Process: 661/2017-T

Date: May 6, 2018

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 661/2017-T) addresses the subjective incidence of Portugal's Unique Circulation Tax (IUC) on a vehicle importer. The claimant, an automobile importer and distributor of B... brand vehicles, contested 84 IUC assessments totaling €10,415.52 plus compensatory interest for tax years 2009-2014. The company's business model involves importing vehicles from the manufacturer C... based on dealer orders, immediately invoicing and transferring ownership to dealers upon importation, then registering the vehicles in Portugal as the registered operator. The core legal issue concerns whether IUC liability attaches to the entity registered as the vehicle owner (the importer) or to the actual economic owner (the dealers) at the moment of taxation. The claimant argued that since ownership had already been transferred to third-party dealers before vehicle registration, it should not be the taxable person for IUC purposes. The Tax Authority dismissed the ex officio revision applications, maintaining the assessments. The arbitral tribunal accepted jurisdiction under the Legal Regime of Tax Arbitration (RJAT) and permitted joinder of all 84 claims as they involve identical factual circumstances and legal interpretation of IUC's subjective scope. This case highlights the tension between formal vehicle registration procedures and substantive economic ownership in determining IUC tax liability, particularly relevant for importers and distributors operating under dealership models where commercial transfer precedes administrative registration.

Full Decision

ARBITRAL DECISION

I. Report

  1. On 20-12-2017, A..., legal entity no. ..., with registered office at ... ..., ...-... ..., submitted, pursuant to the provisions of articles 2, no. 1, paragraph a), and 10, no. 1, paragraph a), of Decree-Law no. 10/2011, of 20/01, which approved the Legal Regime of Tax Arbitration (RJAT), and articles 1 and 2 of Ordinance no. 112-A/2011, of 22/03, a request for constitution of an Arbitral Tribunal, in which the TAX AND CUSTOMS AUTHORITY (AT) appears as Respondent.

  2. The Claimant contests the decision of the Head of Division of the Large Taxpayers Unit (AT), of 08-09-2017, issued under delegation of authority conferred by Decision no. 12729/2015 (DR, 2nd series, no. 222, of 12.11.2015), which dismissed the applications for ex officio revision timely presented against 84 tax assessments of the Unique Circulation Tax (IUC) and compensatory interest (JC), relating to the years 2009, 2010, 2011, 2013 and 2014, requesting that the Tribunal declare the illegality of said decision dismissing the application (see Doc. 1) as well as the illegality of the acts assessing IUC and JC, which are the subject of the same applications for ex officio revision, in the total amount of € 10,415.52, identified in the annex to the application (see Doc. 3 and attached List), with their consequent annulment and reimbursement of tax improperly paid, plus the corresponding compensatory interest, calculated in accordance with legal terms.

  3. It also requests the condemnation of the Respondent to the costs of the proceedings.

  4. The Claimant opted for non-designation of an arbitrator.

  5. 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 22-12-2017.

  6. Pursuant to the provisions of no. 1 of article 6 of the RJAT, by decision of the President of the Deontological Council, duly communicated to the parties within applicable legal time limits, the undersigned was appointed as arbitrator, who communicated acceptance of the appointment to the Deontological Council and the Centre for Administrative Arbitration within the regularly applicable time limit.

  7. On 07-02-2018, the Parties were duly notified of this appointment and did not express any intention to refuse the appointment of the arbitrator, in accordance with the combined terms of article 11, no. 1, paragraphs a) and b), of the RJAT and articles 6 and 7 of the Deontological Code.

  8. Accordingly, in compliance with the provisions of paragraph c) of no. 1 of article 11 of the RJAT, as amended by article 228 of Law no. 66-B/2012, of 31/12, the arbitral tribunal was constituted on 27-02-2018.

  9. In response to what was requested, the Tax and Customs Authority (AT) expressed itself to the effect of the dismissal of the present request for arbitral decision, expressing the understanding that the tax acts contested should be maintained in the legal order and, accordingly, the tribunal should pronounce itself for the acquittal of the respondent entity.

  10. The regularly constituted arbitral tribunal is materially competent, given the provisions of articles 2, no. 1, paragraph a), of the RJAT.

  11. The parties have judicial personality and capacity and are entitled to bring proceedings (articles 4 and 10, no. 2, of the RJAT, and article 1 of Ordinance no. 112-A/2011, of 22/03).

  12. No nullities occur and no preliminary questions or exceptions were raised, so nothing prevents judgment on the merits, the present proceedings thus being in conditions for the final decision to be rendered.

  13. Given the knowledge that results from the procedural documents submitted by the parties, which is considered sufficient for the decision, the Tribunal decided to dispense with the meeting referred to in article 18 of the RJAT as well as the hearing of the witness indicated by the Claimant.

II. Joinder of Claims

  1. Considering the existence of a direct relationship between the tax assessments whose legality is questioned in the present proceedings, nothing prevents the joint appraisal of the tax acts in question, given that, in light of what is alleged and the documentation submitted, it is evident that, in substance, the possible success of the claim depends on the same factual circumstances and the interpretation and application of the legal norms relating to the subjective scope of the IUC.

  2. Thus, given that what is in question is essentially the appraisal of the same factual circumstances and application of the same legal norms concerning the subjective scope of the IUC, the joinder of claims is legal, in the terms in which it is permitted under article 3 of the RJAT.

  3. Indeed, the cited provision, as well as article 104 of the CPPT, provides that joinder of claims is admissible "when the success of the claims depends essentially on the appraisal of the same factual circumstances and the interpretation and application of the same principles or rules of law."

  4. It is emphasized that the referred legal norms do not require complete identity of the contested acts nor do they require the coexistence, alongside common grounds, of a specific ground for annulment of some or all of the contested acts.[1]

  5. In the present case, tax acts relating to the IUC are involved, involving a large number of motor vehicles, and, in the legal sphere, the application of the legal norms relating to the subjective scope of this tax.

  6. In these terms, considering the identity of the tax facts, of the tribunal competent to render the decision and of the factual and legal grounds invoked, it is concluded, in light of the provisions of articles 3 of the RJAT and 104 of the CPPT, that nothing prevents the joinder of claims.

III. Factual Matters

  1. Based on the documentary evidence that is part of the present proceedings, the following factual elements are highlighted which, not being contested by the Respondent, are considered entirely proved:

20.1. The Claimant is a commercial company whose corporate purpose is the sale of automobiles, respective parts and accessories.

20.2. In the course of its activity, it proceeds to the importation, in Portuguese territory, of all motor vehicles of the B... brand.

20.3. The vehicles are purchased from C... following a prior request from the dealers, submitted electronically directly to the manufacturer.

20.4. The need to import vehicles derives from orders placed directly by dealers with the Claimant, so there are no sales of vehicles to the Claimant and from the Claimant to them without the respective purchase order.

20.5. The vehicles imported into Portuguese territory are, immediately, invoiced by the Claimant to the dealers and immediately delivered at their facilities, except for vehicles intended for the Autonomous Regions of the Azores and Madeira which are deposited in the warehouse of a logistics company.

20.6. Once the vehicles are imported, the Claimant, through an associated official representative, requests the assignment of the respective registrations.

20.7. Given that, at the time of sale, the vehicles transferred are not yet registered in Portugal, they are identified in the respective invoicing through the indication of the corresponding chassis number.

20.8. Only after the sale to the dealers does the Claimant, in the capacity of registered operator, bear the corresponding Vehicle Tax, which it passes on to the purchasers, then promoting the respective registration in Portugal.

20.9. It thus results that at the moment in which the vehicles are registered, the Claimant has already transferred ownership of the vehicles to third parties.

20.10. The situation described above covers the vehicles identified in a list annexed to the present request for arbitral decision, which is hereby considered entirely reproduced, to which, in the assessments now contested, corresponds the total amount of € 10,415.52, of IUC and compensatory interest.

20.11. Regarding the vehicles in the situation referred to above, the respective sales invoices are presented as evidence (annexed, collectively, as Doc. 6) as well as a list in which all the assessments now contested are listed (Doc. 5).

20.12. The Claimant, although it paid the tax and compensatory interest that were assessed against it, deduced applications for ex officio revision of the assessments in question, under article 78, no. 1, of the General Tax Law (LGT), on the grounds that, as of the date the tax obligation became due, it was not the owner of the vehicles to which it relates, and therefore was not the taxpayer of the corresponding tax obligation (see Doc. 4).

20.13. The referred applications for ex officio revision were the subject of express dismissal by decision of the Head of Division of the Large Taxpayers Unit of the AT, issued in the exercise of delegation of authority (Decision 12,729/2015 – DR, 2nd series, no. 222, of 12.11.2015), after the Claimant was timely afforded the exercise of the right to prior hearing.

20.14. The referred decision was notified through Official Letter no. ..., of 20-09-2017, from the Division of Tax Management and Assistance (DGAT) of the Large Taxpayers Unit.

V. Matters of Law

  1. The Claimant bases the request for arbitral decision, essentially, on the illegitimacy of its qualification as taxpayer of the IUC, with respect to the vehicles and taxation periods that it identifies in documents annexed to the request for arbitral decision, considering the fact that ownership of the vehicles was transferred to third parties before the date of their registration in Portugal;

  2. According to the allegation of the Claimant, although the vehicles in question were registered in its name at the Motor Vehicle Registry, it was not their actual owner as of the date of occurrence of the facts that determine the tax obligation, given that they had already been sold to the respective dealers, as evidenced by the invoices issued, which it submits as evidence.

  3. Indeed, in light of the elements attached to the proceedings proving the alleged facts, it is verified that the Claimant, in the course of its business activity, proceeds to the importation into Portuguese territory of new vehicles which, at a time prior to their registration, it transfers to its dealers, a fact proven by a copy of the respective invoicing.

  4. However, by virtue of the applicable legal norms, the registration of the vehicles in question is effected in the name of the Claimant, even though, at the moment when it is effected, the Claimant is not the owner thereof.

  5. This is what results from the combined reading of articles 117, no. 4, of the Highway Code - which imposes on the person, natural or legal, who proceeds to the admission, importation or introduction into consumption in national territory, the obligation to request the registration of the vehicles - and 24, no. 1, of the Motor Vehicle Registration Regulation - which provides that the initial registration of ownership of imported, admitted, assembled, constructed or reconstructed vehicles is based on the respective request.

  6. From the referred norms it results, therefore, that the Claimant, in the capacity of registered operator who proceeds to the importation of new vehicles into national territory, necessarily appears in the respective initial registration as its owner, even though at the moment when it is effected, the ownership of the same has already been transferred to third parties.

  7. From the above, the Respondent concludes that, "given that the Claimant requested the issuance of a certificate of registration, the same being registered in its name, the prerequisites of the fact constituting the IUC are met, as well as its enforceability, the Claimant being the taxpayer of the tax."

  8. Conversely, the Claimant understands that the norm of subjective scope of the referred tax, set forth in article 3 thereof, establishes a legal presumption of ownership, capable of being rebutted by contrary proof.

  9. What is thus in question is the interpretation of article 3, no. 1, of the IUC Code, in the wording effective at the date of the facts, in order to determine whether it does or does not establish a presumption regarding the qualification as owner, and consequently, as taxpayer of this tax, the person, natural or legal, in whose name the property of the vehicle is registered and, should it be concluded in the affirmative, its rebuttal based on the evidential elements that compose it.

Regarding the Subjective Scope of the IUC

  1. Notwithstanding the IUC Code establishing the principle of equivalence as a structuring principle of this tax, understood as compensation for the harmful effects in environmental and energy terms resulting from the circulation of vehicles [2], the referred Code elects, with regard to subjective scope, the owner of the vehicle, considering as such the person in whose name it is registered (article 3, no. 1, of the IUC Code, in the wording of Law no. 22-A/2007, of 29/06).

  2. Not generally attributing special relevance to the actual use of vehicles, the legislator does not fail to consider such fact in specific situations involving their presumptive and potential use, equating to owners financial lessees, purchasers with reservation of ownership, as well as other holders of a right of purchase option by virtue of a lease contract (article 3, no. 2, of the IUC Code).

  3. The norm of subjective scope, by referring to the elements of motor vehicle registration, does not distinguish between the initial registration of the vehicle and subsequent registrations: the taxpayer of the tax is the owner of the vehicle, being considered as such the person, natural or legal, in whose name the vehicle is registered.

  4. It is, therefore, on the interpretation of the norm of no. 1 of article 3 that, as already mentioned, the different positions expressed by the Claimant and the Respondent are evident.

  5. According to the Claimant, the referred norm, in the wording in force at the date of occurrence of the tax facts to which the questioned assessments relate, establishes a presumption of ownership, based on motor vehicle registration, rebuttable in general terms and, in particular, by virtue of the provisions of article 73 of the General Tax Law.

  6. Conversely, the Respondent understands that, establishing the IUC Code the taxpayer status as well as the fact constituting the tax obligation, by reference to the elements contained in motor vehicle registration, as results from articles 3 and 6 of the respective Code, being the Claimant the one to request the issuance of the certificate of registration and the vehicles being registered in its name in the taxation periods to which the questioned assessments relate, "the prerequisites of the fact constituting the IUC are met, as well as its enforceability, the Claimant being the taxpayer of the tax."

  7. This matter has been the subject of numerous arbitral decisions which, repeatedly and uniformly, have pronounced to the effect that the norm of no. 1 of article 3 of the IUC Code, in the wording of Law no. 22-A/2007, of 29/06, establishes a presumption, rebuttable, in general terms and, in particular, by virtue of the provisions of article 73 of the LGT.[3] This is the approach to which we adhere and will follow closely.

  8. Indeed, with the exception of the provisions of no. 2, regarding situations of sale with reservation of ownership and leases that assume the nature of financing, article 3 of the IUC Code, in the wording in force at the date of occurrence of the tax facts to which the contested assessments relate, provides that the taxpayers of this tax are the owners of the vehicles, being as such considered the persons in whose name the vehicles are registered.

  9. The recourse to motor vehicle registration as a structuring element of the system of assessment of this tax is evident throughout the respective Code. Reference is made, in particular, to its article 6 relating to the definition of the fact constituting the tax obligation, the no. 1 of which provides that it is constituted by the ownership of the vehicle, "as attested by the registration or registration in national territory." From this provision it follows that motor vehicles which are not, nor should be, registered in Portuguese territory, are only covered by the objective scope of this tax if they remain therein for a period exceeding 183 days, as provided in no. 2 of the same article. It is, therefore, a norm which, resorting to the registral element, simultaneously establishes the fact constituting the tax obligation and the respective tax connection. It is also from the elements of motor vehicle registration that the moment of the beginning of the taxation period and constitution of the tax obligation is extracted and, in general, all the elements necessary for the assessment of the tax in question, as is indeed well emphasized in the response elaborated by the AT.

  10. However, from the dependence of the IUC taxation regime on motor vehicle registration, one cannot extract, as an immediate conclusion, that the norm of subjective scope, in the segment in which it considers as owner the person in whose name the vehicle is registered, does not constitute a presumption of subjective scope.

  11. It will thus be necessary to resort to other interpretative elements, with special relevance to the legal notion of presumption.

  12. According to the notion set forth in article 349 of the Civil Code, presumptions are the inferences which the law or the judge draws from a known fact to establish an unknown fact. Presumptions constitute means of proof, having this as its function the demonstration of the reality of the facts (article 341 of the Civil Code). Thus, whoever has the benefit of the legal presumption is excused from proving the fact to which it leads (article 350, no. 1, of the Civil Code). However, presumptions, except in cases where the law prohibits it, may be rebutted by contrary proof (article 350, no. 2, of the Civil Code). In the case of presumptions of tax scope, these are always rebuttable, as expressly provided by article 73 of the LGT.

  13. Presumptions may be explicit or merely implicit in the text of the law.

  14. Indeed, in the definition of the subjective scope of the PCI, ICA and IMV, taxes which the current IUC came to replace, that was the expression used by the legislator. Within the scope of the abolished taxes, it is established that "the tax is due by the owners of the vehicles, being presumed as such, until proof to the contrary, the persons in whose name they are registered or matriculated" [4]

  15. In the same sense, article 3, no. 1, of the Regulation of Circulation and Haulage Taxes, approved by Decree-Law no. 116/94, of 03/05, provides that the taxpayers of these taxes are "the owners of the vehicles presumed as such, until proof to the contrary, the natural or legal persons in whose name they are registered."

  16. With regard to the IUC, the legislator chose to use a formulation different from the norm of subjective scope. As with the abolished taxes, it continues to attribute to vehicle owners the status of taxpayers. However, it abandons the expression "presumed as such, until proof to the contrary, the persons in whose name they are registered" in favor of "considered as such the persons (...) in whose name they are registered".

  17. Contrary to the position expressed by the AT, we understand that we are dealing with a mere semantic issue, which does not alter in any way the content of the norm in question and for two reasons: In order for one to be in the presence of a legal presumption, it is necessary that the norm that establishes it conforms to the respective legal concept, set forth in article 349 of the Civil Code, being for this purpose irrelevant whether it is explicit, revealed by the use of the expression "are presumed" or only implicit [5].

  18. It is, therefore, in the sense of the legal concept of presumption and in respect of the constitutional principles of equality and tax capacity that the legislator attributes full effectiveness to the presumption derived from motor vehicle registration, accepting it as such, in the definition of the subjective scope of this tax established in no. 1 of article 3 of the IUC Code.

  19. It is also added that Decree-Law no. 54/75, of 12/02, which governs the registration of motor vehicles, not providing any norm regarding the constitutive character of the registration of automotive property, establishes, in no. 1 of its article 1 that motor vehicle registration aims only to give publicity to the legal situation of the goods. In accordance with article 7 of the Land Registry Code, suppletively applicable to motor vehicle registration, by referral from article 29 of that diploma, it determines that registration only "(...) constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it."

  20. Pronouncing on this matter, the STJ, in a judgment of 19-02-2004, delivered in case no. 3B4369, concludes that "(...) registration does not have constitutive effect, since it is intended to give publicity to the registered act, functioning (only) as a mere presumption, rebuttable (presumption "juris tantum") of the existence of the right (articles 1, no. 1, and 7, of the Land Registry Code and 350, no. 2, of the Civil Code) as well as of the respective ownership, in accordance with the terms thereof contained (...)".

  21. Thus, following the reiterated arbitral jurisprudence relating to identical situations, one cannot but understand that the expression "considered as such" contained in the referred norm, constitutes a legal presumption, and that this is rebuttable, in general terms, and, in particular, by virtue of the provisions of article 73 of the LGT which provides that presumptions enshrined in norms of tax scope always admit contrary proof.

Rebuttal of the Presumption

  1. Presumptions of tax scope may be rebutted through the proper contradictory procedure provided for in article 64 of the CPPT or, alternatively, through the means of administrative review or judicial challenge of the tax acts based thereon.

  2. In the present case, the Claimant did not use that proper procedure, instead opting for the present request for arbitral decision which, thus, constitutes the proper means to rebut the presumption of subjective scope of the IUC on which the tax assessments whose annulment constitutes its purpose are based, since it is a matter that falls within the material competence of this arbitral tribunal (articles 2 and 4 of Decree-Law 10/2011).

  3. To rebut the presumption derived from the entry in motor vehicle registration, the Claimant offers, as a means of proof, the invoicing issued with reference to the transfer of the vehicles to which the questioned assessments relate (Doc. 6 and attached List).

  4. Pronouncing on the documentary evidence presented, the Respondent considers that "...although this is not understood – which is only for the sake of academic hypothesis – and accepting that rebuttal of the presumption is admissible in light of the jurisprudence already established in this arbitral tribunal, it will be necessary to appraise the documents submitted by the Claimant and their evidentiary value for such rebuttal."

  5. In the understanding of the Respondent, "(…) The invoices submitted by the Claimant are not apt to prove the conclusion of a synallagmatic contract such as buying and selling, since such documents do not by themselves reveal an essential and unequivocal declaration of intention (that is, acceptance) on the part of the alleged purchasers."

  6. In support of this thesis, the Respondent refers to case 63/2014-T of CAAD in which, although with a dissenting vote, the Arbitral Tribunal considered invoices to be "unilateral and internal documents, to which jurisprudence has recognized very limited value in proving the existence of a synallagmatic contract."

  7. In the same sense of the insufficiency of invoices to rebut the presumption contained in no. 1 of article 3 of the IUC Code, it also refers to arbitral decisions delivered in cases nos. 150/2014-T and 220/2014-T.

  8. As well extracted from the position of the Respondent regarding the evidence produced, based on the reasoning of the cited judicial decisions, the same would be insufficient to rebut the presumption established in the norm of tax scope, defined on the basis of ownership, as contained in motor vehicle registration.

  9. However, not being that the understanding of the tribunal, it is necessary to evaluate the evidence produced by the Claimant in order to determine if it is sufficient to rebut the presumption derived from registration which, in the sphere of subjective scope, is accepted for purposes of the IUC.

  10. For this, it is important to bear in mind that, in the situation under analysis, we are in the presence of contracts of sale which, relating to movable property and not being subject to any special formalities (Civil Code, article 219), effect the corresponding transfer of property rights (Civil Code, article 408, no. 1).

  11. Being contracts that involve the transfer of ownership of movable property in exchange for payment of a price, these have, as essential effects, among others, that of delivering the thing (Civil Code, articles 874 and 879).

  12. However, given that a vehicle sale contract is involved, in which registration is mandatory, its proper performance presupposes the issuance of the declaration of sale necessary for the inscription in the register of the corresponding acquisition in favor of the purchaser, as has been understood by the jurisprudence of the superior courts.[6]

  13. Such declaration, relevant for registration purposes, may constitute proof of the transaction, but does not constitute the sole or exclusive means of proof of such fact.

  14. For registration purposes, no special formalism is required either, it sufficing for the submission to the competent entity of a request subscribed by the purchaser and confirmed by the seller, which, through a declaration of sale confirms that ownership of the vehicle was acquired by the latter through a verbal contract of sale (see Motor Vehicle Registration Regulation, article 25, no. 1, paragraph a)).

  15. Notwithstanding that these are the rules resulting from the provisions of civil law, relating to the informality of the transfer of movable property and, being the case of the respective registration, one cannot but also bear in mind that, in the situation under analysis, we are in the presence of commercial transactions, effected by a business entity in the course of the activity that constitutes its corporate purpose.

  16. In that context, the company is bound by compliance with specific accounting and tax norms, in which invoicing assumes special relevance.

  17. In particular, by virtue of tax norms, the entity transferring the goods is obliged to issue an invoice with respect to each transfer of goods, regardless of the status of the respective purchaser (VAT Code, article 29, no. 1, paragraph b).

  18. Also in accordance with the provisions of tax norms, the invoice must comply with a certain form, detailed in articles 36 of the VAT Code and article 5 of Decree-Law no. 198/90, of 19/06.

  19. It is on the basis of this document issued by the supplier of the goods that the purchaser, when an economic operator – as is the case with the majority of the situations to which the present proceedings refers – will deduce the VAT to which he is entitled (VAT Code, article 19, no. 2) and account for the expense of the transaction (CIT Code, articles 23, no. 6 and 123, no. 2).

  20. For his part, it is also on the basis of the invoicing issued by him that the supplier of the goods must account for the respective income, as results from the provisions of paragraph b) of no. 2 of article 123 of the CIT Code.

  21. Insofar as they are issued in legal form and constitute elements supporting the accounting entries in accounts organized in accordance with commercial and tax legislation, the data contained therein are covered by the presumption of truthfulness to which article 75, no. 1, of the LGT refers.

  22. Indeed, the referred presumption covers not only the accounting books and records, but also the respective supporting documents, as is, in fact, a settled understanding of the tax administration itself [7] and the established jurisprudence of the superior courts [8]

  23. The presumption of truthfulness of commercial invoices issued in accordance with legal terms may, however, be set aside whenever the operations to which they refer do not correspond to reality, it being sufficient for this that the Tax Administration gather and demonstrate well-founded indicia of that fact (LGT, article 75, no. 2, paragraph a). [9]

  24. In the present case, the Respondent has not contested, nor does it raise any doubt, regarding the operations documented by the invoices presented by the Claimant.

  25. Considered, therefore, the relevance attributed by tax legislation to invoices issued, in accordance with legal terms, by commercial companies in the course of their business activity and the presumption of truthfulness of the operations documented thereby, one cannot but consider that they constitute, in themselves, sufficient proof of the transfers invoked by the Claimant, following, in this matter, the majority arbitral jurisprudence. [10]

  26. Considering thus proven documentarily the transfer of the right of ownership of the vehicles in question, it remains only to determine the date on which, according to the respective invoice, the same will have occurred, taking into account that the enforceability of the tax, with respect to new land vehicles, occurs on the first day of the taxation period, which begins on the date of registration, as provided in article 6, no. 3, of the IUC Code, this being the moment in which the tax legal relationship is defined.

  27. Based on the documents that compose the present proceedings (Doc. 6 and attached List) it is verified that, as of the date the tax became enforceable, the vehicles identified therein were no longer the property of the Claimant by virtue of having been transferred by it to third parties.

  28. In light of the above, it is concluded that there is no legal basis for the acts assessing IUC and compensatory interest regarding the vehicles and periods identified in the annex to the request for arbitral decision.

  29. In these terms, considering rebuttable the presumption of ownership derived from motor vehicle registration accepted in article 3 of the IUC Code - in the wording in force at the date of the facts to which the assessments in question relate - the assessments identified in the list annexed to the present request for arbitral decision should be annulled, in the total amount of € 10,415.52, on the grounds of illegality and error in the assumptions on which they are based.

Regarding the Right to Compensatory Interest

  1. In addition to the revocation of the decision dismissing the applications for ex officio revision and annulment of the assessments of tax and compensatory interest, and consequent reimbursement of the amounts improperly paid, the Claimant also requests that it be recognized the right to compensatory interest, under articles 43 and 100 of the LGT.

  2. Article 100 of the LGT provides that "The tax administration is obliged, in case of full or partial success of administrative complaints or appeals, or of judicial proceedings in favor of the taxpayer, to the immediate and complete restitution of the situation that would have existed if the illegality had not been committed, including the payment of compensatory interest, in the terms and conditions provided for by law."

  3. Now, in accordance with the provisions of no. 1 of article 43, compensatory interest shall be due "when it is determined, in administrative review or judicial challenge, that there was error attributable to the services from which resulted payment of the tax debt in an amount greater than that legally due."

  4. In this particular, in addition to the administrative and judicial means referred to in the transcribed norms, we understand that, as results from no. 5 of article 24 of the RJAT, the right to the mentioned interest can be recognized in the arbitral proceedings and, thus, we rule on the claim.

  5. The right to compensatory interest to which the norms of the LGT referred to above allude presupposes that tax has been paid in an amount exceeding that due and that such derives from error, of fact or of law, attributable to the services of the AT, which manifestly occurs in this arbitral proceeding.

  6. However, the annulment of the assessments only occurred by way of challenge to the dismissal of the applications for ex officio revision submitted by the Claimant on 10-04-2017, so paragraph c) of no. 3 of article 43 of the LGT applies to it: "3 - Compensatory interest is also due in the following circumstances: (…) - c) When revision of the tax act at the initiative of the taxpayer takes place more than one year after his request, except if the delay is not attributable to the tax administration."

  7. The fact that the AT decided before the lapse of one year (about five months after the requests for revision) is not, in the understanding of this Arbitral Tribunal, a circumstance preventing the right to the compensatory interest claimed by the Claimant, given that in that case the AT did not revise the tax acts, instead obliging the Claimant to appeal the dismissal to this Tribunal.

  8. Indeed, it is long-standing settled jurisprudence that compensatory interest is due whenever the AT decides favorably to the pretension of the taxpayer, after the lapse of that one-year period from the date of the request for revision, as it will also be due when more than one year lapses after the request for revision because the taxpayer is obliged to resort to the judicial route to obtain a decision favorable to its pretension, owing to the AT (within or outside that period) having refused to revise the act.[11] Such is what occurs in the case of the Claimant who only after appealing to this arbitration sees his pretension acted upon.

  9. Thus, the Claimant is entitled to compensatory interest, but only that which is due as from one year after the submission of the applications for ex officio revision and until the date of reimbursement to the Claimant of the amounts of the annulled assessments.

VI - Decision

In these terms, and with the grounds set out, the Arbitral Tribunal decides:

a) To judge founded the request for declaration of illegality of the dismissal of the applications for ex officio revision, determining, consequently, its annulment;

b) To judge founded the request for arbitral decision regarding the annulment of the assessments of tax and compensatory interest, with respect to the taxation periods and vehicles identified in the list annexed to the present request for arbitral decision;

c) To judge founded the request as concerns the recognition of the right to compensatory interest that is due as from one year after the submission of the applications for ex officio revision and until the date of reimbursement to the Claimant of the amounts of the annulled assessments.

d) To condemn the Respondent to the costs of the present proceedings.

Value of the proceeding: € 10,415.52

Costs: Pursuant to article 22, no. 4, of the RJAT, and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at € 918.00.

Lisbon, 6 May 2018,

The Arbitrator,

Álvaro Caneira

[1] In this sense, see STA, Judgment of 16.11.2011, Case 608/11.

[2] See Sérgio Vasques, "The Special Consumption Taxes", Almedina, 2000 and Explanatory Memorandum of Legislative Proposal no. 118-X, which gave rise to Law no. 22-A/2007, of 29/05 (reform of automotive taxation).

[3] In this sense, Arbitral Decisions of 19.7.2013, Case 26/1013-T, of 10.9.2013, Case 27/2013-T, of 15.10.2013, Case 14/2013-T, of 5.12.2013, Case 73/2013-T, of 14.2.2014, Case 170/2013-T, of 30.4.2014, Case 256/2013-T, of 2.5.2014, Case 286/2013, of 16.6.2014, Case 289/2013-T, of 14.7.2014, Case 43/2014-T, of 6.6.2014, Case 294/2013-T, of 15.9.2014, Cases 63/2014-T and 220/2014 and, more recently, relating to factual situations identical to those of the present proceedings, Arbitral Decisions of 13.9.2017, Case 173/2017-T and of 4.10.2017, Case 185/2017.

[4] See article 3, no. 1 of the Regulation of the Municipal Tax on Vehicles, approved by Decree-Law no. 143/78, of 12 June.

[5] Cf. Jorge de Sousa, CPPT, 6th Edition, Áreas Editora, Lisbon, 2011, pages 586 and STA, Judgments of 29.2.2012 and of 2.5.2012, Cases 441/11 and 381/12.

[6] Cf. STJ, Judgments of 23.3.2006 and of 12.10.2006, Cases 06B722 and 06B2620.

[7] Cf. Opinion of the Centre for Tax Studies, approved by decision of the Director-General of Taxes, of 2 January 1992, published in Science and Tax Technique no. 365.

[8] Cf. STA, Judgment of 27.10.2004, Case 0810/04, TCAS, Judgment of 4.6.2013, Case 6478/13 and TCAN, Judgment of 15.11.2013, Case 00201/06.8BEPNF, among others.

[9] Cf. STA, Judgments of 24.4.2002, Case 102/02, of 23.10.2002, Case 1152/02, of 9.10.2002, Case 871/02, of 20.11.2002, Case 1428/02, of 14.1.2004, Case 1480/03, among many others.

[10] In this sense, cf., among others, Arbitral Decisions of 19.7.2013, Case 26/2013-T, of 10.9.2013, Case 27/2013-T, of 15.10.2013, Case 14/2013-T, of 5.12.2013, Case 73/2013-T, of 14.2.2014, Case 170/2013-T, of 30.4.2014, Case 256/2013-T, of 2.5.2014, Case 289/2013-T, of 6.6.2014, Case 294/2013-T, of 25.6.2014, Case 42/2014, of 6.7.2014, Case 52/2014-T, of 15.9.2017, Case 173/2017-T and of 4.10.2017, Case 185/2017-T.

[11] Cf., STA, Judgments of 2.11.2006, Case 0604/06, of 11.11.2006, Case 028/06, of 12.12.2016, Case 0918/06, of 18.1.2017, Case 0890/16 and of 6.12.2017, Case 0926/17, among others.

Frequently Asked Questions

Automatically Created

Who is the taxable person subject to IUC (Imposto Único de Circulação) under Portuguese tax law?
Under Portuguese tax law, the taxable person subject to IUC (Imposto Único de Circulação) is generally the person or entity registered as the vehicle owner in the Portuguese vehicle registration system at the relevant tax date. According to Article 3 of the IUC Code, liability attaches to whoever holds the registration certificate. However, disputes arise when economic ownership has transferred before formal registration occurs, as in this case where the importer registered vehicles after selling them to dealers. The determination of the correct taxable person depends on whether Portuguese law prioritizes formal registration or substantive economic ownership.
Can a company challenge IUC tax assessments through CAAD tax arbitration proceedings?
Yes, companies can challenge IUC tax assessments through CAAD (Centro de Arbitragem Administrativa) tax arbitration proceedings. Under Articles 2(1)(a) and 10(1)(a) of Decree-Law 10/2011 (RJAT - Legal Regime of Tax Arbitration), taxpayers may submit requests for arbitration against tax decisions, including IUC assessments. The claimant must first exhaust administrative remedies (such as filing a pedido de revisão oficiosa) before accessing arbitration. CAAD provides an alternative to judicial courts for resolving tax disputes, offering faster resolution. Companies may challenge individual IUC assessments or, as in this case, join multiple related assessments in a single arbitration when they share common factual and legal grounds under Article 3 of RJAT and Article 104 of CPPT.
What is the legal procedure for filing a pedido de revisão oficiosa against IUC tax assessments in Portugal?
The legal procedure for filing a pedido de revisão oficiosa (application for ex officio revision) against IUC tax assessments in Portugal follows the general rules in Article 78 of the Tax Procedure and Procedural Code (CPPT). Taxpayers must submit the application to the tax authority that issued the assessment (typically the Large Taxpayers Unit for significant taxpayers) within the statutory limitation period (generally four years from the date of assessment). The application must identify the contested assessments, specify the alleged illegality, and provide supporting documentation. The tax authority must issue a decision within the legal timeframe. If the revision application is dismissed, as occurred in this case, the taxpayer may then pursue judicial remedies through administrative courts or, alternatively, request arbitration through CAAD under RJAT provisions.
Are compensatory interest charges (juros compensatórios) applicable to IUC tax assessments?
Yes, compensatory interest charges (juros compensatórios) are applicable to IUC tax assessments under Portuguese tax law. According to Article 35 of the General Tax Law (LGT), compensatory interest is charged when tax payment is delayed due to facts attributable to the taxpayer, compensating the State for the delayed receipt of tax revenue. For IUC assessments issued after the legal payment deadline, the Tax Authority calculates compensatory interest from the date payment should have occurred until actual payment or assessment date. In this case, the contested amount of €10,415.52 included both IUC principal and compensatory interest for multiple tax years (2009-2014). If assessments are successfully challenged and annulled, taxpayers are entitled to reimbursement of both improperly paid IUC and associated compensatory interest, plus indemnity interest on the refunded amounts.
What are the grounds for claiming illegality of IUC tax assessments and obtaining a tax refund with indemnity interest?
Grounds for claiming illegality of IUC tax assessments and obtaining tax refunds with indemnity interest include: (1) incorrect determination of the taxable person (subjective incidence), as argued in this case where the importer contested liability after transferring ownership; (2) errors in vehicle classification or tax calculation; (3) procedural irregularities in assessment; (4) application of incorrect tax rates or exemptions; and (5) violation of substantive tax law principles. To succeed, claimants must demonstrate that assessments violate legal provisions governing IUC under the IUC Code or constitutional principles. If assessments are annulled, Article 43 of LGT and Article 61 of CPPT require the Tax Authority to refund improperly collected amounts plus indemnity interest (juros indemnizatórios) calculated from payment date until refund, compensating taxpayers for improper deprivation of funds. The refund includes both principal IUC and any compensatory interest previously charged.