IUC Subjective Tax Incidence: Vehicle Registration vs Ownership in Long-Term Lease – CAAD 658/2018-T

ARBITRAL TAX JURISPRUDENCE

Case No. 658/2018-T

Decision Date: 16 February 2026

Tax: IUC (Unique Vehicle Circulation Tax)

Value of Claim: €622.47

Subject Matter: Subjective incidence of the unique vehicle circulation tax (IUC) – violation of constitutional principles of equality, proportionality or equivalence – Reform of decision (attached).

Replaces the arbitral decision of 3 October 2024

REFORM OF THE ARBITRAL DECISION IN PROC. No. 658/2018-T

SUMMARY

1. For purposes of the provision in No. 1 of Article 3 of the CIUC, in the wording introduced by Article 4 of Decree-Law No. 41/2016, of 1/8, the person in whose name the motor vehicle is registered at the time of the taxable event is liable for payment of the IUC.

2. This rule on subjective incidence is not incompatible with the legal possibility for the seller of the vehicle to demonstrate the lack of equivalence between registration and ownership of the vehicle, which is the taxable event, in accordance with No. 1 of Article 6.

3. Proof of the sale of the motor vehicle may be effected by the legal means of proof that the law determines or authorizes.

4. The mere attachment of an invoice, without any proof of its payment, does not legally demonstrate the transfer of ownership of the motor vehicle at the end of a long-term lease contract.

5. It is the Motor Vehicle Sales Declaration, also known as the Motor Vehicle Registration Request, to be submitted by the seller following the exercise of the lessee's right of purchase at the end of the long-term lease contract, that effectuates the transfer of ownership of the vehicle to the lessee.

REPORT

1. Identification of the Parties

1.1 Claimant

A..., S.A., a limited company registered at the Commercial Registry Office under the single registration and identification number..., with registered office at Rua... Lisbon.

1.2 Respondent

Tax and Customs Authority.

2. Course of Proceedings

2.1. The request for arbitral decision was presented and accepted on 21/12/2018 and, on the same date, forwarded to the Respondent and the Claimant, the latter not exercising the faculty of appointing an arbitrator.

2.2. The Respondent was notified of the arbitral action on 26/12/2019.

2.3. On 9/1/2019, the Tax Authority would designate as process representatives the legal experts... and...

2.4. On 8/2/2019, a sole arbitrator, the legal expert Álvaro Caneira, would be appointed in the present arbitral proceedings.

2.5. On 28/2/2019, a ruling by the president of the CAAD Ethics Council would proceed to constitute the Arbitral Tribunal.

2.6. On that date, the Arbitral Tribunal would notify the Respondent, in accordance with Article 170 of the RJAT, to submit a response within 30 days, to request, if deemed necessary, additional evidence, and to send the administrative process (AP).

2.7. On 1/4/2019, the Respondent would send the Response and attach the AP.

2.8. On 16/4/2019, the Arbitral Tribunal would issue the following ruling:

"I - Article 18 of the RJAT

a) That this is, in this case, a process not susceptible to definition of specific procedural rules, different from those commonly followed by CAAD in the generality of tax proceedings, and

b) that there are no exceptions to be considered and decided before ruling on the merits, nor any apparent need for correction of procedural documents.

II - Testimonial Evidence

The production of testimonial evidence does not appear necessary or useful, given the issues raised, the documentary evidence presented, and the non-controversial nature of the essential facts. Therefore, in light of the principle prohibiting the performance of unnecessary acts, the tribunal dispenses with witness examination.

III - Final Submissions

The positions of the parties are clearly expressed in the documents presented. However, a period of 20 days is granted to the parties, if they wish, to present written submissions, on facts (essential facts they consider proven) and on law.

IV - Date for Pronouncement and Notification of Arbitral Decision

31 May 2019 is fixed as the deadline for pronouncement and notification of the final decision.

V - Remaining Arbitration Fee

The Claimant must give timely compliance with the provision in Article 4, No. 3, of the RCPAT (payment before decision and in the regulatory form of the remaining arbitration fee).

VI - Pleadings in Word Format

In light of the principle of cooperation, both parties shall submit to CAAD their respective procedural documents (pleadings) and submissions in editable format (word) with a view to facilitating and expediting the preparation of the final decision on the facts (Article 7 CPC."

Notify."

2.9. On 22/4/2019, the Respondent would request from the Arbitral Tribunal the holding of successive submissions, instead of the simultaneous ones initially determined.

2.10. On 26/4/2019, the Arbitral Tribunal would rule that, as submissions are optional, there are no grounds to grant what was proposed by the Respondent.

2.11. On 30/4/2019, the Claimant would insist with the Arbitral Tribunal on holding the meeting provided for in Article 180 of the RJAT aimed at examining, at least, one of the witnesses summoned by it.

2.12. In the same action, it would also request the utilization of evidence produced in the arbitral process No. 261/2018 IT and the attachment to the proceedings of the Arbitral Decision No. 332/2018-T, in the Claimant's view of interest to the case.

2.13. On 10/5/2019, the Arbitral Tribunal would issue the following ruling:

"Considering the request submitted by the Claimant. Let it be attached to the proceedings.

No concrete and historically situated facts are alleged that require or are susceptible to testimonial evidence.

The versions presented by the parties have their evidentiary foundation based on documents.

The issues to be decided are fundamentally matters of Law and assessment of the aforementioned documents.

Therefore, I decide to maintain my previous ruling in the sense of not convening the meeting under Article 18 of the RJAT.

Notify."

2.14. Also on that date the Claimant would submit its pleadings.

2.15. On 16/3/2024, the Respondent would submit its pleadings.

2.16. On 24/5/2024, the Arbitral Decision would be taken and recorded.

2.17. On 6/12/2019, the Claimant would communicate to CAAD the challenge of the Arbitral Decision before the Central Administrative Court South, which would be included in Proc. No. 77/19.5 BCLSB.

2.18. On 7/5/2024, that court would annul the challenged Arbitral Decision on the ground that, given that the challenger had raised the question of unconstitutionality of No. 1 of Article 3 of the Unique Vehicle Circulation Tax Code (CIUC) and the Arbitral Tribunal had based its decision on the application of that specific rule, it was necessary that it had considered or ruled on that objection. Having failed to do so, it must be concluded that the Arbitral Tribunal violated the duty to pronounce upon it that rested upon it and, consequently, the Arbitral Decision suffers from nullity due to omission of pronouncement.

2.19. On 6/4/2024, that judgment would become final and would be returned by the South Administrative Court to the Arbitral Tribunal for remedy of the said nullity.

2.20. On 9/7/2024, the president of the CAAD Ethics Council would issue the following ruling reactivating the arbitral proceedings: "With reference to the case in question, His Excellency Dr. Álvaro Caneira, arbitrator of the single arbitral tribunal constituted in this process, has resigned from arbitral functions invoking for such purpose reasons that are to be considered as justified. In accordance with this, pursuant to and under the provisions of the Regulation for Selection and Appointment of Arbitrators in Tax Matters (Article 6, No. 5), the replacement is determined, as arbitrator in the present process, of His Excellency Dr. Álvaro Caneira by His Excellency Dr. António de Barros Lima Guerreiro. Let this be noted."

2.21. On 6/9/2024, the president of the CAAD Ethics Council would appoint the proposed arbitrator.

2.22. On 3/10/2024, the Arbitral Tribunal would proceed to reform the Arbitral Decision.

2.23. On 13/10/2024, the Claimant's representative would appeal to the Constitutional Court (CC) which would be admitted by the Arbitral Tribunal on 18/10/2024.

2.24. On 6/1/2025, the Claimant's representative would transmit to CAAD the text of the CC Decision No. 820/2025, which would grant the appeal on the ground of unconstitutionality of the interpretation of No. 1 of Article 3 of the CIUC, upon which the Arbitral Tribunal based its decision.

2.25. On 22/1/2025, the CC would communicate to CAAD the finality of that appeal.

2.26. On the same date, CAAD would reopen the proceedings.

2.27. On 10/1/2026, the Claimant would request from the Arbitral Tribunal the reform of Arbitral Decision No. 658/2018-T, giving effect to the Summary Decision No. 820/2025 of the CC.

3. Presuppositions Regarding the Tribunal and the Parties

3.1. The arbitral tribunal was regularly constituted.

3.2. The Parties have legal personality and capacity and are regularly represented.

3.3. Given the identity of the factual and legal grounds invoked, the Arbitral Tribunal considers there is no obstacle to the joinder of claims, in accordance with Articles 3 of the RJAT and 104 of the CPPT.

4. Subject Matter of the Proceedings

The request for arbitral decision aims at assessment of the legality of four acts of assessment of unique vehicle circulation tax (IUC), relating to the year 2017, in the total amount of €622.47; €608.25, including compensatory interest in the amount of €14.22, as well as the acts of dismissal, on 20/9/2018, of gracious objections presented against those assessments.

5. Position of the Claimant

Notwithstanding the amendment to No. 1 of Article 3 of the CIUC effected by Article 4 of Decree-Law No. 41/2016, of 1/8 approved under the legislative authorization granted by subparagraph e) of Article 169 of Law No. 7-A/2016, of 30/3, according to which the persons subject to the tax are the natural or legal persons, of public or private law, in whose names the motor vehicles are registered, the Claimant continues to understand that such rule constitutes a merely refutable presumption of the subjective incidence of the IUC.

Thus, the interpretation of that rule made by the Respondent that the subjective incidence of the tax depends entirely and exclusively on the taxable event of registration of the vehicle with the Motor Vehicle Registry Office, which could not be contradicted by any contrary evidence, is incompatible with the constitutional principles of equality, proportionality or equivalence.

When the lessee exercises his right to acquire the leased asset at the residual value, plus expenses and VAT, he becomes the (new) owner of the motor vehicle formerly leased, and the provisions of No. 1 of Article 3 of the CIUC apply to him in full, with the consequent responsibility for payment of the tax.

At the end of the financial leasing contract, the exercise of the purchase option does indeed extinguish the right of ownership of the lessor.

The wording of No. 1 of Article 3 of the CIUC given by Article 4 of Decree-Law No. 41/2016 is inadequate and disproportionate, in that it obliges the owner to register the sale at the Motor Vehicle Registry Office, under penalty of bearing the IUC and other charges associated with ownership of the asset.

Such a charge, if it exists, would impose on the former owner a cost "in perpetuity", in this case, the IUC periodically borne, as well as the passing on of damage that the taxpayer did not cause, damage which, moreover, the tax administration can always avoid, merely by assessing the tax to the true owner, and thus not defrauding the expectations of the public exchequer.

It is the conviction of the Claimant that the principle of equivalence, as a criterion of tax equality, prohibits any irrefutable presumption or legal fiction that triggers – automatically and blindly – the passive subjective incidence to the IUC by the mere fact that the vehicle is registered in the name of a given entity.

Thus, the only constitutionally compatible interpretation of No. 1 of Article 3 of the CIUC is that it establishes a refutable presumption, that is, one that admits contrary evidence, even after the entry into force of Decree-Law No. 41/2016.

If the possibility of rebutting the presumption that the person who appears in the motor vehicle registry is the owner of that motor vehicle and, therefore, responsible for payment of the respective IUC is admitted, it must be admitted as unequivocal proof of this demonstration the invoices issued by the Claimant at the time of sale of the said motor vehicles to the former lessees-subsequent owners.

Also, Article 170-A of the CIUC, added by Article 215 of Law No. 82-B/2014, of 31/12, which, under the heading "[e]ffects of regularization of ownership", confers relevance for IUC purposes to the special procedure for registration of ownership of vehicles acquired by verbal contract of purchase and sale approved by Article 1 of Decree-Law No. 177/2014, of 15/12, with effects backdated to the date of transmission, when that request is submitted by the seller within one year after the deadline for compliance with the mandatory registration referred to in Article 2 of that special procedure, is not, as the Respondent claims, a rule of subjective incidence of the IUC, merely conferring on the owner of the motor vehicle the faculty to alter the ownership registration, which he may exercise or not.

The Claimant invokes in support of its position Constitutional Court Decisions No. 1108/2025, 1013/2025 and 1046/2025, which the Summary Decision No. 820/2025, on the basis of which the present arbitral proceedings would be reopened, confirms.

6. Position of the Respondent

For the Respondent, the letter of the law is crystal clear: after the wording given to No. 1 of Article 3 of the CIUC by Article 4 of Decree-Law 41/2016, it left no doubt that the subjective incidence of the IUC falls on the person who holds the registration or registration of the vehicle. With that rule, the possibility was definitively foreclosed for the so-called "proprietors of law" to exclude the incidence of the IUC, alleging the transmission of ownership to "proprietors in fact" who, in turn, negligently, have not brought their acquisition to the motor vehicle registry.

To understand otherwise would force one to reach the (absurd) conclusion that the legislature in 2016 only wanted to change the letter of the law by mere whim or fancy, to, after all, leave everything the same.

Even if that interpretation of the law were accepted, it would always be condemned to failure, given that the Claimant did not minimally fulfill another evidentiary burden that rested on it:

It was incumbent on the Claimant to demonstrate that the legislature did not adopt the most appropriate solutions nor was able to express its intent in adequate terms, in accordance with No. 3 of Article 9 of the Civil Code (CC).

Indeed, the invoices exhibited by the Claimant to demonstrate its right are not apt to prove the execution of a synallagmatic contract as is purchase and sale. Such documents do not reveal by themselves an essential and unequivocal declaration of intent (acceptance) on the part of the alleged acquirors, which from the outset excludes that they can be considered contractual declarations.

On the other hand, as is well known, the IUC is assessed in accordance with registration information duly transmitted by the Institute of Registries and Notaries (IRN).

The said tax is thus assessed, not in accordance with information generated by the Respondent itself, but in accordance with information transmitted by a third party, the IRN.

Having failed to ensure the updating of the ownership registration of the motor vehicle, as was incumbent upon it, in accordance with Chapter III of Decree-Law 54/75, of 12/2 (Regulation for Motor Vehicle Registration), and No. 4 of Article 118 of the Road Code (CE), in accordance with which the seller or the person who, in any legal capacity, transfers the right of ownership of the vehicle to another must communicate this fact to the competent authority for registration, in the terms and within the deadline referred to in the previous number, identifying the acquiror or the person in favor of whom the right is constituted, the special procedure already referred to for registration of ownership of vehicles acquired by verbal contract of purchase and sale, and having failed to order the cancellation of the registrations of the vehicles here in question, it must be concluded that the Claimant did not proceed with the diligence required of it, and it is thus admissible that the tax consequences of that breach fall upon it, without any violation of the principles of equality, proportionality or equivalence.

7. Substantiation

7.1. Substantiation of Fact

7.1.1 Facts Proven

7.1.1.1. The Claimant is a credit institution, engaging in the activity of "Other Monetary Intermediation", with CAE 64180.

7.1.1.2. In the exercise of its activity, it proceeds to the execution of – among others – financial leasing contracts or long-term lease contracts, intended for the acquisition, by companies and individuals, of motor vehicles.

7.1.1.3. It dedicated to this activity the vehicles..., ..., ... and..., which continued at the time of the facts under consideration to be registered in its name at the respective Motor Vehicle Registry Office.

7.1.1.4. Parallel to this, the Claimant promised to sell and the lessees promised to buy the leased vehicles when, after the end of the lease contract, the vehicles cease to be used for these purposes, with the price determined as a function of the mileage traveled and the conservation status of the vehicle at the time of execution of the promised contract.

7.1.1.5. This option is contractually mandatory, in accordance with Clauses 4 and 5 common to all contracts of promise; for this purpose the seller, now the Claimant, must notify the lessee to execute the purchase and sale contract within 8 days, with the sending of the invoice serving as notification, in cases where the seller chooses not to send a letter.

7.1.1.6. In accordance with Clause 6 of the contract promising sale of each of those vehicles, its transmission occurs only with the execution of the promised contract and the full payment of the price by the lessee.

7.1.1.7. To lessee B... Unipessoal Ldª the Claimant promised to sell the vehicle..., leased to the Claimant on 30/6/2010, for the amount of €5,588.54, with the IUC due (Assessment No...) amounting to €258.72.

7.1.1.8. To lessee C..., the Claimant promised to sell the vehicle... leased on 19/7/2010 for the amount of €1,750.567, with the IUC paid (Assessment No. 2017...) amounting to €135.94.

7.1.1.9. To lessee D..., the Claimant promised to sell the vehicle... leased on 19/7/2010 for the amount of €205.47 with the IUC paid (Assessment No. 2017...) amounting to €135.94.

7.1.1.10. To lessee E..., the Claimant promised to sell the vehicle..., leased on 13/5/2007, for the amount of €2,555.93 with the IUC paid (Assessment No. 2017...) amounting to €57.60.

7.1.1.11. On 25/12/2016, the Claimant invoiced lessee B... Unipessoal Ldª in the amount of €7,434.19, plus VAT.

7.1.1.12. On 1/8/2016, the Claimant would invoice C... €1,750.56, plus VAT and €33.33 in document expenses.

7.1.1.13. On 9/8/2016, the Claimant would invoice D... €205.47 plus VAT and €33.33 in document expenses.

7.1.1.14. On 2/5/2014, the Claimant would invoice E... €2,553.96 plus VAT and €33.33 in document expenses.

7.1.1.15. None of these invoices contains any declaration of satisfaction of the debtor's obligations.

7.1.1.16. On 22/6/2018, the Claimant would graciously object to these assessments.

7.1.1.17. On 20/9/2018, the Claimant was notified of the dismissal of these objections.

7.2. Facts Not Proven

7.2.1. It was not proven that the Claimant notified each of the lessees to execute the promised contract, in the terms referred to in 7.1.1.5.

7.2.2. It was not proven that the long-term lease contracts in question were registered by the Claimant at the Motor Vehicle Registry Office.

7.2.3. It was not proven that the lessees of the vehicles, at the end of the long-term lease contracts of the vehicles to which they relate, paid to the Claimant the residual value thereof on that date.

7.2.4. It was not proven that the buyer, seller, or both submitted the Motor Vehicle Registration Request to the Institute of Registries and Notaries, nor that the seller resorted to the special procedure for regularization of ownership of motor vehicles of Decree-Law No. 177/2014, of 15/12.

7.2.5. No other relevant facts for the resolution of the case are considered not proven.

7.3. Substantiation of the Determination of Fact

The Arbitral Tribunal has the duty to select the facts pertinent to the resolution of the case, based on their legal relevance and having regard to the various plausible solutions of the legal questions raised by the parties, as well as the duty to discriminate between proven and unproven facts. However, the Arbitral Tribunal does not have a duty to pronounce upon all the factual matter alleged by the parties, in accordance with the provision in No. 2 of Article 123 of the CPPT and No. 1 of Article 596, as well as in No. 3 of Article 607, both of the CPC, applicable by reference to subparagraphs a) and e) of No. 1 of Article 29 of the RJAT.

The Tribunal formed its intimate and prudent conviction regarding the facts proven and not proven through examination of all evidentiary materials brought before it, which are of an exclusively documentary nature.

These were assessed and evaluated on the basis of the principle of free assessment of facts and the rules of experience, normality and rationality, in accordance with the precepts set forth in subparagraph e) of Article 16 of the RJAT and in Nos. 4 and 5 of Article 607 of the Code of Civil Procedure (CPC), applicable by reference to subparagraph e) of No. 1 of Article 29 of the RJAT.

7.2. Substantiation of Law

Given that the Constitutional Court has ruled on the incompatibility with constitutional principles of the capacity to contribute, a logical corollary of the principle of tax equality enshrined in Article 13 of the Constitution of the Portuguese Republic (CRP), as well as of proportionality and equivalence, of the interpretation of No. 1 of Article 3 of the CIUC, in the wording given by Article 4 of Decree-Law 42/2016, approved under the legislative authorization granted to the Government by subparagraph e) of Article 169 of Law No. 7-A/2016, of 19/3, to the effect that it establishes an irrefutable presumption of the subjective incidence of the IUC determined as a function of motor vehicle registration, which would have been the basis for the Arbitral Decision annulled by the Constitutional Court, it remains to determine whether the Claimant succeeded or not, in the particular case, in rebutting that presumption by demonstrating that the motor vehicles in question had ceased to be its property.

In accordance with No. 1 of that Article 3, the persons subject to the tax are the natural or legal persons, of public or private law, in whose names the ownership of motor vehicles is registered.

No. 2 of that rule equates with subject persons the financial lessees, the acquirors with reservation of title, as well as other holders of purchase option rights by force of the lease contract.

In its original wording, Article 3, No. 1, of the CIUC provided that the persons subject to the tax were the owners of the vehicles, and were considered as such the natural or legal persons, of public or private law, in whose names they were registered.

In accordance with No. 1 of Article 6, the taxable event of the tax is constituted by the ownership of the vehicle, as attested by the registration at the National Registry.

From the combined interpretation of these rules it results that the registration is a mere means of proof of the ownership of vehicles, a condition for the subjective incidence of the IUC.

No. 2 of that rule also considers as a taxable event the presence in national territory for a period exceeding 183 days, consecutive or interpolated, in each calendar year, of vehicles not subject to registration in Portugal and which are not vehicles for goods with a gross weight equal to or greater than 12 tons.

In accordance with No. 3, the tax becomes due on the first day of the taxation period referred to in No. 2 of Article 4.

The Supreme Administrative Court (STA), in particular in decisions of 18/4/18, Proc. No. 0206/17, and of 20/3/19, Proc. No. 0466/14.1, interpreted the original wording of No. 1 of Article 3 of the CIUC to the effect that, for purposes of the subjective incidence of the IUC, owners are not the persons registered in the motor vehicle registry, but those who as such are considered in accordance with the rules of the motor vehicle registry. In considering as owners only those who as such are considered in accordance with the rules of the motor vehicle registry, the legislature would be availing itself of a presumption derived from the registry, a presumption that is refutable in accordance with general rules: the presumption that the person in whose name the vehicle is registered or matriculated at the Motor Vehicle Registry Office is its owner.

The objective of the legislature would have been, in this manner, to tax the persons presumed to be owners of the vehicles, although that presumption is merely "juris tantum", it not being, thus, the registration the only means of demonstrating the ownership of the motor vehicle or the absence thereof.

This jurisprudence is in harmony with Article 2 of the Code for Registration of Movable Assets, approved by Article 1 of Decree-Law No. 277/95, of 25/10, in accordance with No. 2 of Article 1 thereof, applicable to the registration of motor vehicles, which provides that the registration of facts relating to the movable asset constitutes presumption of the existence of the legal situation in the precise terms defined therein.

Given that the legislature opted to establish as a taxable event the ownership of the motor vehicle, the fiction of that ownership constructed solely from the registry or registration, according to the jurisprudence of the Constitutional Court, cited by the Claimant, as well as that which formed the basis for Summary Decision No. 820/2025, would violate the principle of capacity to contribute in cases where the holder of the registration demonstrates not being its owner, in that it does not have any real property right of enjoyment of the asset.

According to No. 1 of Article 4 of the General Tax Law (LGT), taxes rest essentially on the capacity to contribute, revealed, in accordance with the law, through income or its use and through assets. Such capacity to contribute may be actual or presumed, based on objective indicia.

The current Constitution does not contain any provision equivalent to Article 28 of the 1933 Constitution, which provided that all citizens must, without distinction, contribute according to their means and in the measure fixed by law for public expenses (a provision corresponding to Articles 145, paragraph 14, of the Constitutional Charter of 1826 and Article 24 of the 1838 Constitution).

It does not explicitly recognize, in truth, the principle of taxation according to capacity to contribute.

Thus, it can be affirmed that capacity to contribute does not today have independent constitutional relevance, with that material limit on taxation instead to be derived indirectly from the principle of tax equality enshrined in Nos. 1 and 2 of Article 13 of the CRP, although combined with other constitutional provisions and principles of fiscal constitutionality.

The limit of capacity to contribute is incompatible, for example, with:

a) Taxation that is exclusively punitive, without proportion to the income or wealth of the person subject to the tax, even when justified by non-compliance with duties of cooperation.

b) Taxation by head through a fixed tax applicable to each citizen regardless of income or wealth, of the type called "poll tax" which Margaret Thatcher attempted to introduce in the United Kingdom in the 1980s, but which has precedents in centuries much earlier than the twentieth century.

c) Indirect taxation of electronic commerce based on transaction volume and, a fortiori, on transaction indicia, including units of information susceptible of being stored or transmitted, ignoring the actual nature of the operations or their value.

d) Substitution of current income taxes with a single tax on mere financial flows, which by nature are alien to the effective capacity to contribute of the beneficiaries.

e) Presumptions themselves that are not based on positive economic facts but on arbitrarily chosen elements and, therefore, the result of their application lacks credibility.

f) Absolute presumptions in Tax Law that prevent the taxpayer from proving the non-existence of the capacity to contribute that the legal provision aims to reach, in accordance with Article 73 of the LGT.

In prohibiting absolute presumptions, this provision of Article 73 of the LGT would embrace the doctrine of Constitutional Court Decision No. 63/96, which declared, regarding the former paragraph 2 of Article 14 of the Code of Capital Taxation, which established, from Decree-Law Number 197/82, of 21/5, an irrefutable presumption of the onerous character of loans made by companies to shareholders, the material unconstitutionality, by violation of the principle of equality, of "jure et de jure" presumptions of tax rules of subjective incidence.

More recently, the Constitutional Court Decision in Proc. 488/2021 refused application of No. 2 of Article 4 of the Code for Personal Income Tax (CIRS), as this led to an irrefutable presumption of the realization of real estate capital gains.

However, in light of recent jurisprudence, notably the Uniformizing Decision by the Full Administrative Court of the Supreme Administrative Court of 17/10/2024, Proc. 083/24.8BALSB, in accordance with which the person in whose name the vehicle is registered at the date of occurrence of the taxable event is liable for payment of the tax, regardless of whether on that date the asset had already been transmitted to another person.

This understanding of the absolute relevance of the inscription in the motor vehicle registry for the definition of subjective incidence to the IUC has already been embraced in identical terms in Decisions of the Northern Administrative Court of 20/09/2018 and 3/10/2018 (Procs. Nos. 01270/14.2BEPNF and 01271/14.0BEPNF, respectively), in which it is argued that "from the wording given to No. 1 of Article 3 of the CIUC by Decree-Law No. 41/2016 it follows that the legislature came to eliminate any legal presumption as to who can be considered the owner of a vehicle, instead determining that the person in whose name the vehicle is registered shall become subject to the tax".

The subjective incidence would, according to the Uniformizing Decision, be satisfied by the mere registration of the right of ownership in the name of the subject, through the description of the characteristics of the vehicle and the inscription of the name of the person in whose name the ownership of the vehicle is registered, regardless of whether that person is or is not the effective owner and possessor of the vehicle in the year to which the IUC relates, in particular in cases of sale of the vehicle without updating of the ownership registration, as in the present case, which is similar to that which was the subject of that Decision: the alleged non-compliance with the duty to update the registration in the case of the exercise of the purchase option right at the end of financial leasing contracts or long-term vehicle lease contracts.

In this manner, the ownership of a motor vehicle, although presumed from the registration, would not be an element of fulfillment of the rule of subjective incidence of the tax.

That incidence would instead be determined exclusively as a function of the registration, regardless of who was the owner of the vehicle.

This does not imply violation of the principle of proportionality: the registration can be altered or cancelled on the initiative of the holder or challenged in accordance with Article 5 of the Code for Registration of Movable Assets, as well as in the Motor Vehicle Registration Regulation (RRA, Decree-Law No. 55/75, of 12/2), although with effects only for the future.

That interpretation of the law made by the Uniformizing Decision was not called into question by the South Administrative Court Decision of 7/5/2024, in Proc. No. 77/19.5 BCLSB, since the ground for annulment was not any disagreement of the Arbitral Decision rendered in the present arbitral process No. 658/18-T on the interpretation of infra-constitutional law, but the omission of pronouncement on the question of the possible unconstitutionality of the solution of Article 4 of Decree-Law No. 41/2016, by violation of the principles of capacity to contribute, proportionality and equivalence, on which the Tribunal Arbitral would not have pronounced.

For the Uniformizing Decision, "the updating of the registration is not such a heavy burden that it cannot and must not be fulfilled by whoever loses or acquires the status of owner, especially in a context in which the legislature has instituted simple mechanisms for updating the motor vehicle registry, in particular through Decree-Law No. 177/2014".

Moreover, continues that Decision, "What is normal is that the holder of the registration be sufficiently diligent to keep the registration updated and even if, through carelessness, he has not done so, the consequences that result therefrom will not be disproportionate, particularly because the tax is due only until cancellation of the registration. And it is also worth noting that whoever holds the registration does so because at some point he was the owner and that, through lack of diligence, he did not make the update, these pathological situations being an exception. It will be more normal, corresponding to normalcy, that whoever for any reason acquires or sells a vehicle does so with updating of the registration, notably when it concerns financial leasing companies, as is the case in the proceedings, in that given the professional nature of the activity developed, it is hard to understand the manifest lack of diligence and consequently the justification of the relief claimed in the proceedings. It should also be said that it is not unprecedented for taxes to have an extrafiscal function, which in this case could very well aim to ensure that the registration of motor vehicles is kept updated, not only to ensure the practicality of the application of the IUC (which surely, with the question of elimination of presumptions, would raise problems not only for the application of the tax, but would further increase congestion in the tax courts), but also to facilitate the application of contraventions law (for excessive speed, for example) or provisions of other branches of law that have as subjects the holders of the registration, constituting a stimulus for this to be duly updated. Thus, taking into account the principle of practicality and tax effectiveness, it can be argued that burdening the motor vehicle registration holder with the obligation of its updating, under penalty of being liable for payment of the tax, does not violate the principle of proportionality".

It should be noted that, in accordance with Article 15-A of the CIUC, in effect at the time of the facts, as it had been added by Article 215 of Law No. 82-B/2014, of 31/12, "Without prejudice to the provisions of Article 3, the alteration of ownership of the right of ownership effected under the special procedure for registration of ownership of vehicles acquired by verbal contract of purchase and sale is relevant for purposes of the unique vehicle circulation tax, from the date of transmission, when that request is submitted by the seller within one year after the deadline for compliance with the mandatory registration referred to in Article 2 of that special procedure."

That registration thus has a declarative nature: its effects are backdated to the date of transfer of ownership of the motor vehicle, and can, if necessary, be considered a subsequent document for purposes of the deadline for filing a gracious objection in No. 4 of Article 70 of the CPPT.

In accordance with No. 1 of Article 3 of the CIUC, this tax is governed by the principle of equivalence referred to in Article 1, seeking to burden the taxpayers in the measure of the environmental and road costs that these cause, in implementation of a general rule of tax equality.

Interpreting these rules, the Uniformizing Decision declares "The holder of the registration not being the possessor of the asset does not alter the subjective incidence of the IUC, the mere potential capacity of the vehicle for the production of such damage sufficing, which occurs when that tax falls on whoever has a closer connection with the vehicle and who presumably may use it, or have a legal title to condition the use of it from which the potential damages would result."

No. 1 of Article 3 of the CIUC would thus be "a general and abstract rule, encompassing all subjects who are in the same circumstances, the same being able to be said of the capacity to contribute which in our system is above all a criterion for determining in a general and uniform manner the measure of the tax that should fall on each subject."

The conjunction of the principle of capacity to contribute with the principle of equivalence naturally presupposes, for the Uniformizing Decision, that "Its subjects are not those who in classical terms have the greatest capacity to contribute as determined on the basis of the concept of income in the broad sense (also involving the holding of assets and use of income in consumption), but those who by their activities or connection with activities/assets susceptible of generating negative externalities will be burdened in the measure of the potential damage that results therefrom."

This is to say, still in accordance with the Uniformizing Decision, that "In a context in which taxes like the IUC return to a commutative logic, which implies a link between the possible damage and the measure of the tax, classical capacity to contribute cannot be applied strictly, and must be tempered by the principle of equivalence which, in many situations, means that whoever has less capacity to contribute, for example, by consuming less ecological and cheaper products, due to lack of means, is more heavily burdened."

Thus, the Uniformizing Decision would conclude, the constitutional principles of proportionality, equivalence and equality would not have been violated by the wording of No. 1 of Article 3 of the CIUC, given by Decree-Law No. 41/2016.

Citing the Uniformizing Decision, any other solution would be "an authentic counter-reform of the legislation through an interpretation lacking the minimum support in the letter of the law, threatening the principle of separation of powers".

For the Constitutional Court Decisions No. 1108/2025, 1013/2025 and 1046/2025, which the Summary Decision No. 820/2025 invokes and on the basis of which the present arbitral proceedings would be reopened, it would be unconstitutional the interpretation of No. 1 of Article 3 of the CIUC, in the wording given by Article 4 of Decree-Law No. 41/2016, to the effect that it would have substituted the previous refutable presumption with a different regime – rule of subjective incidence of the IUC, in accordance with which the person owning the vehicle according to the registry is necessarily subject to the tax, regardless of not being the holder of the real property right of ownership over the vehicle.

Although the elimination of the mere legal presumption may possibly be due to reasons of simplicity and practicality, which would have induced the legislature to determine that the person in whose name the vehicles are registered shall always be subject to the tax, even if it proves not to be the owner, such interpretation would necessarily violate the principle of equality.

The aforementioned Constitutional Court Decision No. 1046/2025 was based on the Supreme Administrative Court decision of 3/6/2020, rendered in Proc. No. 0467/14.0BEMDL 0356/18, in particular in the following passage:

"But let's look at how the rule functions, assuming we have a remissive proposition: if the legislature intends that the holder of the registration who is known not to be the true owner be taxed as owner, we have a legal fiction, that is the functioning of a rule that deems as existing a fact that is known to be non-existent.

Now, the application of these legal fictions in tax law must be proportioned to the objectives of efficiency and combating tax evasion. And it is not apparent how a rule that operates even in limit situations in which it is known that the true owner is another can be considered proportioned. Tax evasion is combated, in these cases, by taxing the true owner. At most, by holding the previous holder responsible when, through its fault, it had made collection of the tax from the true owner impossible. But not by ignoring all this, transforming tax efficiency into an end in itself, completely detached from tax justice.

On the other hand, the functioning of these fictions also cannot affront the principle of capacity to contribute, enshrined in Article 4, No. 1, of the General Tax Law. Revealed, in accordance with the law, through income or its use or its assets.

Now, the registration of ownership of a vehicle does not, by itself, reveal any capacity to contribute to financing the environmental and road costs that vehicle use generates. Because the registration does not by itself confer the power to extract any income from the vehicles, the economic value of their use or even their holding. A tax centered on the registration of vehicles only really reveals the economic capacity to register them".

It falls to the Arbitral Tribunal not to pronounce on that divergence, but to proceed with the reform of the Arbitral Decision, in compliance with Summary Decision No. 820/2025 of the Constitutional Court, which has become final, pronouncing on whether the Claimant succeeded or not in rebutting the presumption of ownership resulting from the registration.

The burden of proof of the transfer of ownership, excluding the application of that presumption, rests with the Claimant, in accordance with No. 1 of Article 74 of the LGT and No. 1 of Article 342 of the Civil Code (CC).

The Claimant presents to justify the transfer of that ownership the invoices referred to in 7.1.1.11, 7.1.1.12, 7.1.1.13 and 7.1.1.14 of the Proven Facts.

Proof of the transfer of ownership of the motor vehicle is effected in accordance with the general rules of law, that is, by the means of proof that the law determines or authorizes (decision of the Supreme Court of Justice of 17/9/2009, Proc. P.841/2002.S1).

The transmission of the vehicle by means of payment of the residual value of the vehicles at the end of financial leasing or long-term lease contracts falls within the figure of purchase and sale.

The contractual declaration of that purchase and sale is not subject to any special form.

The invoice is not a contractual declaration, as the Respondent reminds us.

An invoice is a commercial document issued by a seller to a buyer, requesting payment for goods or services delivered or rendered.

It serves only as a formal notification directed to the customer that payment for the goods or services mentioned therein is due.

Unlike a simple estimate or quotation, an invoice means that the transaction has occurred and that a payment obligation has been established.

For the seller, it is a record of a sale and the creation of an account receivable; for the buyer, it is a record of a purchase and the creation of an account payable.

It is nothing more than a payment order, nor does it prove the possible underlying legal transaction.

As clarified by the decision of the Lisbon Court of Appeal of 6/2/2024, Proc. 16506/20.2 YIPRT.L-2-7, invoices are not commercial record books, and thus do not benefit from the probative force of merchants' documents provided for in Article 44 of the Commercial Code.

They do not prove the transmission of the goods or provision of the services to which they relate.

It is true that, aware of the negative effects of non-alteration and updating of the registration of vehicle ownership in the names of acquirors, with the attendant liability of sellers, not only for payment of the IUC but for possible violations of road legislation, which resulted from the then-existing regime requiring that the Motor Vehicle Registration Request be signed by buyer and seller, the Government, through Decree-Law No. 177/2014, of 15/12, created a special regime for registration of ownership of vehicles acquired by verbal contract of purchase and sale, with a view to regularization of ownership.

The new special regime, in accordance with its Article 2, permits that, after the deadline for mandatory registration has elapsed, registration of vehicle ownership be requested, in person, by mail or "on line", only by the seller, on the basis of documents indicating purchase and sale, such as invoices, receipts, cash sales or other payment documents, on which appear the vehicle registration, the name and address of the seller and buyer. The registration form will also indicate the other details of the buyer, such as Tax ID and date of purchase and sale, that do not appear in those documents.

Subsequently, in accordance with Article 3, the Motor Vehicle Registry Office notifies the buyer so that he, within 15 days, may oppose the registration request, contest any of its particulars or complete the necessary details for registration, the acquisition being considered registered in his name if he does not file an opposition or, having filed one, the registrar considers it without merit.

If the buyer opposes claiming that the vehicle no longer belongs to him by reason of having meanwhile transmitted it, the registrar rules the opposition without merit and notifies him of that decision, with an indication that he may initiate a new procedure for regularization of vehicle ownership under Decree-Law No. 177/2014.

In accordance with Articles 9 and 10, if the decision not to register becomes final, the registrar requests the seizure of the vehicle. And if three months pass from the request for seizure without the ownership being regularized, the registration is officially and gratuitously cancelled by the IMT, cancellation that does not prejudice the validity of motor liability insurance contracts.

The attached invoices, however, are not capable of indicating the transfer of ownership even if that special regime applied, which is not the case.

In fact, simple invoices, which do not constitute payment documents because they do not prove payment, do not prove purchase and sale and consequently the transfer of vehicle ownership.

The exhibited invoices do not, in fact, have the characteristics of invoice-receipts, nor did the Claimant designate them as such.

Such invoices are used in contexts of immediate payment, serving to prove the acquisition of the product/service and the satisfaction of its consideration.

The invoice-receipt does indeed allow one to combine in a single document the invoice and the receipt, and thus can only be issued in cases in which the date of invoicing and the date of payment coincide: in that case, the transaction is automatically settled, and it is not necessary to issue a receipt.

That special regime is, however, inapplicable to the present case, taking into account the Proven Facts in 7.1.1.5 and 7.1.1.6.

In accordance with the long-term lease contracts, as per Clauses 4 and 5 common to all: for the transfer of ownership of motor vehicles it is not sufficient to send the invoices to the lessee.

It is necessary that the lessee have proceeded to payment of such invoices.

In accordance with Clause 6, transmission occurs only with the execution of the promised contract, within the 8 days following notification of the lessee by the lessor for that purpose, and the full payment of the price owed by the lessee.

Such circumstances – notification of the lessee to execute the purchase and sale and full payment of the price – were not proven by the Claimant.

That temporal deferral between issuance and payment of the invoices is incompatible with qualifying the documentation in question as invoice-receipts.

The 4 invoices thus do not demonstrate any payments, nor any transfer of ownership of the motor vehicles to which they relate, and the doctrine sustained in Arbitral Decisions Nos. 462/2019-T and 594/2023-T, which deemed proven the issuance of invoice-receipts to justify the transfer of motor vehicle ownership, thus has no application in this case, which has not occurred.

It is a fact that Arbitral Decisions Nos. 258/2017-T, 430/2017-T and 585/2023-T considered that certain invoices, "although not proving the actual payment of the price by the same buyer, constitute proof of that same transaction, that is, of the purchase and sale effected".

In the present arbitral proceedings, however, the parties themselves expressly agreed that the transfer of ownership depends on the execution of the promised contract and the payment of the residual value of the vehicle. Prior to that payment, there is no transmission of ownership capable of triggering the procedure for registration of the motor vehicle.

On the other hand, No. 1 of Article 12 of Decree-Law No. 177/2014 would alter No. 1 of Article 25 of the Motor Vehicle Registration Regulation, which would then provide:

"1 - Subsequent registration of ownership acquired by verbal contract of purchase and sale may be effected on the basis of:

a) Request signed by the buyer and confirmed by the seller, through motor vehicle sales declaration submitted with the registration request;

b) Request signed jointly by the seller and the buyer;

c) Request signed by the seller, in cases where the latter is a commercial entity whose principal activity is the purchase of vehicles for resale and who proceeds to request registration of ownership acquired by reason of transfer of a vehicle in the exercise of that activity, in the terms and with the limitations set by decree of the Government member responsible for the justice area;

d) Request signed by the seller, in cases where the latter is an entity which, by reason of its activity, proceeds with regularity to transfer vehicle ownership, in the terms and with the limitations set in the decree referred to in the preceding subparagraph;

e) Request signed by the seller, following the exercise of the purchase right at the end of the financial leasing or long-term lease contract registered, before expiry of the registration, accompanied by the invoice corresponding to the respective sale or a payment document".

Thus, moving away from the regime of subparagraphs a) and b) of No. 1 of that Article 12, in accordance with which the Motor Vehicle Registration Request must be signed by buyer and seller, with the inconveniences that Decree-Law No. 177/2014 attempted to resolve, the Motor Vehicle Registration Request at the end of a long-term lease or financial leasing contract of a motor vehicle may be signed only by the seller.

According to the Institute of Registries and Notaries (Document "Frequently Asked Questions and Process Flows", available on the Internet:

"1.27 What documents must be submitted with the request for registration of transfer of ownership at the end of a registered financial leasing or long-term lease contract, following the exercise of the purchase right?

It is necessary to attach a request signed by the seller following the exercise of the purchase right at the end of the registered financial leasing or long-term lease contract, accompanied by an invoice or a payment document".

Thus, it is the Motor Vehicle Sales Declaration, also known as the Motor Vehicle Registration Request, to be submitted by the seller following the exercise of the purchase right by the lessee at the end of the long-term lease contract, that effectuates the transfer of ownership of the vehicle to the lessee.

It is such Declaration, to be submitted with the payment document of the debt that is not every invoice but only the invoice-receipt, that serves as the basis for Registration at the Motor Vehicle Registry Office.

Such Declaration is a mere private document, which produces effects so long as the signature has not been challenged by the buyer or by the Motor Vehicle Registrar.

No plausible reason is perceived as to why the Claimant would not have submitted the required documentation at the Motor Vehicle Registry Office.

Having failed to do so, the presumption must be that the transmission of the vehicle did not occur.

The legal proof of transmission by means of the Motor Vehicle Sales Declaration and not by mere invoice aims not only to ensure collection of the IUC and other tax obligations such as highway tolls, within the normal period of limitation of the right to assess, but also to ensure effective combat of road casualties and the proper functioning of the internal market reserved for registered vehicles (Council Directive No. 1399/37/EC).

This means of proof was not established arbitrarily.

Thus, mere transfer of the vehicle does not have effects that transmit its ownership. Even if the change in possession had been proven (which it was not), it would have no effect on the alteration of the subjective incidence of the IUC.

DECISION

For these reasons, it is decided:

a) To rule against the request for arbitral decision and to uphold the four acts of assessment of the unique vehicle circulation tax (IUC) relating to the year 2017, in the total amount of €608.25, including compensatory interest in the amount of €14.22, as well as the acts of dismissal, on 20/9/2018, of the gracious objections filed against those assessments;

b) To order the Claimant to pay all costs of the proceedings.

10. Value of the Case

Given the provision in Article 97-A of the CPPT, applicable by reference to subparagraph e) of No. 1 of Article 29 of the RJAT, the value of the case is set at €622.47.

11. Costs

In accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, the costs are in the amount of €306.00 to be borne by the Claimant, in accordance with No. 2 of Article 12 and No. 4 of Article 22, both of the RJAT and Article 4 of that Regulation.

Notify.

The Sole Arbitrator

Lisbon, 16 February 2025

(António Lima Guerreiro)

CAAD: Tax Arbitration

Case No.: 658/2018-T

Subject Matter: Unique vehicle circulation tax (IUC) – subjective incidence regulated in No. 1 of Article 3 of the Code of the Unique Vehicle Circulation Tax (CIUC) – definition of the person subject to the tax as a function of the right of ownership registration of the motor vehicle – violation of constitutional principles of equality, proportionality and equivalence – Reform of the arbitral decision (attached to the decision).

Replaced by the Arbitral Decision of 16 February 2025.

SUMMARY

1. For purposes of the provision in No. 1 of Article 3 of the CIUC, in the wording introduced by Decree-Law No. 41/2016, of 1/8, the person in whose name the vehicle is registered at the time of the taxable event is liable for payment of the IUC, regardless of whether on that date the transmission of the vehicle's ownership to another person has already occurred.

2. This rule on subjective incidence does not violate the constitutional principles of equality and its logical corollary of taxation according to capacity to contribute, of proportionality and of equivalence.

ARBITRAL DECISION

I. REPORT

1. Identification of the Parties

1.1 Claimant

A..., S.A., a limited company registered at the Commercial Registry Office under the single registration and identification number..., with registered office at Rua..., No...., ...-... Lisbon.

1.2 Respondent

Tax and Customs Authority (TA)

2. Course of Proceedings

2.1. The request for arbitral decision was presented and accepted on 21/12/2018 and, on the same date, forwarded to the Respondent and the Claimant, the latter not exercising the faculty of appointing an arbitrator.

2.2. In conformity therewith, on 22/12/2019, CAAD would designate as sole arbitrator the legal expert Álvaro Caneira, from the list of CAAD arbitrators, who on the same day accepted the appointment.

2.3. The Respondent was notified of the arbitral action on 26/12/2019.

2.4. On 9/1/2019, the TA would designate as process representatives the legal experts … and ….

2.5. On 8/2/2019, a sole arbitrator, the legal expert Álvaro Caneira, would be appointed in the present arbitral proceedings.

2.6. On 28/2/2019, a ruling by the president of the CAAD Ethics Council would proceed to constitute the Arbitral Tribunal.

2.7. On that date, the Arbitral Tribunal would notify the Respondent, in accordance with Article 17 of the RJAT, to submit a response within 30 days, to request, if deemed necessary, additional evidence, and to send the administrative process (AP).

2.8. On 1/4/2019, the Respondent would send the Response and attach the AP.

2.9. On 16/4/2019, the Arbitral Tribunal would issue the following ruling:

"I - Article 18 of the RJAT

Unless stated otherwise by express objection from either party within five days, the meeting is dispensed with, taking into account:

a) That this is, in this case, a process not susceptible to definition of specific procedural rules, different from those commonly followed by CAAD in the generality of tax proceedings, and

b) that there are no exceptions to be considered and decided before ruling on the merits, nor any apparent need for correction of procedural documents.

II - Testimonial Evidence

The production of testimonial evidence does not appear necessary or useful, given the issues raised, the documentary evidence presented, and the non-controversial nature of the essential facts.

Therefore, in light of the principle prohibiting the performance of unnecessary acts, the tribunal dispenses with witness examination.

III - Final Submissions

The positions of the parties are clearly expressed in the documents presented. However, a period of 20 days is granted to the parties, if they wish, to present written submissions, on facts (essential facts they consider proven) and on law.

IV - Date for Pronouncement and Notification of Arbitral Decision

31 May 2019 is fixed as the deadline for pronouncement and notification of the final decision.

V - Remaining Arbitration Fee

The Claimant must give timely compliance with the provision in Article 4, No. 3, of the RCPAT (payment before decision and in the regulatory form of the remaining arbitration fee).

VI - Pleadings in Word Format

In light of the principle of cooperation, both parties shall submit to CAAD their respective procedural documents (pleadings) and submissions in editable format (word) with a view to facilitating and expediting the preparation of the final decision on the facts (Article 7, CPC).

Notify."

2.10. On 22/4/2019, the Respondent would request from the Arbitral Tribunal the holding of successive submissions, instead of the simultaneous ones initially determined.

2.11. On 26/4/2019, the Arbitral Tribunal would rule that, as submissions are optional, there are no grounds to grant what was proposed by the Respondent.

2.12. On 30/4/2019, the Claimant would insist with the Arbitral Tribunal on holding the meeting provided for in Article 18 of the RJAT aimed at examining, at least, one of the witnesses summoned by it.

2.13. In the same action, it would also request the utilization of evidence produced in the arbitral process No. 261/2018/T and the attachment to the proceedings of the Arbitral Decision No. 332/2018-T, in the Claimant's view of interest to the case.

2.14. On 10/5/2019, the Arbitral Tribunal would issue the following ruling:

"Considering the request submitted by the Claimant. Let it be attached to the proceedings.

No concrete and historically situated facts are alleged that require or are susceptible to testimonial evidence.

The versions presented by the parties have their evidentiary foundation based on documents.

The issues to be decided are fundamentally matters of Law and assessment of the aforementioned documents.

Therefore, I decide to maintain my previous ruling in the sense of not convening the meeting under Article 18 of the RJAT.

Notify."

2.15. Also on that date the Claimant would submit its pleadings.

2.16. On 16/3/2024, the Respondent would submit its pleadings.

2.17. On 24/5/2024, the Arbitral Decision would be taken and recorded.

2.18. On 6/12/2019, the Claimant would communicate to CAAD the challenge of the Arbitral Decision before the South Administrative Court, which would be included in Proc. No. 77/19.5 BCLSB.

2.19. On 7/5/2024, that court would annul the challenged Arbitral Decision on the ground that, given that the challenger had raised the question of unconstitutionality of No. 1 of Article 3 of the Code of the Unique Vehicle Circulation Tax (CIUC) and the Arbitral Tribunal had based its decision on the application of that specific rule, it was necessary that it had considered or ruled on that objection. Having failed to do so, it must be concluded that the Arbitral Tribunal violated the duty to pronounce upon it that rested upon it and, consequently, the Arbitral Decision suffers from nullity due to omission of pronouncement.

2.20. On 6/4/2024, that judgment would become final and would be returned by the South Administrative Court to the Arbitral Tribunal for remedy of the said nullity.

2.21. On 9/7/2024, the president of the CAAD Ethics Council would issue the following ruling reactivating the arbitral proceedings: "With reference to the case in question, His Excellency Dr. Álvaro Caneira, arbitrator of the single arbitral tribunal constituted in this process, has resigned from arbitral functions invoking for such purpose reasons that are to be considered as justified. In accordance with this, pursuant to and under the provisions of the Regulation for Selection and Appointment of Arbitrators in Tax Matters (Article 6, No. 5), the replacement is determined, as arbitrator in the present process, of His Excellency Dr. Álvaro Caneira by His Excellency Dr. António de Barros Lima Guerreiro. Let this be noted."

2.22. On 6/9/2024, CAAD would appoint the proposed arbitrator.

3. Presuppositions Regarding the Tribunal and the Parties

3.1. The arbitral tribunal was regularly constituted.

3.2. The Parties have legal personality and capacity and are regularly represented.

3.3. Given the identity of the factual and legal grounds invoked, the Arbitral Tribunal considers there is no obstacle to the joinder of claims, in accordance with Articles 3 of the RJAT and 104 of the CPPT.

4. Subject Matter of the Proceedings

The request for arbitral decision aims at assessment of the legality of four acts of assessment of unique vehicle circulation tax (IUC), relating to the year 2017, in the total amount of €622.47; €608.25, including compensatory interest in the amount of €14.22, as well as the acts of dismissal, on 20/9/2018, of gracious objections filed against those assessments.

5. Position of the Claimant

Notwithstanding the amendment to No. 1 of Article 3 of the CIUC effected by Article 4 of Decree-Law No. 41/2016, of 1/8 approved under the legislative authorization granted by subparagraph e) of Article 169 of Law No. 7-A/2016, of 30/3, according to which the persons subject to the tax are the natural or legal persons, of public or private law, in whose names the ownership of motor vehicles is registered, the Claimant continues to understand that such rule constitutes a merely refutable presumption of the subjective incidence of the IUC.

Thus, the interpretation of that rule made by the Respondent that the subjective incidence of the tax depends entirely and exclusively on the taxable event of registration of the vehicle with the Motor Vehicle Registry Office lacks legal basis.

When the lessee exercises his right to acquire the leased asset at the residual value, plus expenses and VAT, he becomes the (new) owner of the motor vehicle formerly leased, and the provisions of No. 1 of Article 3 of the CIUC apply to him in full, with the consequent responsibility for payment of the tax.

At the end of the financial leasing contract, the exercise of the purchase option does indeed extinguish the right of ownership of the lessor.

The interpretation of No. 1 of Article 3 of the CIUC, with the wording of the said Article 4 of Decree-Law No. 41/2016, to the effect that it would require the former lessor and owner to register the sale at the Motor Vehicle Registry Office, under penalty of bearing the IUC and other charges associated with ownership of the asset, is inadequate and disproportionate.

Such a charge, if it exists, would impose on the former owner a cost "in perpetuity", in this case, the IUC periodically borne, as well as the passing on of damage that the taxpayer did not cause, which, moreover, the tax administration can always avoid,