Process: 696/2018-T

Date: July 19, 2019

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitral decision (Process 696/2018-T) addresses the subjective incidence of the Single Circulation Tax (IUC) and who bears liability when vehicles are disposed of at the termination of financial leasing contracts. The claimant, a leasing company, contested IUC assessments totaling €4,150.65 for 2013, arguing the vehicles had already been sold before the tax liability arose. The core legal dispute centers on whether the Tax Authority can rely exclusively on vehicle registration records to determine IUC liability, or whether actual ownership at the taxable event date prevails. The claimant argued that registration serves merely a publicity function and its presumption can be rebutted with contrary evidence, citing the principle that the Tax Authority is not a third party for registration purposes. The Tax Authority countered that Article 3(1) of the IUC Code expressly defines taxpayers as registered owners, not presumed owners, and that the claimant failed to comply with Article 19 obligations requiring leasing entities to provide user identification data. The AT also emphasized that allowing disposal dates to override registration would violate the systematic interpretation of the CIUC and broader tax legal system. This case illustrates the tension between formal registration requirements and substantive ownership transfers in determining IUC liability, with significant implications for leasing companies and vehicle traders regarding their obligations to update registrations and communicate vehicle user data to tax authorities.

Full Decision

ARBITRAL DECISION

Arbitrator Raquel Franco, appointed by the Ethics Council of the Center for Administrative Arbitration ("CAAD") to form the Arbitral Tribunal constituted on 07.03.2019, decides as follows and on the grounds set out below:

I – REPORT

A... S.A., legal entity number..., with registered office at ..., ..., ..., ...-... ..., filed a request for constitution of an Arbitral Tribunal and for arbitral decision on 28.12.2018, which was accepted and automatically notified to the Tax and Customs Authority ("AT"), in its capacity as Respondent.

The Claimant contests the legality of the partial dismissal order, dated 28.09.2019, of the Finance Directorate of Lisbon, insofar as it dismissed the request for Official Review submitted against collections of Single Circulation Tax (IUC) and compensatory interest (JC) relating to the year 2013, and collected on the vehicles whose registrations are listed in article 16 of the request for arbitral decision, in the total amount of €4,150.65, as well as the legality of these same collections, on the grounds that the vehicles in question had already been disposed of, at the termination of their respective financial leasing contracts, on the date on which the taxable event occurred.

The Claimant did not appoint an arbitrator, therefore, pursuant to article 6, paragraph 2, subparagraph a) and article 11, paragraph 1, subparagraph a) of the RJAT, the President of the Ethics Council of the CAAD appointed the undersigned as arbitrator of the Sole Arbitral Tribunal, who communicated acceptance of the appointment within the applicable deadline.

On 15.02.2019, the parties were notified of this appointment and did not manifest any intention to reject it.

In accordance with the provisions of article 11, paragraph 1, subparagraph c) of the RJAT, the Sole Arbitral Tribunal was constituted on 07.03.2019.

On 16.04.2019, the Respondent, duly notified for this purpose, submitted its response by way of defence and objection.

By order of 18.06.2019 – notified to the parties on that date – this Tribunal communicated to the parties the possibility of submitting written submissions, having given the Claimant a period of 10 days from notification of that order and the Respondent the same period counted from the submission of submissions by the Claimant or from the expiration of the deadline therefor. On this date (18.07.2019) it is noted that both periods have expired, therefore an arbitral decision may be rendered, the deadline for which expires on 07.09.2019 (a deadline of which the parties were duly warned in good time, as well as, in this case only the Claimant, of the need to effect payment of the subsequent arbitration fee).

Summary of the Claimant's position

The Claimant argues that the Tax and Customs Authority, in proceeding with the collections in question, relied solely on information contained in the Vehicle Registry (IRN – Institute of Registries and Notary, and IMTT – Institute of Mobility and Land Transport), which would not have been current on the dates of IUC exigibility (dates of the anniversary of the vehicles) because they had already been disposed of on those dates.

It contests the lack of diligence of the AT in collecting additional evidence or in considering it when it was presented to it in the course of the administrative process, which it was obliged to do under the principle of inquisitorial investigation.

As for the AT's argument that the Claimant could have proceeded with registration in accordance with the provisions of article 25 of Decree-Law no. 55/75, of 12 February, as amended by Decree-Law no. 20/2008, of 31 January, according to which sellers may promote the registration of the vehicle following a purchase and sale contract, provided that, by virtue of their commercial activity, they proceed with regularity to the transfer of ownership of motor vehicles or proceed with the purchase and sale of vehicles for resale, the Claimant argues that this is merely a faculty, and cannot be required of the seller to effect this registration or, if not doing so, to suffer negative consequences such as the assessment of tax after the date of sale. The obligation to proceed with registration rests with the purchaser of the vehicle, in accordance with the provisions of paragraph 1 of article 8-B of the Real Property Registry Code, applicable by virtue of article 29 of the Motor Vehicle Registry Code: the faculty conferred on the seller in no way alters the burden that rests on the purchaser.

Furthermore, it argues that the function of registration is merely publicity, and that registration does not constitute facts. For this reason, the presumption arising therefrom may be rebutted by means of contrary proof.

Finally, it further argues that the AT is not a third party for purposes of registration, and therefore cannot invoke the lack of registration of the contract to disregard the effects of the purchase and sale.

Summary of the AT's position

The AT begins by noting that it was incumbent upon the Claimant to demonstrate that it had complied with the ancillary obligation imposed by article 19 of the CIUC, according to which "for the purposes of article 3 of this Code (…), entities that carry out financial leasing, operational leasing or long-term rental of vehicles shall be obliged to provide to the General Directorate of Taxes data relating to the identification of users of leased vehicles." It argues, therefore, that if the Claimant intends to rebut the presumption of article 3 of the CIUC, it would have had to comply with the provisions of article 19 of the CIUC. Having failed to do so, it cannot rebut the presumption.

It also understands, generically, that the interpretation advocated by the Claimant stems from a biased reading of the letter of the law and the adoption of an interpretation that does not take into account the systematic element, violating the unity of the regime enshrined in the entire CIUC and, more broadly, in the entire tax-legal system, and further stems from an interpretation that ignores the ratio of the regime enshrined in the article in question, and also in the entire CIUC.

Regarding the case law invoked by the Claimant, the AT emphasizes that it has no binding precedent value, but merely persuasive value. On the other hand, it notes that the most recent case law of arbitral tribunals at the CAAD has followed a different orientation, citing by way of example cases no. 126/2014-T and no. 220/2014-T.

The AT further argues the following:

- As regards the collections relating to vehicles disposed of before the tax exigibility date, the interpretation advocated by the Claimant not only incurs a biased reading of the letter of the law, but also the adoption of an interpretation that does not take into account the systematic element, violating the unity of the regime enshrined in the entire CIUC and, more broadly, in the entire tax-legal system, and further stems from an interpretation that ignores the ratio of the regime enshrined in the article in question, and also in the entire CIUC.

- The tax legislator, in establishing in article 3, paragraph 1, who are the passive subjects of the IUC, expressly and intentionally established that these are the owners (or in the situations provided for in paragraph 2, the persons enumerated therein), being considered as such the persons in whose names they are registered.

- Note that the legislator did not use the expression "are presumed," as it could have done, for example, in the following terms: the passive subjects of the tax are the owners of the vehicles, being presumed as such the natural or legal persons, of public or private law, in whose names they are registered. In contrast, the tax provision is full of provisions analogous to those enshrined in the final part of paragraph 1 of article 3, in which the tax legislator, within its legislative freedom of action, expressly and intentionally, establishes what must be considered legally, for purposes of incidence, of income, of exemption, of determination and of periodization of taxable profit, for purposes of residence, of location, among many others. Therefore, if it were understood that in using the expression "is considered" the legislator had enshrined a presumption, practically all incidence rules in the context of IRC would be set aside precisely because accounting prescribes solutions different from those of the CIRC, and this is exactly the legislator's aim to set aside such accounting rules.

- Also the systematic element of interpretation of the law demonstrates that the solution advocated by the Claimant is intolerable and does not find the understanding supported by it any support in the law. Even admitting that, from the perspective of the rules of civil law and real property registration, the absence of registration does not affect the acquisition of the quality of owner and that registration is not a condition of validity of contracts with real efficacy, in accordance with what is established in the CIUC (which in the case in question constitutes special law, which, in accordance with general rules of law, derogates from the general rule), the tax legislator intentionally and expressly wanted those who were considered as owners, lessees, purchasers with reservation of ownership or holders of the right of option to purchase in long-term rental to be persons in whose names the vehicles are registered.

- In light of a teleological interpretation of the regime enshrined in the entire CIUC, the interpretation advocated by the Claimant in the sense that the passive subject of the tax is the beneficial owner, regardless of whether or not this quality appears in the motor vehicle register, is manifestly wrong. And it is a wrong interpretation insofar as it is the very ratio of the regime enshrined in the CIUC that constitutes clear proof that what the tax legislator intended was to create a tax based on the taxation of the owner of the vehicle as it appears in the motor vehicle register. And this is precisely because the new regime of taxation of the IUC came to substantially alter the regime of motor vehicle taxation, making the passive subjects of the tax the owners listed in the property register, regardless of the circulation of the vehicles on public roads.

- As to the documents attached to the case file by the Claimant to prove what was sought, the Respondent challenges the duplicate copies of debit notes and points out the fact that invoices of the alleged sales were not attached, nor were receipts or checks attached as proof of payment of the price. It also notes that in the debit notes it appears in the lower left corner "Document valid as Receipt after proof of good collection," which does not allow for conclusion of payment of the amount stated therein. The duplicate copies of debit notes attached are unilateral and internal documents, therefore, the Respondent argues, they are not suitable and sufficient proof of the transfer of ownership, nor do they prove the conclusion of a synallagmatic contract such as a purchase and sale. The debit notes do not reveal in themselves an essential and unequivocal declaration of intent (i.e., acceptance) by the presumed purchasers.

For the reasons set out above, the AT concludes that the arbitral request is unfounded.

II. PROCEDURAL PREREQUISITES

The Arbitral Tribunal has material competence and is regularly constituted, in accordance with articles 2, paragraph 1, subparagraph a), 5 and 6, paragraph 1, of the RJAT.

The parties have legal personality and capacity, are legitimate and are legally represented, as provided for in articles 4 and 10 of the RJAT and article 1 of Ordinance no. 112-A/2011, of 22.03.

The action is timely and the process is not subject to nullities.

As to the joinder of claims effected by the Claimant, considering the existence of a direct relationship between the tax assessments whose legality is questioned in the present process, nothing prevents the joint consideration of the tax acts in question, given that, in view of what has been alleged and the documentation attached, it is found that, in essence, the possible upholding of the request depends on the same circumstances of fact and the interpretation and application of the legal rules relating to the subjective incidence of the IUC. Thus, the consideration of the same circumstances of fact and the application of the same legal rules on the subjective incidence of the IUC will be at issue, and the joinder of claims is legal, in accordance with article 3 of the RJAT and article 104 of the CPPT.

III. REASONING

A. FACTUAL MATTER

A.1. Proven facts

The Claimant is a commercial company engaged in the activity of automobile financial leasing.

In the course of its activity, it holds, for short periods of time, motor vehicles in its name.

At the end of the financial leasing contracts it concludes, lessees have the possibility of acquiring the invoice and frequently exercise this faculty.

After the termination of such contracts, B... proceeds to transfer ownership of the vehicles to the corresponding lessees or to third parties, for a residual value.

The Respondent assessed IUC for the year 2013 on various motor vehicles that were held by the Claimant.

The Claimant submitted a request for Official Review of the assessments in question on 14.10.2016.

The request was partially dismissed by order notified to the Claimant on 03.10.2018.

The vehicles that gave rise to IUC assessments in question in this process and which are listed in the list reproduced in article 16 of the initial petition had already been disposed of by the Claimant on the date on which the taxable event occurred.

A.2. Unproven facts

There are no alleged facts of relevance to the decision that should be considered unproven.

A.3. Reasoning of the proven and unproven factual matter

The facts pertinent to the adjudication of the case were selected and delineated according to their legal relevance, in view of the plausible solutions to the legal questions, in accordance with the combined application of articles 123, paragraph 2, of the Code of Procedure and Tax Process ("CPPT"), and 596, paragraph 1, and 607, paragraph 3 of the Code of Civil Procedure ("CPC"), by reference to article 29, paragraph 1, subparagraphs a) and e) of the RJAT.

Allegations made by the parties and presented as facts, consisting of strictly conclusive statements, incapable of proof and whose veracity is to be assessed in relation to the concrete consolidated factual matter, were not taken as proven or unproven.

With regard to the facts proven, the conviction of the arbitrator was based on the positions assumed by the parties in their respective procedural documents and on the critical analysis of the documentary evidence attached to the case file.

B. ON THE LAW

The core issue in the present case is whether the facts alleged and the proof presented by the Claimant regarding them constitute grounds for exclusion of subjective tax incidence and whether, consequently, the contested acts should be considered to suffer from the defect of violation of law due to error as to the elements of the tax fact, which would constitute a defect warranting annulment, with the legal consequences of restitution of the tax and interest paid unduly.

The Claimant bases its request on the argument that the prerequisites of subjective incidence provided for in article 3 of the CIUC are not met because, on the dates of IUC exigibility relating to the vehicles in question, it was no longer the owner of the vehicles in question, as it had already sold them to previous lessees.

It invokes the provisions of article 3 of the CIUC, according to which those responsible for payment of the IUC are the owners of the vehicles on the date of exigibility of the IUC, that is, on the date of registration or on the anniversary dates in relation to the date of registration (paragraph 1 of article 3 of the CIUC), and also the "(…) financial lessees, purchasers with reservation of ownership, as well as other holders of purchase option rights by virtue of the leasing contract" on the same date, since these are equated with the owners of the vehicles (paragraph 2 of the same legal instrument).

It argues that the sales of the vehicles occurred on the date of issuance of the debit notes appearing on pages 25 to 138 of the administrative case file (PA).

The Claimant alleges that the vehicles on which the IUC is assessed had already been disposed of on the date on which the taxable event of the tax occurred, seeking to prove such facts through the debit notes which it attached to the request for Official Review and which are contained in the PA duly forwarded by the Respondent to the present case.

The AT understands that these documents are not capable of proving the conclusion of a synallagmatic contract such as a purchase and sale, as they do not reveal an essential and unequivocal declaration of intent (i.e., acceptance) by the presumed purchasers.

The Claimant invokes the provisions of article 3 of the CIUC, which, in its view, establishes an implicit presumption of ownership of vehicles in favor of those in whose names they are registered, a presumption which, by virtue of the application of the general rule provided for in article 73 of the General Tax Law, is rebuttable by means of contrary proof. For the Respondent, article 3 of the CIUC does not establish any implicit presumption, but rather a true, non-rebuttable legal fiction.

On the date of the taxable events of the tax assessed through the assessments in question, paragraph 1 of article 3 of the CIUC provided that:

"The passive subjects of the tax are the owners of the vehicles, being considered as such the natural or legal persons, of public or private law, in whose names they are registered."

The question that is discussed with respect to this rule is the following: should it be understood that the legislator used the word "being considered" just as it could have used the word "being presumed" or, on the contrary, did the legislator intend to establish a legal fiction, prohibiting the possibility of presenting contrary proof?

In accordance with the provisions of article 349 of the Civil Code, "presumptions are the inferences that the law or the judge draws from a known fact to establish an unknown fact." On the other hand, paragraph 2 of article 350 of the Civil Code clarifies that legal presumptions may be rebutted by means of contrary proof, except in cases where the law prohibits it.

With regard to presumptions of tax incidence, article 73 of the General Tax Law provides that these always admit contrary proof.

"Legal fictions," on the other hand, consist, differently, "in a legal process that considers a situation or a fact as different from reality in order to attribute legal consequences to it."

Now, contrary to what the Respondent argues, analysis of the literal element, as well as the historical and teleological elements present in the rule in question lead to the conclusion that the legislator did not intend to establish any legal fiction but only and solely a presumption, rebuttable by means of contrary proof in accordance with and for the purposes of the provisions of article 73 of the General Tax Law. Being the incidence rule provided for in paragraph 1 of article 3 of the CIUC a tax incidence rule, any other understanding would be clearly contrary to the principles governing the tax legal relationship.

As to the historical element, it is important to note that the CIUC had its genesis in the creation, through DL 599/72, of 30 December, of the tax on vehicles, which already expressly provided that the tax was owed by the owners of the vehicles, being presumed as such the persons in whose names they are registered or recorded. On the other hand, article 2 of the Regulations on Circulation and Hauling Taxes (approved by Decree-Law no. 116/94) provided that: "the passive subjects of the circulation tax and the hauling tax are the owners of the vehicles, being presumed as such, until proof to the contrary, the natural or legal persons in whose names they are registered."

It is true that in the CIUC, the legislator replaced the expression "being presumed" with the expression "being considered," which, from the Respondent's perspective, translated the establishment of a legal fiction, non-rebuttable. We do not, however, consider this to be the case. The change of verb does not constitute a substantive change in the incidence rule, which, in our view, continues to establish a presumption rebuttable by means of contrary proof – in accordance, moreover, with the provisions of article 73 of the LGT.

As DIOGO LEITE CAMPOS, BENJAMIM SILVA RODRIGUES and JORGE LOPES DE SOUSA state, in the annotation to paragraph 3 of article 73 of the LGT, "presumptions in the matter of tax incidence may be explicit, revealed by the use of the expression 'is presumed' or similar (…). However, presumptions may also be implicit in incidence rules, in particular objective incidence rules, when certain values of movable or immovable property are considered to constitute taxable matter, in situations in which it is not impracticable to ascertain the real value."

In sum, in the matter of tax incidence, presumptions may be revealed by the expression "is presumed" or by a similar expression. By way of example, JORGE LOPES DE SOUSA notes that in article 40, paragraph 1, of the CIRS, the expression "is presumed" is used, whereas in article 46, paragraph 2 of the same Code the expression "is considered" is used, with no difference between one and the other expression, both meaning, after all, the same thing: a legal presumption.

As to the teleological element, it is important to note that the structuring principle of the automobile taxation reform is precisely that of the incidence of taxation on the true user of the vehicle, and this principle is not compatible with the "blind" reading of the letter of the law, which could, after all, lead to taxing those who are not owners and, in that way, those who are not the subjects causing the "environmental and road cost" provoked by the vehicle, to which article 1 of the CIUC refers.

Thus, as to the subjective incidence of the tax, it is to be concluded that there are no changes in relation to the situation previously in force within the scope of the Municipal Tax on Vehicles, Circulation Tax, and Hauling Tax, as is widely recognized by the doctrine, continuing to be valid a rebuttable presumption in this matter. This understanding is, moreover, the only one that appears adequate and in accordance with the principle of material truth and justice, underlying tax relationships, with the aim of taxing the real and effective owner and not the one who, due to circumstances of a different nature, is often merely an apparent and false owner, by appearing in the motor vehicle register.

In this conformity, considering the elements of interpretation of the law referred to above, we are led to the conclusion that the expression "being considered" has exactly the same meaning as the expression "being presumed," and should therefore be understood as establishing article 3, paragraph 1, of the CIUC a true presumption of ownership and not any fiction, and therefore such presumption is rebuttable. As this is the case, it must be allowed to the person registered in the motor vehicle register the possibility of presenting probative elements sufficient to demonstrate that the beneficial owner is, in fact, a different person from the one appearing in the register.

It is also necessary to take into account, in the present analysis, the legal value of the motor vehicle register. Thus, in accordance with the provisions of paragraph 1 of article 1 of DL 54/75, of 12 February, which established the Motor Vehicle Property Register, "the registration of vehicles has essentially as its purpose to give publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce." Article 7 of the Real Property Registry Code further adds that "the definitive registration constitutes a presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it." The motor vehicle property register, therefore, does not have a constitutive nature, but merely a declarative one, allowing only the inscription in the register to presume the existence of the right and its ownership. Therefore, the presumption resulting from the register may be rebutted by means of contrary proof. And this is so precisely because, in accordance with the provisions of article 408 of the Civil Code, except for the exceptions provided by law, the constitution or transfer of real rights over a determined thing is effected by the mere effect of the contract, and its validity does not depend on the inscription in the register.

In sum, the motor vehicle register, in the economy of the CIUC, represents merely a rebuttable presumption of the passive subjects of the tax. In the case of a contract for the sale and purchase of a motor vehicle, the law not providing any exception for it, the contract has real efficacy, the purchaser becoming its owner, independent of registration; likewise, the person registered in the register will cease to be the owner, notwithstanding that they may continue, for some time or even much longer, to appear in the register as such.

It is also to be noted that the transfers effected are enforceable against the Respondent, notwithstanding the provisions of paragraph 1 of article 5 of the Real Property Registry Code, which provides: "facts subject to registration produce effects against third parties only when registered." The notion of third parties for purposes of registration is established in paragraph 4 of the same article 5: third parties, for purposes of registration, are those who have acquired from a common author rights incompatible with each other, which is manifestly not the case of the AT. Thus, the AT is not a third party for purposes of registration.

As a consequence of the foregoing, the registered owner of a motor vehicle may present proof, for purposes of taxation in the context of IUC, that it is no longer the beneficial owner of the vehicle in question, in particular by having proceeded to its sale. For this purpose, it is important to bear in mind that we are faced with contracts for the sale and purchase of goods which, being relative to movable property and not being subject to any special formalities in accordance with article 219 of the Civil Code, effect the corresponding transfer of real rights in accordance with paragraph 1 of article 408 of the same code.

The next question concerns proof. As to the burden of proof, there is no doubt that it is incumbent upon the passive subject to present suitable means to promote the proof necessary to rebut the presumption. It must present "proof to the contrary," that is, proof that it was not the owner on the date of the tax fact. On the other hand, it is important to clarify through what means the owner may achieve this objective, and it is here that the question raised by the Respondent becomes relevant, regarding the suitability of the debit notes presented by the Claimant as a means of proof of the sale of the vehicles.

In accordance with the provisions of articles 219 and 408, paragraph 1, of the Civil Code, contracts for the sale and purchase of vehicles have a consensual basis and are not subject to special formalities. On the other hand, ownership of motor vehicles is subject to compulsory registration (cfr. article 5, paragraphs 1 and 2, of Decree-Law no. 54/75, of 12/2). The obligation to proceed with registration rests with the purchaser – the active subject of the fact subject to registration (cfr. article 8-B, paragraph 1, of the Real Property Registry Code, applicable to the Motor Vehicle Register by virtue of article 29 of Decree-Law no. 54/75, of 12/2, read together with article 5, paragraph 1, subparagraph a), of this latter instrument). However, the Motor Vehicle Registry Regulations contain a special regime, in force since 2008, for entities that, by virtue of their commercial activity, proceed with regularity to the transfer of ownership of motor vehicles. According to this regime, which is established in article 25, paragraph 1, subparagraph d) of Decree-Law no. 55/75, of 12/2 (as amended by Decree-Law no. 20/2008, of 31/1), registration may be promoted by the seller, by means of a request signed by the seller only.

The rebuttal of the legal presumption resulting from registration is subject to the rule contained in article 347 of the CC, according to which full legal proof can only be contradicted by means of proof that shows the fact that is the subject of it to be untrue. This means that it is not enough for the opposing party to present mere counter-proof – which is intended to cast doubt on the facts (cfr. article 346 of the CC) – it must demonstrate that the presumed fact is not true, in such a way that no uncertainty remains that the facts resulting from the presumption are not real.

An invoice is an accounting document drawn up internally in a company and is intended for the counterparty in a transfer of goods or provision of services, but also serves other purposes, in particular, with the AT, for purposes of tax assessment. Therefore, unless its falsity is demonstrated, invoices are presumed valid for all legal purposes. For its part, a debit note also consists of the document in which the issuer communicates to the recipient that the latter owes it a certain monetary amount. Both documents appear in the phase of liquidation of the amount payable by the purchaser and which does not always coincide with the actual payment, often preceding it. Thus, although they do not prove the actual payment of the price by the purchaser, they constitute proof of the transaction that justifies it, that is, of the sale and purchase effected.

In these terms, the documents attached to the case file – and which served as the basis for the proven factual matter – constitute a suitable means to rebut the presumption of subjective incidence of the IUC on which the tax assessments whose annulment is requested in this case are based. Furthermore, they enjoy the presumption of veracity conferred upon them by article 75, paragraph 1 of the LGT, and thus have sufficiency and force to rebut the presumption which supported the assessments made on the basis of the motor vehicle register. It is therefore concluded that the Claimant was not really the owner of the vehicles to which the assessments in question relate, as it transferred, on the date on which the respective IUC was due, the ownership of the vehicles, in accordance with the provisions of civil law.

Consequently, the assessments in question, as well as the order dismissing the request for Official Review, appear to be illegal and suffer from the defect of violation of law due to error as to the factual and legal elements underlying them, and therefore their annulment is necessary and, consequently, the restitution to the Claimant, by the Tax and Customs Authority, of the respective amounts paid unduly, as is evident from the documents attached to the case file.

IV – DECISION

For these reasons, this Arbitral Tribunal decides:

To hold the arbitral request for annulment of the above-identified tax acts, relating to IUC assessed with reference to the year 2013, in the total amount of €4,150.65, to be well-founded;

To hold the request for annulment of the order dismissing the request for Official Review dated 28.09.2019 to be well-founded;

To order the restitution to the Claimant of the amount of tax paid unduly.

V – Value of the process

The value of the process is set at €4,150.65 (four thousand one hundred and fifty euros and sixty-five cents), in accordance with article 97-A, paragraph 1, subparagraph a), of the Code of Procedure and Tax Process, applicable by virtue of subparagraphs a) and b) of paragraph 1 of article 29 of the RJAT and paragraph 2 of article 3 of the Regulations on Costs in Tax Arbitration Proceedings.

VI – Costs

The value of the arbitration fee is set at €612.00 in accordance with Table I of the Regulations on Costs in Tax Arbitration Proceedings, to be borne by the Respondent.

Lisbon, 19 July 2019

The Arbitrator

(Raquel Franco)

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when a vehicle has been sold at the end of a financial leasing contract?
Under Article 3(1) of the IUC Code, liability for IUC payment rests with the person registered as the vehicle owner on the tax liability date (the vehicle's registration anniversary). When a vehicle is sold at the end of a financial leasing contract, the Tax Authority maintains that the registered owner remains liable unless registration is updated. The leasing company argued that actual ownership transfer should determine liability, but the AT position is that registration constitutes the definitive criterion, not merely a rebuttable presumption. Leasing entities have an additional obligation under Article 19 CIUC to provide user identification data to the tax authorities, and failure to comply with this requirement may prevent them from rebutting the registration-based presumption of ownership.
Can the Tax Authority base IUC assessments solely on vehicle registration records without verifying current ownership?
The Tax Authority's position is that it can legitimately base IUC assessments on vehicle registration records maintained by the IRN and IMTT without independent verification of current ownership. The AT argues that Article 3(1) of the IUC Code expressly establishes registered owners as taxpayers, using definitive language rather than creating a rebuttable presumption. While taxpayers contend that registration serves only a publicity function and that the Tax Authority is not a 'third party' entitled to rely on registration formalities, the AT counters that this interpretation ignores the systematic unity of the CIUC regime and the legislator's intentional choice of language. The Tax Authority emphasizes that allowing assessments to be challenged based on unregistered ownership changes would undermine the tax system's administrative efficiency and legal certainty, particularly when taxpayers have failed to comply with their registration update obligations or, in the case of leasing entities, their Article 19 reporting requirements.
What is the subjective incidence of IUC and how does it relate to vehicle ownership at the time of the taxable event?
The subjective incidence of IUC is defined in Article 3 of the IUC Code, which establishes that passive subjects (taxpayers) are vehicle owners, specifically identifying them as the natural or legal persons in whose names vehicles are registered. The critical legal question is whether this creates a definitive criterion or a rebuttable presumption. The Tax Authority argues the legislator intentionally avoided using presumptive language (such as 'are presumed to be') and instead established registration as the definitive criterion for determining taxpayer status. This means that at the tax liability date—the anniversary of the vehicle's registration—the registered owner is liable regardless of whether actual ownership has transferred. Taxpayers argue this approach ignores substantive economic reality when vehicles have been sold before the liability date, but the AT maintains that registration provides the necessary legal certainty for tax administration. The tension between formal registration and actual ownership is particularly acute for leasing companies and vehicle traders who may experience delays between sale completion and registration updates, potentially leaving them liable for IUC on vehicles they no longer own economically.
How can taxpayers challenge IUC assessments through the official review (revisão oficiosa) procedure when vehicles have already been transferred?
Taxpayers can challenge IUC assessments through the official review (revisão oficiosa) procedure by submitting evidence that vehicles were transferred before the tax liability date. However, success depends on demonstrating compliance with procedural requirements and overcoming the Tax Authority's registration-based position. In this case, the claimant submitted purchase and sale contracts and other documentation proving disposal before the IUC liability dates, but the Finance Directorate partially dismissed the review request. The AT argued that leasing entities must first comply with Article 19 CIUC obligations to provide user identification data, and that failure to do so prevents rebuttal of the registration presumption. Taxpayers also face the argument that they could have used Article 25 of Decree-Law 55/75 (as amended by Decree-Law 20/2008), which allows sellers engaged in regular vehicle trading to promote registration transfers directly. While taxpayers correctly note this is a faculty rather than an obligation, the Tax Authority may use non-exercise of this option to support its position that registration reflects the legally relevant ownership status. The arbitral tribunal must balance the claimant's argument that registration serves only publicity functions against the AT's systematic interpretation emphasizing registration as the definitive criterion for IUC liability.
What happens when the vehicle registration does not reflect the actual ownership status at the date the IUC taxable event occurs?
When vehicle registration does not reflect actual ownership at the IUC taxable event date, a conflict arises between formal registration records and substantive ownership reality. The Tax Authority's position is that this discrepancy does not affect IUC liability because Article 3(1) CIUC establishes registration as the definitive criterion for identifying taxpayers, not merely an evidentiary presumption. The AT argues that accepting unregistered ownership changes would violate the systematic unity of the tax regime and create administrative uncertainty. Taxpayers counter that registration's publicity function means its presumptions can be rebutted by contrary evidence, and that the Tax Authority—unlike private third parties—cannot invoke registration formalities to disregard proven ownership transfers. The practical consequence is that registered owners remain liable for IUC even after disposing of vehicles unless they either: (1) ensure prompt registration updates (which legally rest with purchasers under Article 8-B of the Real Property Registry Code, applicable via Article 29 of the Motor Vehicle Registry Code); (2) exercise the Article 25 faculty to promote registration as sellers (if qualifying as regular vehicle traders); or (3) comply with Article 19 reporting obligations (for leasing entities). This creates particular hardship for leasing companies and vehicle traders who may face IUC liability for vehicles they no longer control economically, highlighting the importance of proactive registration management and compliance with sector-specific reporting requirements.