thus, as results from the above, the notification of compensatory interest in question was effected and duly founded in accordance with the law, informing the taxpayer of the reasons of fact and law that determined the liquidation. […]. In summary, in light of all the above it is necessary to conclude that the liquidations of compensatory interest are duly founded in accordance with the law, not suffering from any vice"; r) "the understanding advocated by the Applicant with a view to eliminating the subjective scope and taxation of the IUC has no legal support and violates the constitutional principles of legality and tax justice, of taxpaying capacity, equality, legal certainty and security"; s) "even if as an academic hypothesis and without conceding that the Singular Arbitral Tribunal comes to conclude the merits of the arbitration petition filed by the Applicant, it is important to note the following: […] the competence for motor vehicle registration is not within the sphere of the Respondent, but rather assigned to various external entities, namely to the Institute of Registries and Notaries to whom it falls to convey to the Respondent the alterations that may occur as to the ownership of motor vehicles. […]. On the other hand, the transmission of ownership of motor vehicles is not susceptible to being controlled by the Respondent, as there is no accessory declaratory obligation as to this matter, contrary to the control that is capable of being carried out, for example, by way of prior payment of the Municipal Tax on the Transmission of Real Property in the matter of transmission of property"; t) "from all that has been stated above it is clear that the tax acts in question are valid and legal, because in conformity with the legal regime in force on the date of the tax facts, whereby, in this case, there was no error attributable to the services. Accordingly, the legal requirements that confer the right to compensatory interest are not met. But even if that were not the case [...] it is undeniable that the Respondent merely complied with article 3.º/1 of the CIUC [...], whereby also by this reasoning the recognition of the right to payment of compensatory interest will necessarily have to fail."

The AT concludes that "the present arbitration petition should be judged without merit, maintaining in the legal order the tax liquidation acts contested and accordingly absolved the Respondent of the petition."

III – PROVEN, UNPROVEN FACTS AND RESPECTIVE GROUNDS

3.1. The following facts are considered proven:

i) The now Applicant is the exclusive importing company of all motor vehicles of brand B… for the national market. All imported vehicles are imported upon prior request from dealers, submitted electronically (via webpage) to the Applicant – and consequently, by C… to the factory. Once imported, all vehicles are immediately sold to dealers of the brand, who in turn sell them to end customers.

ii) The now Applicant proceeded to the voluntary payment of alleged outstanding IUC, relating to the vehicles identified in the arbitration petition and relating to the years 2013 and 2014, in the total amount involved, of €10,331.54 (see Doc. no. 3 attached to the present file).

iii) On a date prior to that to which the tax pertained, the vehicles in question here were not the property of the now Applicant, as can be observed from reading Doc. no. 6 attached to the present file – which, given its length, will be considered fully reproduced herein. All sales are supported by their respective sales invoices, which are duly identified.

iv) When vehicles are sent from dealers to customers, the ownership registration is changed to the name of the end customer. Although in an initial phase the registration and record of the vehicles is done in the name of the Applicant, on the date of the registration request the dealer is already the owner thereof. That is, on the date of the registration request the vehicles in question had already been invoiced/sold by the Applicant here to the dealers. Since the vehicles were sold to the dealers before the date of their registration, those sales invoices cannot contain the respective registration numbers, containing only the chassis numbers of the vehicles sold to the dealers, as results from the contents of the invoices whose copies are included in Doc. no. 6 attached to the present file.

v) The now Applicant filed an administrative claim (no. …2016…), which was expressly dismissed. On 28/10/2016, the Applicant filed, from the aforementioned dismissal decision and from the (76) acts of IUC liquidation referred to (vehicles listed in Doc. no. 5 attached to the present file), the present arbitration petition.

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

3.3. The facts considered pertinent and proven (v. 3.1) are grounded in the analysis of the positions exposed by the parties and the documentary evidence attached to the file.

IV – ON THE LAW

In the present case, there are four disputed legal issues: 1) whether article 3.º of the CIUC contains a presumption and whether the rebuttal thereof was made; 2) whether, as the AT alleges, the interpretation of the now Applicant does not heed the systematic and teleological elements of interpretation of law; 3) whether, as the AT alleges, "the interpretation conveyed by the Applicant [...] shows itself contrary to fundamental law"; and 4) whether compensatory interest is owed to the Applicant.

Let us examine them.

  1. and 2) The first two legal issues converge in the direction of the interpretation of art. 3.º of the CIUC, whereby it proves necessary to: A) determine whether the rule of subjective scope, contained in said art. 3.º, establishes or does not establish a presumption; B) determine whether, in considering that this rule establishes a presumption, this violates the "unity of the regime", or disregards the systematic and teleological element; C) determine – admitting that the presumption exists (and that it is presumptio iuris tantum) – whether the rebuttal thereof was made.

A) Article 3.º, nos. 1 and 2, of the Vehicle Circulation Tax Code, has the following wording, which is reproduced here:

"Article 3.º – Subjective Scope

1 - The taxpayers subject to 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, acquirers with reservation of ownership, as well as other holders of purchase option rights by virtue of the lease contract".

The interpretation of the cited legal text is, naturally, essential for the resolution of the case under analysis. In that measure, it proves necessary to resort to art. 11.º, no. 1, of the LGT, and, by reference thereto, to art. 9.º of the Civil Code (CC).

Now, pursuant to the aforementioned art. 9.º of the CC, interpretation proceeds from the letter of the law and aims, through it, to reconstruct the "legislative thinking". The same is to say (regardless of the objectivism-subjectivism dispute) that literal analysis is the basis of the interpretive task and the systematic, historical or teleological elements are guides to orient the aforementioned task.

The literal apprehension of the legal text in question does not generate - even though the separation thereof from the ascertainment, even if minimal, of the respective meaning is highly debatable - the notion that the expression "considering-se as such" means something different from "presuming-se as such". Indeed, we would hardly find authors who, in a task of pre-understanding of the aforementioned 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.º, 369.º, no. 2, 374.º, no. 1, 376.º, no. 2, and 1629.º. And, with particular interest, the case of the expression "considers-se", contained in art. 21.º, no. 2, of the CIRC. As point out Diogo Leite Campos, Benjamin Silva Rodrigues and Jorge Lopes de Sousa, regarding that article of the CIRC: "in addition to this rule evidencing that what is at stake in the taxation of capital gains is ascertaining real value (that of the market), the limitation on ascertaining real value derived from the rules for determining the taxable value provided for in the Corporate Income Tax Code cannot fail to be considered as a presumption in matters of incidence, whose rebuttal is permitted by article 73.º 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 affirm 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 a basis for presumptions. And, among these, the expressions "considers-se as" or "considering-se as" assume, as we have seen, prominence.

If literal analysis is merely the basis of the task, it naturally proves essential to evaluate the text in light of the other elements (or sub-elements of the so-called logical element). Indeed, the AT also alleges that the Applicant's interpretation does not heed the systematic element and that, in light of a teleological interpretation of the regime established throughout the CIUC, the interpretation advocated by the now Applicant is erroneous.

It is justified, therefore, to investigate whether the interpretation that considers the existence of a presumption in art. 3.º 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 taxpayers in the measure of the environmental and road cost that these cause, in implementation of a general rule of tax equality" (see art. 1.º of the CIUC).

What can be inferred from this article 1.º? It can be inferred that the close connection of the 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 the owners but rather with the figure of the users (or of the economic owners). As was well noted in the Arbitral Decision rendered in case no. 73/2013-T: "in truth, 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 effective owners or financial lessees, as it is these who have the polluting potential causing the environmental costs to the community."

C) From the above it follows the conclusion that limiting the taxpayers subject to this tax only to the owners of the vehicles in whose names the same are registered - ignoring situations in which these no longer coincide with the real owners or real users thereof - constitutes a restriction that, in light of the purposes of the IUC, does not find a basis for support. And, even if it is alleged that the legislator's intention was that, for purposes of IUC, those considered owners are those who, as such, appear in the motor vehicle register, it is necessary to bear in mind that such register, in light of what was said previously, generates only a rebuttable presumption, i.e., a presumption that can be set aside by the presentation of contrary evidence. In this sense, see, for example, the Decision of the Administrative Court of Appeal of 19/3/2015, case 8300/14: "The […] art. 3.º, no. 1, of the CIUC, establishes a legal presumption that the holder of the motor vehicle register is its owner, and such presumption is rebuttable".

It would, moreover, be unjustified to impose a kind of irrebuttable presumption, since, without an apparent reason, one would be imposing a (admittedly disputable) formal truth to the detriment of what really could and would have been proven; and, on the other hand, it would set aside the duty of the AT to comply with the inquisitorial principle established in art. 58.º of the LGT, i.e., the duty to carry out the necessary diligences for a correct determination of the factual reality on which its decision should be based (which means, in the present case, the determination of the current and actual owner of the vehicle).

Furthermore, if one did not allow the seller to rebut the presumption contained in art. 3.º of the CIUC, one would be benefiting, without a plausible reason, purchasers who, in possession of correctly filled and signed purchase contract forms, and enjoying the advantages associated with their condition as owners, attempted to exempt themselves, by way of a "registry formalism", from the payment of tolls or fines.

In this regard, it is also worth noting that vehicle registration does not have constitutive effect, functioning, as was said before, as a rebuttable presumption that the holder of the register 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: "The register does not have constitutive effect, as it is intended to give publicity to the registered act, functioning (only) as mere presumption, rebuttable, (presumption "juris tantum") of the existence of the right (arts. 1.º, no. 1 and 7.º, of the Constitutional Charter 84 and 350.º, no. 2, of the Civil Code) as well as of the respective ownership, all on the terms contained therein."

In the same sense, the Arbitral Decision rendered in case no. 14/2013-T stated, in terms that are here accompanied: "the essential function of the motor vehicle register is to give publicity to the legal situation of the vehicles not resulting the register having constitutive effect, functioning (only) as mere rebuttable presumption of the existence of the right, as well as of the respective ownership, all on the terms contained therein. The presumption that the right registered belongs to the person in whose name it is inscribed can be rebutted by contrary evidence. Not meeting the AT the requirements of the notion of third party for purposes of registration [circumstance that could prevent the full effectiveness of purchase and sale contracts celebrated], it cannot avail itself of the absence of updating of the register of the right of ownership to challenge the full effectiveness of the purchase and sale contract and to demand from the seller (previous owner) the payment of the IUC due by the purchaser (new owner) as long as the presumption of the respective ownership is rebutted through sufficient proof of the sale."

As is well highlighted in the Arbitral Decision rendered in case 845/2015-T, of 30/10/2015, "article 72.º of the General Tax Law allows the use 'for the knowledge of the facts necessary to the decision of the procedure of all means of proof admitted in law'. The Respondent did not raise any incident of impugning the truthfulness of these means of proof. Moreover, the same did not allege that this means of proof was false, in the case at issue, but only that 'the invoices attached are not documents capable of proving, by themselves alone, the supposed sales of the vehicles in question herein, since they are mere documents unilaterally issued by the Applicant'. Not specifically referring to any case in which the sales were not effected. Furthermore, all invoices must be prepared using certified software, pursuant to Ordinance no. 22-A/2012, of January 24. And the same are used for accounting for VAT and Corporate Income Tax. Therefore, if for purposes of these taxes invoices are accepted by the Tax Authority, there is no reason for, in this case, not to permit their use as means of proof, on the basis of generic speculations."

Note also, with respect to the probative force of invoices, the Arbitral Decision rendered in case no. 27/2013-T, of 10/9/2013, which emphasizes that "the documents presented, particularly copies of the invoices that support, from the outset, the sales [of] the vehicles [...] referenced, [...] embody means of proof with sufficient force and adequate to rebut the presumption founded on the register, such as established in no. 1 of art. 3.º of the CIUC, documents, those, which moreover enjoy the presumption of truthfulness provided for in no. 1 of art. 75.º of the LGT."

In this same sense, see, lastly, the Arbitral Decision rendered in case no. 230/2014-T, of 22/7/2014: "the documentary elements, consisting of copies of the respective sales invoices [...] enjoy the probative force provided for in article 376.º of the Civil Code and the presumption of truthfulness that is conferred by art. 75.º, no. 1, of the LGT, having, thus, suitability and sufficient force to rebut the presumption that supported the liquidations effected. These operations of transmission of ownership are enforceable against the Tax and Customs Authority, insofar as, although facts subject to registration only produce effects in relation to third parties when registered, in light of the provision of art. 5.º, no. 1, of the Land Registration Code [applicable by reference of the Motor Vehicle Registration Code], the Tax Authority is not a third party for purposes of registration, since it is not in the situation provided for in no. 2 of the aforementioned art. 5.º of the Land Registration Code, applicable by force of the Motor Vehicle Registration Code, that is: it has not acquired from a common author incompatible rights. As to proof of sale of vehicles, it can be made by any means, since the Law does not require a specific form, namely, written."

In this sequence, it is also justified to add that it is also evident, in light of the documentary evidence presented, that the Applicant should not be deemed the owner, as can be observed from reading Doc. no. 6 attached to the initial petition – which, given its length, will be considered fully reproduced herein. All sales are supported by their respective sales invoices, which are duly identified – given that such documentary evidence is decisive for purposes of application of the provision of art. 3.º, no. 2, of the CIUC. Indeed, the documentary evidence was made and the truthfulness of those documents was not challenged by the Respondent.

  1. It is concluded, in light of the above [see 1) and 2), for which reference is made hereto], that there has been no "interpretation [...] contrary to fundamental law", contrary to what was alleged by the Respondent in points 226.º to 238.º of its answer.

  2. A final note to address, under article 24.º, no. 5, of the LRAT, the request for payment of compensatory interest in favor of the Applicant (see art. 43.º of the LGT and 61.º of the CPPT).

In this regard, the Arbitral Decision rendered in case no. 26/2013-T, of 19/7/2013 (which dealt with a situation similar to that now under consideration), notes: "The right to compensatory interest referred to in the LGT norm cited above presupposes that there has been payment of tax in an amount exceeding that due and that such results from error, of fact or of law, attributable to the services of the AT. [...] even if it is recognized that the tax paid by the applicant is not due, as the applicant is not the taxpayer of the tax obligation, thereby determining, as a consequence, the respective refund, it is not seen how, at its origin, there is the error attributable to the services, which determines such right [to compensatory interest] in favor of the taxpayer. Indeed, in promoting the official liquidation of the IUC considering the applicant as the taxpayer of this tax, the AT merely complied with the norm of no. 1 of art. 3.º of the CIUC, which, as extensively referred to above, imputes such quality to the persons in whose names the vehicles are registered." In the same sense, see, for example, the Arbitral Decisions rendered in cases: no. 170/2013-T, of 14/2/2014; no. 136/2014-T, of 14/7/2014; no. 230/2014-T, of 22/7/2014; and no. 140/2014-T, of 29/8/2014.

Given the justification cited, and with which it is agreed, it is concluded, equally in the present case, by the lack of merit of the aforementioned request for payment of compensatory interest.

V – DECISION

In light of the above, it is decided:

  • To judge the arbitration petition meritorious, with the consequent annulment, with all legal effects, of the liquidation acts in question and the refund of the amounts unduly paid;

  • To judge without merit the petition in the part concerning the recognition of the right to compensatory interest in favor of the applicant.

The value of the case is set at €10,331.54 (ten thousand three hundred and thirty-one euros and fifty-four cents), pursuant to art. 32.º of the Administrative Court Procedure Code and art. 97.º-A of the Tax Procedure Code, applicable by force of the provision of art. 29.º, no. 1, paragraphs a) and b), of the LRAT, and art. 3.º, no. 2, of the Cost Regulation for Tax Arbitration Proceedings (RCPAT).

Costs charged to the Respondent, in the amount of €918.00, pursuant to Table I of the RCPAT, and in compliance with the provisions of articles 12.º, no. 2, and 22.º, no. 4, both of the LRAT, and the provision of art. 4.º, no. 4, of the aforementioned Regulation.

Notify.

Lisbon, 27 March 2017.

The Arbitrator

(Miguel Patrício)

Text prepared by computer, pursuant to the provision contained in art. 131.º, no. 5, of the Civil Procedure Code, applicable by reference of art. 29.º, no. 1, paragraph e), of the LRAT.

The writing of this decision is governed by the spelling prior to the Orthographic Agreement of 1990.

Frequently Asked Questions

Automatically Created

Who is liable for paying IUC (Imposto Único de Circulação) on vehicles registered in Portugal?
Under Article 3 of the Vehicle Circulation Tax Code (CIUC), IUC taxpayers are vehicle owners, with financial lessees and reservation-of-ownership buyers equated to owners. While vehicle registration creates a legal presumption of ownership, CAAD jurisprudence consistently holds this presumption is rebuttable. Documentary evidence such as sales invoices proving ownership transfer before the registration date can overcome this presumption. The actual owner at the relevant tax moment (registration date for first-year IUC, or annual liability dates) bears the tax obligation, not necessarily the registered person. This reflects the polluter-pays principle underlying IUC, as only actual vehicle users generate the environmental and road costs the tax aims to address.
Can a vehicle importer challenge IUC self-assessments through tax arbitration under the RJAT?
Yes, vehicle importers can challenge IUC self-assessments through CAAD tax arbitration under the RJAT (Legal Regime of Arbitration in Tax Matters - Decree-Law 10/2011). However, Article 10(1)(a) of RJAT requires first exhausting the gracious complaint (reclamação graciosa) procedure. The importer must file an administrative claim with the Tax Authority, await its decision (dismissal or partial acceptance), and only then petition for arbitration within the legal deadline. In this case, the administrative claim was dismissed on 7/7/2016, and the arbitration petition was filed on 28/10/2016, demonstrating proper sequential compliance with mandatory pre-arbitration procedures. The CAAD has material jurisdiction over IUC disputes under Article 2(1)(a) of RJAT.
What constitutes an error in the factual assumptions for IUC subjective incidence?
An error in factual assumptions for IUC subjective incidence occurs when the Tax Authority incorrectly determines who owned the vehicle at the relevant tax moment. In this case, the AT presumed the importer was the owner because vehicles were registered in its name, but ignored evidence that ownership had already transferred to dealers before registration. The applicant proved through sales invoices that the sale (and ownership transfer) occurred prior to registration dates. Under Portuguese civil law, vehicle ownership transfers by mere consensual contract effect, not requiring registration or delivery for juridical effectiveness. Therefore, the AT's factual assumption that the registered person remained owner constituted an error invalidating the IUC assessments under Articles 3, 4, and 11 of CIUC.
How does the gracious complaint (reclamação graciosa) procedure work before filing a CAAD arbitration request?
The gracious complaint (reclamação graciosa) is a mandatory administrative pre-litigation procedure under Article 68 of the General Tax Law (LGT). Taxpayers must file the complaint with the competent tax office challenging the illegality of tax acts within the legal deadline (generally 120 days from notification). The Tax Authority has 4 months to decide, which may be extended. The authority can grant total or partial relief, or dismiss the complaint through a dismissal dispatch (despacho de indeferimento). Only after receiving an unfavorable decision can the taxpayer access CAAD arbitration under Article 10 of RJAT. In this case, the Large Taxpayers Unit dismissed the complaint on 7/7/2016, enabling the subsequent arbitration petition filed on 28/10/2016. Failure to pursue this administrative remedy first renders arbitration petitions inadmissible.
Are compensatory interest and indemnity interest available when IUC self-assessments are annulled?
Yes, both compensatory interest (juros compensatórios) and indemnity interest (juros indemnizatórios) are available when IUC self-assessments are annulled, though they serve different purposes. Compensatory interest under Article 43 of LGT compensates taxpayers for amounts unduly paid from payment date until restitution, calculated at the legal interest rate. The applicant expressly requested recognition of this right 'in accordance with legal terms.' Indemnity interest under Article 43(3) of LGT may also apply if the tax collection resulted from AT error or fault, though requirements are stricter. When the CAAD annuls illegal IUC assessments, it typically orders restitution of amounts paid plus compensatory interest. The tribunal can also award indemnity interest if proven the AT acted with culpable illegality beyond mere legal error.