Process: 655/2017-T

Date: July 12, 2018

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 655/2017-T) addresses the subjective incidence of Portugal's Unique Circulation Tax (IUC) on vehicles previously under financial leasing. A..., S.A., a former lessor, challenged three IUC assessments totaling €162.48 for 2015, arguing it was no longer the vehicle owner when the tax became due. The core legal issue concerns Article 3(1) of the IUC Code, which presumes the registered owner is the taxpayer. The Claimant contended this presumption is rebuttable under Article 73 of the General Tax Law (LGT), which allows contrary proof for tax incidence presumptions. To overcome the registry presumption, the Claimant submitted invoices evidencing vehicle transfers to former lessees after leasing contract termination. The Tax Authority countered that the Claimant failed to prove actual ownership transfer and questioned documentary sufficiency. The arbitral tribunal examined whether invoices constitute adequate proof to rebut the ownership presumption and whether the former lessor remained liable despite contractual transfer. The case illustrates the distinction between legal presumptions and legal fictions in Portuguese tax law, particularly regarding vehicle taxation. It also addresses procedural aspects including the evidentiary burden in tax arbitration, the role of vehicle registry records, and compliance obligations under Article 19 of the IUC Code. The decision has significant implications for financial institutions managing leased vehicle fleets, establishing precedent on documentary requirements for rebutting IUC taxpayer presumptions and the enforceability of transfer evidence in administrative tax proceedings.

Full Decision

Arbitral Decision

I - Report

  1. A..., S.A., legal person no. ..., with registered office at Rua ... no. ..., ...-... Lisbon (hereinafter referred to as "Claimant"), submitted, on 18-12-2017, a request for arbitral pronouncement, pursuant to article 2.º no. 1, subparagraph a) and article 10.º, nos. 1 and 2 of the Legal Framework for Tax Arbitration, provided in Decree-Law no. 10/2011, of 20 January, as amended by article 228.º of Law no. 66-B/2012, of 31 December (hereinafter abbreviated "LFTA") and articles 1.º and 2.º of Ordinance no. 112-A/2011, of 22 March.

  2. The Claimant seeks the pronouncement of the Arbitral Court with a view to declaring the illegality of three tax assessment acts for the Unique Circulation Tax (IUC), for the year 2015, in the amount of € 158.89 (one hundred and fifty-eight euros and eighty-nine cents), plus compensatory interest in the amount of € 3.59 (three euros and fifty-nine cents), totalling € 162.48 (one hundred and sixty-two euros and forty-eight cents), relating to three motor vehicles, and likewise, the acts denying the hierarchical appeals filed against the acts that denied the administrative complaints submitted by the Claimant concerning the aforementioned assessment acts and, consequently, to order the reimbursement of the amount unduly paid plus compensatory interest calculated at the legal rate.

  3. The Respondent is the Tax and Customs Authority (hereinafter referred to as "Respondent").

  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 19-12-2017.

  5. Pursuant to subparagraph a) of no. 2 of article 6.º and subparagraph b) of no. 1 of article 11.º of the LFTA, as amended by article 228.º of Law no. 66-B/2012, of 31 December, the Deontological Council of CAAD designated as arbitrator of the singular arbitral tribunal His Excellency Dr. Olívio Mota Amador who, within the applicable period, communicated his acceptance of the assignment.

  6. The Claimant was notified on 07-02-2018 of the designation of the arbitrator and did not manifest any will to refuse the designation, pursuant to the combined provisions of article 11.º, no. 1, subparagraphs a) and b) of the LFTA and articles 6.º and 7.º of the Deontological Code.

  7. In accordance with subparagraph c) of no. 1 of article 11.º of the LFTA, as amended by article 228.º of Law no. 66-B/2012, of 31 December, the Arbitral Court was constituted on 27-02-2018.

  8. The Respondent, duly notified through the arbitral order of 09-03-2018, submitted its Reply on 16-04-2018.

  9. The Respondent attached the Administrative File on 19-04-2018.

  10. The Arbitral Tribunal, by order of 13-06-2018, requested that the Claimant indicate the facts on which it intended to examine the two witnesses enrolled in the request for arbitral pronouncement. The Claimant, on 21-06-2018, indicated the facts contained in the request for arbitral pronouncement on which it intended the witnesses to be examined.

  11. The Arbitral Tribunal, by order of 21-06-2018, determined: (i) the exemption from examination of the witnesses enrolled by the Claimant, given that the factual matters relevant to the question discussed in the present arbitral proceedings are established by documentary evidence; (ii) to dispense with the holding of the meeting provided for in article 18.º of the LFTA, in accordance with the general principles of procedural efficiency and the prohibition of useless acts and to promote speed, simplification and informality of the arbitral proceedings, pursuant to subparagraphs c) and e) of article 16.º and no. 2 of article 29.º of the LFTA, given that no exceptions were raised nor questions raised that prevent the substantive consideration of the claim; (iii) if the parties wish to submit written arguments, these must be produced within 10 days from notification of the present order; (iv) to set 13 July 2018 as the deadline for issuing the arbitral decision, and by that date, the Claimant must proceed to pay the subsequent arbitral fee, pursuant to no. 3 of article 4.º of the Fees Regulation in Tax Arbitration Proceedings, and communicate the respective payment to CAAD.

  12. The Claimant submitted its arguments on 03-07-2018.

  13. On 04-07-2018, the Respondent submitted its arguments, and on 09-07-2018 submitted new arguments, due to the fact that the first arguments sent contained inaccuracies.

  14. The position of the Claimant, in accordance with the provisions of the request for constitution of the Arbitral Court and in the arguments, is, in summary, as follows:

14.1. In the present proceedings, the legality of three IUC assessment acts is under discussion, in relation to which the Claimant was notified in its capacity as former lessor entity and owner of three vehicles, for which, on the date the IUC became due, the respective financial leasing contract had already terminated and consequently the ownership of the vehicles had been transferred to the former lessees.

14.2. Regarding the presumption established in no. 1 of article 3.º of the Unique Circulation Tax Code (IUC Code), arbitral jurisprudence has been unanimous in considering that the legislature did not determine that the owner is always necessarily the one registered in the motor vehicle registry and merely used the registry so that, absent proof to the contrary, ownership would thus be determined.

14.3. In summary, it is a presumption (and not a legal fiction) relating to the subjective incidence of the tax, and which must necessarily be rebuttable, in accordance with the provisions of article 73.º of the General Tax Law, which determines that presumptions established in the norms of tax incidence always admit proof to the contrary.

14.4. Pursuant to article 429.º of the Code of Civil Procedure, and since the facts that were intended to be proven have relevance to the decision of the case – the fulfilment of the obligation contained in article 19.º of the IUC Code which, although having an ancillary nature and never being able to have an impact on the determination of the taxpayer – the Court must proceed to notify the Respondent to attach to the proceedings the documents that prove the (non-)compliance with the contested obligation. And should this not be understood, still, such fact could never have consequences in terms of the subjective incidence of the tax.

14.5. The Claimant, to rebut such presumption, attached to its Request for Arbitral Pronouncement invoices relating to the transfer of each of the motor vehicles in question, which, after good collection, also served as receipts.

14.6. If there were serious doubts about the truthfulness of the documentary evidence attached in the present proceedings, the TA had no alternative but to resort to the appropriate procedural mechanisms – which was not done.

14.7. Furthermore, the TA is also not correct when it claims that "the Claimant failed to prove the alleged transfer of the vehicles in question," because the Claimant proceeded to attach the invoices relating to the transfers of those vehicles, despite the Respondent not having noted such occurrence.

14.8. The invoice is precisely the document that has been used in other arbitral proceedings to prove the transfer of motor vehicles and that has always fulfilled, in that capacity, its exact purpose.

14.9. In summary, there is no alternative but to summarily reject the TA's claims regarding the alleged insufficiency of the invoices attached by the Claimant, since these lead to the conclusion that the Claimant was not the owner of the motor vehicles to which the tax acts in question refer.

14.10. Thus, the IUC assessment acts contested suffer from manifest and irremediable illegality, having been issued under a gross error of fact regarding the facts and, therefore, a flagrant violation of law.

14.11. Regarding the responsibility for payment of arbitral costs and compensatory interest, the Claimant emphasizes that, pursuant to arbitral jurisprudence, this responsibility has been charged to the TA.

14.12. Strictly speaking, these tax acts are the sole and exclusive responsibility of the TA, which, consequently, cannot fail to assume the arbitral costs and be properly held responsible for payment of compensatory interest, calculated at the legal rate.

  1. The position of the Respondent, expressed in the reply and in the arguments, can be summarized as follows:

15.1. Even if one concluded that there were financial leasing contracts executed by the Claimant, it was always incumbent upon the latter to demonstrate having complied with the ancillary obligation imposed by article 19.º of the IUC Code and the Claimant made no proof regarding compliance with this obligation, with respect to the motor vehicles under analysis in the proceedings.

15.2. Upon consultation with the Motor Vehicle Registry Office, it is verified that the Claimant appears as owner of the motor vehicles, as is moreover attested by the administrative file and the Claimant's own statement of facts.

15.3. In fact, in the matter of financial leasing, the Claimant could only be exempted from the tax if it had complied with the specific obligation provided for in that norm of the IUC Code. To this end, that is, having the Claimant not complied with that obligation, it must be concluded that it is the taxpayer of the tax.

15.4. Notwithstanding the Claimant's claim to have entered into financial leasing contracts, it is certain that it is responsible for payment of the respective IUCs, since it did not communicate the existence of financial leasing referred to in article 19.º of the IUC Code.

15.5. On the other hand, the Claimant also did not attach any document proving the transfer of ownership of the vehicle, merely attaching a copy of the financial leasing contracts, with uncertainty as to whether they were complied with or whether there are breaches.

15.6. In summary, article 3.º of the IUC Code does not contain any legal presumption.

15.7. In these terms, the failure to update the registry, pursuant to article 42.º of the Motor Vehicle Registry Regulation, shall be imputable to the legal sphere of the taxpayer of the IUC and not to the Portuguese State, as the active subject of this Tax.

15.8. The position of the Claimant, expressed in the proceedings, unequivocally calls into question legal certainty and security (insofar as the institution of motor vehicle registry would cease to provide the security and certainty that constitute its main purposes), as well as the power-duty of the Respondent to assess taxes.

15.9. Thus, the tax acts in issue do not suffer from any defect of violation of law, insofar as in light of the provisions of article 3.º, nos. 1 and 2 of the IUC Code and article 6.º of the same code, it was the Claimant, in its capacity as owner, the taxpayer of the IUC.

15.10. The Claimant came to support its request for arbitral pronouncement by attaching the leasing contracts. From this naturally arises the following question: do the contracts constitute sufficient proof to undermine the (alleged) legal presumption established in article 3.º of the IUC Code? Clearly not, which is why the documents attached to the statement of facts are impugned for all legal purposes.

15.11. In fact, the leasing contracts do not prove that ownership of the motor vehicle was transferred. In truth, the TA does not know whether the contract was performed or whether there was a transfer of ownership. Indeed, the Claimant did not attach a single financial statement or check proving that the leasing contract was performed. The evidence presented by the Claimant consists exclusively of particular, unilateral and internal documents, with insufficient value in light of substantive law of evidence, to deny the validity of facts – the ownership of vehicles – regarding which there exists legal evidence – a legal presumption – that exempts the Respondent from any burden of proof, and which is not contradictable through mere counter-evidence that casts doubt on the facts proven by the presumption.

15.12. Having the Claimant failed to care for the updating of the motor vehicle registry, as indeed it could and was incumbent upon it, and having not ordered the cancellation of the registrations of the vehicles in question, it must be concluded that the Claimant did not proceed with the diligence that was required of it. Thus, it inexorably led the Respondent to limit itself to fulfilling the legal obligations to which it is bound and, in parallel, to follow the registry information provided to it by those entitled. Therefore, it was not the Respondent that gave rise to the filing of the request for arbitral pronouncement, but rather the Claimant itself. Consequently, the Claimant should be ordered to pay the arbitral costs and, by the foregoing, the legal requirements conferring the right to compensatory interest are not met.

II - Adjudication

  1. The parties have legal personality and capacity, appear legitimate and are duly represented (articles 4.º and 10.º, no. 2 of the LFTA and article 1.º of Ordinance no. 112-A/2011, of 22 March).

The tribunal is competent and properly constituted.

The proceedings do not suffer from any nullities.

No exceptions were raised.

There are no other circumstances that prevent substantive consideration of the case.

In these terms, the Arbitral Tribunal is duly constituted to appreciate and decide the object of the proceedings.

III - Substantive Merits

III.1. Matters of Fact

  1. Proven Facts

17.1. With relevance to the appreciation and decision of the questions raised, the following facts are deemed established and proven:

  • The Claimant is a credit institution which, in the scope of its activity, engages in the financing of the automotive sector, proceeding to enter into – among others – financial leasing contracts intended for the acquisition, by companies and individuals, of motor vehicles.

  • With regard to the vehicle with registration ... (Month: August; Year: 2000), the Claimant was notified to proceed with payment of the IUC, for the year 2015 (Tax assessment demonstration no. 2015...) arising from the assessment act, issued on 12-11-2016, in the amount of €41.72, plus compensatory interest, for the period from 01-09-2015 to 12-11-2016, in the amount of €2.01, totalling €47.73 (as per Document no. 1 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • The Claimant, on 14-12-2016, made the voluntary payment of the IUC referred to in the preceding paragraph (see Document no. 2 attached to the request for arbitral pronouncement).

  • The vehicle identified in the preceding paragraph is the subject matter of the financial leasing contract (no. 2005/.../...) entered into on 24-01-2005 between the Claimant, in its capacity as lessor, and B..., taxpayer no. ..., as lessee (as per Document no. 4 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • The financial leasing contract identified in the preceding paragraph had a duration of 60 months (see no. 2, subparagraph a), of the Particular Clauses of the financial leasing contract attached as Document no. 4 to the request for arbitral pronouncement).

  • The vehicle identified in the preceding paragraph was sold on 28-04-2010 to the former lessee (B...) for the price of €226.90, as per invoice/receipt no. 2010..., issued by the Claimant (see Document no. 7 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • With regard to the vehicle identified in the preceding paragraph, on 02-11-2017, the hierarchical appeal (no. ...2017...) filed by the Claimant on 10-07-2017 against the denial of the administrative complaint (no. ...2017...), decided through order of the Head of Central Service Division of the Large Taxpayers Unit on 23-06-2017, against the IUC assessment act for the year 2015, was denied by order of the Director of Central Service (see Annex B attached to the request for arbitral pronouncement).

  • With regard to the vehicle with registration ... (Month: November; Year: 2000), the Claimant was notified to proceed with payment of the IUC, for the year 2015 (Tax assessment demonstration no. 2015...) arising from the assessment act issued on 12-03-2016, in the amount of €52.00 plus compensatory interest, for the period from 01-12-2015 to 12-03-2016, in the amount of €0.59, totalling €52.59 (as per Document no. 2 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • The Claimant, on 15-04-2016, made the voluntary payment of the IUC referred to in the preceding paragraph (see Document no. 2 attached to the request for arbitral pronouncement).

  • The vehicle identified in the preceding paragraph is the subject matter of the financial leasing contract (no. 2000/.../...) entered into on 24-11-2000 between the Claimant, in its capacity as lessor, and C... Lda., legal person no. ..., as lessee (as per Document no. 5 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • The financial leasing contract identified in the preceding paragraph had a duration of 60 months (see no. 2 of the Particular Clauses of the financial leasing contract attached as Document no. 5 to the request for arbitral pronouncement).

  • The vehicle identified in the preceding paragraph was sold on 23-05-2005 to the former lessee (C... Lda) for the price of €7,975.75, as per invoice/receipt no. 2005..., issued by the Claimant (see Document no. 8 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • With regard to the vehicle identified in the preceding paragraph, on 04-09-2017, the hierarchical appeal (no. ...2017...) filed by the Claimant on 26-01-2017 against the denial of the administrative complaint (no. ...2016...), decided through order of the Head of Central Service Division of the Large Taxpayers Unit on 16-12-2016, against the IUC assessment act for the year 2015, was denied by order of the Director of Central Service (see Annex C attached to the request for arbitral pronouncement).

  • With regard to the vehicle with registration ... (Month: November; Year: 2005), the Claimant was notified to proceed with payment of the IUC, for the year 2015 (Tax assessment demonstration no. 2015...) arising from the assessment act issued on 16-04-2016, in the amount of €65.17, plus compensatory interest, for the period from 01-12-2015 to 16-04-2016, in the amount of €0.99, totalling €66.16 (as per Document no. 3 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • The Claimant, on 23-05-2016, made the voluntary payment of the IUC referred to in the preceding paragraph (see Document no. 3 attached to the request for arbitral pronouncement).

  • The vehicle identified in the preceding paragraph is the subject matter of the financial leasing contract (no. 2005/.../...) entered into on 14-10-2005 between the Claimant, in its capacity as lessor, and D... Lda., legal person no. ..., as lessee (as per Document no. 6 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • The financial leasing contract identified in the preceding paragraph commenced on 14-10-2005 and terminated on 05-12-2009 (see no. 2, subparagraph a), of the Particular Clauses of the financial leasing contract attached as Document no. 6 to the request for arbitral pronouncement).

  • The vehicle identified in the preceding paragraph was sold on 26-02-2010 to the former lessee (D... Lda.) for the price of €1,844.63, as per invoice/receipt no. 2010..., issued by the Claimant (see Document no. 9 attached to the request for arbitral pronouncement and which is hereby fully reproduced for all legal purposes).

  • With regard to the vehicle identified in the preceding paragraph, on 04-09-2017, the hierarchical appeal (no. ...2017...) filed by the Claimant on 26-01-2017 against the denial of the administrative complaint (no. ...20160...), decided through order of the Head of Central Service Division of the Large Taxpayers Unit on 16-12-2016, against the IUC assessment act for the year 2015, was denied by order of the Director of Central Service (see Annex D attached to the request for arbitral pronouncement).

  • The acquirers of the vehicles referred to in the preceding paragraphs had not, as of the date of the tax facts, registered their acquisitions with the Motor Vehicle Registry Office, such that in the database thereof, the Claimant continued to be listed as owner of the aforementioned vehicles.

17.2. There are no other facts with relevance to substantive consideration that were not proven.

17.3. Substantiation of Matters of Fact

With regard to the factual matters deemed proven, the Arbitral Tribunal's conviction was founded on the free appreciation of the documentary evidence attached to the proceedings.

The Respondent impugns as a means of proof the three financial leasing contracts relating to the vehicles above identified, presented by the Claimant as Documents nos. 4, 5 and 6 attached to the request for arbitral pronouncement (see nos. 95.º, 96.º and 97.º of the Respondent's Reply).

The aforementioned contracts constitute suitable means of proof. There are, moreover, no elements that allow for understanding that the data recorded in those contracts do not correspond to the contractual truth, and this Tribunal sees no reasons to question them. Moreover, being the aforementioned contracts private documents, it was incumbent upon the Respondent to challenge the authenticity of the signature and handwriting, but the Respondent did not do so.

By the foregoing, the financial leasing contracts presented by the Claimant (see no. 17.1, preceding paragraphs) have full probative force, as do the invoices/receipts relating to the sale of the vehicles, subject matter of the aforementioned contracts (see no. 17.1, preceding paragraphs), despite these not having been mentioned by the Respondent.

Accordingly, given the matters under consideration in the proceedings, the Tribunal considered irrelevant the examination of the two witnesses enrolled by the Claimant, as timely decided (see no. 11 above).

17.4. Joinder of Claims

The present request for arbitral pronouncement concerns three IUC assessments, as well as three decisions denying appeals, issued in the hierarchical appeal phase, following the express denial of three administrative complaints.

Considering the provisions of articles 3.º of the LFTA and 104.º of the Tax Procedural Code and having regard to the identity of the tax facts and the identical factual and legal grounds invoked, the tribunal considers that nothing prevents the joinder of the present claims.

III.2. Matters of Law

  1. In light of the foregoing in the preceding numbers, the principal question to be considered in the present proceedings consists of determining whether, for the purposes of article 3.º, no. 1 of the IUC Code, the taxpayer of the IUC is the lessor or the new owner, if it has been verified that, on the date of the occurrence of the taxable event, the vehicle remained registered in the name of the lessor (its former owner) although its sale had already occurred.

Such requires consideration.

  1. Article 3.º of the IUC Code, in its numbers 1 and 2, in the wording in force on the date of the facts to which the present request refers, provides as follows:

"1 - The taxpayers of the tax are the owners of the vehicles, those being considered as natural or legal persons, of public or private law, in whose name they are registered.

  1. Financial lessees, acquisitions with reservation of ownership, as well as other holders of purchase option rights by virtue of a leasing contract are treated as owners."

  2. The subjective incidence of the IUC has been the subject of numerous decisions in the arbitral courts operating at CAAD, to the effect of considering that the norm cited above contains a legal presumption that admits proof to the contrary.

In this regard, Arbitral Decision no. 145/2017-T (and to whose content we hereby refer) states:

"On this question, that is, whether the norm of subjective incidence contained in no. 1 of art. 3.º of the IUC Code establishes a presumption, it should be noted that the jurisprudence established at CAAD points in the direction that the said norm establishes a rebuttable legal presumption. Indeed, from the first Decisions issued on this matter, in the year 2013, among which may be mentioned in particular those issued within the context of Processes nos. 14/2013-T, 26/2013-T and 27/2013-T, up to the most recent of which may be indicated the Decisions issued within the scope of Processes no. 69/2015-T, no. 191/2015-T and no. 202/2015-T, passing through numerous Decisions issued in the year 2014, of which are mentioned, merely by way of example, the Decisions issued in Processes nos. 34/2014-T, 120/2014-T and 456/2014-T, all point to the understanding that no. 1 of art. 3.º of the IUC Code establishes a rebuttable legal presumption.

In this connection, reference should also be made to the recent Decision of the Lisbon Tax Court, issued on 23-01-2017, in Proc. No. 463/13.4BELRS, where it is considered that the '[…] claimant succeeded in rebutting the presumption established in art. 3.º, no. 1 of the IUC Code.'

Consideration should also be given to the understanding set forth in the Judgment of the Southern Central Administrative Court, issued on 19-03-2015, Process 08300/14, available at: www.dgsi.pt, which seconds the said jurisprudence when it expressly states that art. 3.º, no. 1 of the IUC Code '[…] establishes a legal presumption that the holder of the motor vehicle registry is its owner, and such presumption is rebuttable by virtue of article 73.º of the General Tax Law'."

  1. The position contained in the aforementioned Arbitral Decision merits our agreement, and reproduction of its substantiation is dispensed with, as unnecessary, in the present proceedings.

  2. Concluding, in accordance with the foregoing in the preceding numbers, that the norm of subjective incidence of the IUC establishes a rebuttable presumption, it becomes important to verify whether the facts alleged by the Claimant in the present arbitral proceedings constitute, or do not constitute, sufficient proof for its rebuttal.

  3. In the factuality subject of the present arbitral proceedings, the vehicles in relation to which payment of the IUC was incumbent were sold on a date prior to that to which the tax refers, although in one case the sale occurred in the same year, but in the month preceding that in which the taxable event occurred and the consequent tax liability accrued (see preceding paragraphs). However, the acquirers of the aforementioned vehicles had not, as of the date of the tax facts, registered their acquisitions with the Motor Vehicle Registry Office, such that in the database thereof, the Claimant continued to be listed as owner thereof (see preceding paragraph).

  4. Due to the entry into a sales and purchase contract, the owner having full title becomes directly subject to no. 1 of article 3.º of the IUC Code. In light of the provisions of article 408.º, no. 1 of the Civil Code, the constitution or transfer of real rights over a determined thing occurs by the mere effect of the contract, except for exceptions provided by law. This is the case with the contract for sale of a motor vehicle (see articles 874.º and 879.º, subparagraph a) of the Civil Code), which does not depend on any special formality, being valid even when entered into verbally.

  5. The right of ownership of motor vehicles is subject to registration, pursuant to Decree-Law no. 54/75, of 12 February, as subsequently amended, whose purpose, in accordance with article 1.º, no. 1, consists of "...giving public notice of the legal situation of motor vehicles and respective trailers, with a view to the security of legal commerce." In fact, the lack of registration does not affect the validity of the sales and purchase contract, but merely its effectiveness, and even this, only with respect to third parties acting in good faith for registration purposes.

  6. From the elements contained in the proceedings, it is verified that, on the date the tax liability accrued in respect of the assessments in question, the Claimant was not the owner of the vehicles identified in the proceedings, as the respective transfers of ownership had already taken place, pursuant to civil law.

  7. The means of proof presented by the Claimant, consisting of copies of invoices/receipts of sales (see preceding paragraphs), enjoy a presumption of truthfulness conferred upon them pursuant to no. 1 of article 75.º of the General Tax Law. Accordingly, these documents appear suitable and with sufficient force to rebut the presumption upon which those assessments rest.

  8. Moreover, the Respondent did not comment on the copies of invoices/receipts of sales and did not argue facts that negate the presumption of truthfulness regarding the aforementioned documents, pursuant to the subparagraphs of no. 2 of article 75.º of the General Tax Law.

  9. As a consequence of the foregoing, the assessments subject of the present arbitral proceedings must be annulled with the consequent restitution of the tax unduly collected from the Claimant.

  10. The Claimant also requests that it be recognized as having a right to compensatory interest, under article 43.º of the General Tax Law.

  11. Pursuant to no. 1 of article 43.º of the General Tax Law, compensatory interest is due "when it is determined, in administrative complaint or judicial challenge, that there was error attributable to the tax administration as a result of which a tax liability was paid in an amount higher than legally due." As follows from article 24.º, no. 5 of the LFTA, the right to the aforementioned interest can also be recognized in the arbitral proceedings.

  12. The right to compensatory interest referred to in the General Tax Law norm presupposes that a tax was paid in an amount higher than that due and that such derives from an error, of fact or of law, attributable to the Tax Authority.

  13. In the present case, even acknowledging that the tax paid by the Claimant is not due, it is not discernible that, in its origin, there is an error attributable to the TA. In conducting the ex officio assessment of the IUC, the TA merely complied with the norm of no. 1 of article 3.º of the IUC Code and attributed the quality of taxpayer of this tax to the legal person in whose name the vehicles were registered.

  14. No. 1 of article 3.º of the IUC Code has the nature of a legal presumption, from which it follows, for the TA, the right to assess the tax and demand it from those persons, without need to prove the facts leading to it, as expressly provided for in no. 1 of article 350.º of the Civil Code.

  15. In these terms, the request is judged unfounded insofar as it concerns the recognition of the right to compensatory interest in favor of the Claimant.

  16. The Arbitral Tribunal, pursuant to the foregoing, judged the Claimant's principal request well-founded and, therefore, in accordance with nos. 1 and 2 of article 527.º of the Code of Civil Procedure, applicable by virtue of subparagraph e) of no. 1 of article 29.º of the LFTA, the responsibility for payment of the arbitral fee is unequivocally that of the Respondent.

IV - Decision

In accordance with the foregoing, it is decided:

  1. To judge the request for arbitral pronouncement well-founded and consequently to annul, with all legal consequences, the IUC assessments to which the collection documents attached to the request for arbitral pronouncement refer, and to refund to the Claimant the tax unduly paid;

  2. To judge the request unfounded insofar as it concerns the recognition of the right to compensatory interest in favor of the Claimant;

  3. To condemn the Respondent to pay the costs of the present proceedings.

V - Value of the Proceedings

Having regard to the provisions of articles 32.º of the Administrative Procedural Code, 306.º, no. 2 of the Code of Civil Procedure and 97.º-A of the Tax Procedural Code, applicable pursuant to the provisions of article 29.º, no. 1, subparagraphs a) and b) of the LFTA and article 3.º, no. 2 of the Fees Regulation in Tax Arbitration Proceedings, the value of the proceedings is set at € 162.48 (one hundred and sixty-two euros and forty-eight cents).

VI - Costs

Costs charged to the Respondent in the amount of € 306.00 (three hundred and six euros), pursuant to Table I of the Fees Regulation in Tax Arbitration Proceedings, in compliance with articles 12.º, no. 2 and 22.º, no. 4, both of the LFTA, as well as with article 4.º, no. 4 of the Fees Regulation in Tax Arbitration Proceedings.

Let it be notified.

Lisbon, Administrative Arbitration Centre, 12 July 2018

The Arbitrator

Olívio Mota Amador

Frequently Asked Questions

Automatically Created

Who is the subjective taxpayer liable for IUC (Imposto Único de Circulação) vehicle circulation tax in Portugal?
The subjective taxpayer liable for IUC in Portugal is presumed to be the person registered as the vehicle owner in the motor vehicle registry on January 1st of the tax year, according to Article 3(1) of the IUC Code. However, this is a rebuttable presumption under Article 73 of the General Tax Law (LGT), not a legal fiction. The actual owner can provide contrary evidence to demonstrate they were not the owner when the tax became due. In financial leasing situations, once the leasing contract terminates and ownership transfers to the lessee, the former lessor is no longer the taxpayer, provided this transfer can be adequately proven through documentary evidence such as invoices, transfer agreements, or other documentation evidencing the change of ownership, even if the vehicle registry has not yet been updated.
Can a financial institution challenge IUC tax assessments through CAAD tax arbitration proceedings?
Yes, financial institutions can challenge IUC tax assessments through CAAD (Centro de Arbitragem Administrativa) arbitration proceedings. As demonstrated in this case, a leasing company filed an arbitration request under Articles 2(1)(a) and 10 of the Legal Framework for Tax Arbitration (RJAT - Decree-Law 10/2011). Financial institutions that receive IUC assessments as registered owners but are no longer the actual owners due to leasing contract termination have legal standing to contest these assessments. The arbitration process allows them to seek declarations of illegality of the tax assessments, annulment of decisions denying administrative complaints and hierarchical appeals, and reimbursement of amounts unduly paid plus compensatory interest. This mechanism provides an alternative to judicial courts for resolving tax disputes efficiently.
What is the procedure for contesting IUC liquidation acts through hierarchical appeal and gracious complaint in Portugal?
The procedure for contesting IUC liquidation acts in Portugal involves a two-tier administrative process before potential arbitration or judicial appeal. First, taxpayers must file a reclamação graciosa (administrative complaint) with the Tax Authority challenging the assessment act. If denied, the taxpayer can then file a recurso hierárquico (hierarchical appeal) to a superior administrative authority. Both administrative remedies must typically be exhausted before accessing CAAD arbitration or judicial courts. The hierarchical appeal and administrative complaint allow the Tax Authority to review and potentially correct errors without litigation. If both administrative remedies are denied, taxpayers can then seek arbitration under the RJAT framework or file suit in administrative tax courts, requesting annulment of the assessment acts and any subsequent denial decisions, along with reimbursement of taxes paid and applicable interest.
Are compensatory interest charges applicable on IUC vehicle circulation tax assessments under Portuguese tax law?
Yes, compensatory interest charges (juros compensatórios) are applicable on IUC vehicle circulation tax assessments under Portuguese tax law. When the Tax Authority issues an IUC assessment after the standard payment deadline, compensatory interest accrues from the date the tax should have been voluntarily paid until actual payment or assessment notification. In this case, the assessments included €3.59 in compensatory interest on the principal amount of €158.89. These interest charges compensate the State for the delayed receipt of tax revenue. Conversely, when taxpayers successfully challenge unlawful assessments and obtain reimbursement, they are entitled to juros indemnizatórios (indemnity interest) calculated at the legal rate from the date of undue payment until reimbursement, compensating them for the improper deprivation of funds. The legal framework governing these interest types is found in the General Tax Law and the Tax Procedure Code.
What are the legal grounds for requesting reimbursement and indemnity interest after an unlawful IUC tax assessment?
Legal grounds for requesting reimbursement and indemnity interest after an unlawful IUC tax assessment include: (1) substantive illegality of the assessment act due to incorrect determination of the taxpayer (error in subjective incidence), as the registered owner may not be the actual owner; (2) violation of Article 3 of the IUC Code when the ownership presumption is successfully rebutted with contrary evidence; (3) gross error of fact (erro sobre os pressupostos de facto) when the Tax Authority incorrectly identifies the liable party; and (4) illegality of decisions denying administrative complaints and hierarchical appeals. Once illegality is established through arbitration or court decision, taxpayers are entitled to reimbursement of all amounts unduly paid (principal and compensatory interest) plus juros indemnizatórios (indemnity interest) calculated at the legal rate from payment date until actual reimbursement, pursuant to Articles 43 and 100 of the General Tax Law and Article 61 of the Tax Procedure Code.