Process: 697/2015-T

Date: April 23, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitration decision (Process 697/2015-T) addresses the subjective incidence of the Single Circulation Tax (IUC) on a vehicle importer registered as the formal owner of 143 vehicles. The claimant, a Portuguese branch of a vehicle importer, challenged IUC assessments totaling €19,685.19 for 2014, arguing that vehicles were imported exclusively pursuant to dealership orders and immediately invoiced and delivered to concessionaires before registration. The importer contended that legal ownership belonged to the dealerships, with registration in the importer's name being merely formal to comply with customs and administrative procedures. The core legal issue involves interpreting Article 3(1) of the Single Circulation Tax Code (CIUC), which establishes a legal presumption that the passive subject of IUC is the person registered as the vehicle owner. The claimant argued this presumption should yield to economic reality, distinguishing between formal registration and actual ownership for circulation purposes, emphasizing that dealerships requested registration plates and sold vehicles to final consumers. Additionally, the importer argued that registration under Decree-Law 54/75 serves only publicity purposes, not property transmission. The Tax Authority defended the literal application of Article 3(1) CIUC, maintaining that registration creates the tax obligation regardless of underlying commercial arrangements. The AT argued the claimant's interpretation violated systematic and teleological interpretation principles, ignoring the ratio legis of the CIUC regime and the broader tax system's unity. The arbitration was constituted under the Tax Arbitration Legal Regime (RJAT) with Maria de Fátima Alves as sole arbitrator. The case raises fundamental questions about whether legal presumptions in tax law can be rebutted by proving economic substance differs from legal form, particularly regarding the distinction between ISV (Vehicle Tax) incidence on importation versus IUC incidence on vehicle circulation and ownership.

Full Decision

ARBITRAL TAX DECISION

1 REPORT

1.1 – A…, S.A–BRANCH IN PORTUGAL, with the NIPC: … (duly identified in the respective case file), Claimant in the tax procedure, above and marginally referenced, hereinafter denominated "Applicant", came, invoking the provisions of paragraph a) of no. 1 of article 2º and article no. 10º of Decree-Law no. 10/2011, of 20 January (hereinafter RJAT) and, of no. 1 of article 102º and of paragraph a) of article 99º, both, of the Code of Tax Procedure and Process (CPPT) and in numbers 1 and 2 paragraph d) of article 95º of the General Tax Law (LGT), to request the constitution of a Singular Arbitral Tribunal, with a view to:

  • The annulment of the assessment acts relating to the Single Circulation Tax (hereinafter designated as IUC), referring to the year 2014 concerning 143 vehicles listed in the Gracious Complaint procedure, attached to the Request for Arbitral Pronouncement, cfr., copies of the documents which are attached to the case file with the denomination of doc no. 1, whose content is hereby reproduced for all legal purposes;

  • The reimbursement of the total amount of € 19,685.19, plus the respective compensatory interest provided for in no. 1 of article 43º of the LGT and in article 61º of the CPPT.

1.2 Pursuant to the provisions of paragraph a) of no. 2 of article 6º and of paragraph b) of no. 1 of article 11º of Decree-Law no. 10/2011, of 20 January, in the wording introduced by article 228º of Law no. 66-B/2012, of 31 December, the Deontological Council appointed as sole arbitrator Maria de Fátima Alves, who communicated the acceptance of the assignment, within the applicable deadline:

  • On 15-01-2016 the parties were duly notified of this appointment, and did not manifest any will to refuse the arbitrator's appointment, in accordance with the combined provisions of article 11º no. 1 paragraphs a) and b) of the RJAT and articles 6º and 7º of the Deontological Code,

  • Whereby, the arbitral tribunal was constituted on 01-02-2016, as prescribed in paragraph c) of no. 1 of article 11º of Decree-Law no.10/2011, of 20 January, in the wording introduced by article 228º of Law 66-B/2012, of 31 December;

  • The Reply of the Respondent (AT) being verified on 08-03-2016, under article 17º of the RJAT;

  • Consequently, the meeting of parties was dispensed with, under article 18º of the RJAT and, the Arbitral Decision was set for pronouncement on 23-04-2016.

1.3 The Applicant has as its corporate purpose the import, exclusively, of all motor vehicles of brand B… for the national market, whereby, in the substantiation of its request for arbitral pronouncement, it asserts, in summary, the following:

  • The Applicant, in the scope of its activity, only imports vehicles pursuant to orders placed directly by the concessionaries to the Applicant;

  • Which in turn, places the respective order to C…;

  • Being that "there are no sales of vehicles to the Applicant and from it to the concessionaries without the respective order";

  • Verifying thus, that the vehicles did not enter the road circuit in the interest, on account, or by virtue of the detention, possession or property of the Applicant;

  • When the Applicant imports the vehicles, these are immediately invoiced by the Applicant, to the respective concessionaries of brand B… and delivered, subsequently, at the facilities of the respective concessionaries, for immediate delivery to final consumers;

  • Except for vehicles destined for Madeira and the Azores which are deposited in a warehouse of a logistics company;

  • In any case, independently of whether or not there is deposit in a warehouse, the property of the vehicles is always that of the concessionary;

  • Verifying, however, that in the respective sales invoices, only the numbers of the respective chassis are mentioned, since the registration plates are requested by the concessionaries of the respective brand, after the sale, by the Applicant, and the concessionaries of the brand, in turn, sell the motor vehicles, to final customers, becoming these the effective users of the corresponding vehicles;

  • It is further to be added that, only formally, the registration plate and registration are made in the name of the Importer, but it is the concessionary of the brand that, in fact, requests the registration plates, since he is already the owner of the vehicles;

  • To the Applicant, in its capacity as national importer of the brand, responsible for the introduction of the vehicles into consumption, is imputable (cfr., art. 5º of the CISV) the tax on vehicles, a distinct tax from the IUC, with autonomous rules of incidence;

  • Being that, the vehicles, in casu, for purposes of the IUC, were sold by the Applicant, prior to the date of the respective registration, not being, therefore, subject to the IUC, all the more so because, the purchase of a new vehicle, always presupposes, invoicing effected by a concessionary and not by a national importer of the brand, in the case sub judice, the Applicant;

  • Given the facts presented, the property of the said vehicles cannot be imputed to the Applicant, and the Applicant cannot be the passive subject of the tax, in light of the letter and spirit of article 3º of the Code of the Single Circulation Tax (hereinafter designated by CIUC);

  • It is a fact that no. 1 of article 3º of the CIUC, considers the ownership of the motor vehicle, the person in whose name the same is registered, however, in the case "sub judice", the completion and transmission of the Vehicle Customs Declaration (DAV), by the Applicant, in its capacity as Registered Operator and the presentation of the registration certificate request does not proceed nor is confused with the taxable event of the Single Circulation Tax;

  • Being that, the registrations of the vehicles at the competent Motor Vehicle Registration Office do not constitute a condition of transmission of property, since such registration aims only, to publicize the legal situation of the goods, as results, in particular, from the provisions in article no. 1 of Decree-Law no. 54/75, of 12 February;

  • Whereby the taxation relating to the CIUC cannot only focus on those registered as owners of the vehicles, one must consider their actual owners.

1.4 The Respondent, the Tax and Customs Authority (hereinafter designated as AT), proceeded to attach the Tax Administrative Process and presented a Reply, from which it is understood that the tax acts, in dispute, do not suffer from any defect of violation of Law, pronouncing itself in favor of the inadmissibility of the request and the maintenance of the controversial assessment acts, defending, summarily, the following:

  • The passive subjects of the single circulation tax are the persons who appear in the registration as owners of the vehicles, as provided in no.1 of article 3º of the CIUC, which in the case sub judice, is verified as to the Applicant;

  • Verifying, for this, that the registration of the vehicles is in the name of a determined person so that the same embodies the position of passive subject of the tax obligation of IUC;

  • That, notoriously, the interpretation that the Applicant makes of the provisions in article 3º of the CIUC is wrong, insofar as it incurs in a "biased interpretation of the letter of the law" and in the "adoption" of an interpretation that does not heed the systematic element, violating the unity of the regime enshrined in the whole CIUC and, more broadly, in the whole legal-fiscal system", the Applicant still following, an "interpretation that ignores the ratio of the regime enshrined in the article in question and, as well as in the whole CIUC".

2 ISSUES FOR DECISION

2.1 In light of what is set forth in the foregoing numbers, relative to the written submissions, of the parties and, to the arguments presented, the main issues to be decided are the following:

  • The challenge made by the Applicant relative to the material assessment of the assessment acts, relative to the year of 2014, concerning the IUC on the vehicles above-mentioned in the PI;

  • The incorrect interpretation and application of the rules of subjective incidence of the single circulation tax assessed and collected, which constitutes, the central issue to be decided in the present process;

  • The legal value of the registration of motor vehicles.

3 FINDINGS OF FACT

3.1 In matters of fact, relevant to the decision to be rendered, this Tribunal deems the following facts to be established, based on the elements existing in the case file:

  • The Applicant presented probative elements of the motor vehicles in question, corresponding to the moment prior to the taxation period – cfr. copies of sales invoices of the vehicles to the respective concessionaries of brand B…, joined to the case file (contained in the PA docs nos. 1) which are hereby reproduced in their entirety for all legal purposes.

SUBSTANTIATION OF PROVEN FACTS

3.1.1 The facts deemed proven are based on the sales invoices to the concessionaries, joined to the case file (contained in the PA, and attached to the PI, Docs no. 1), which are hereby reproduced in their entirety for all legal purposes.

3.1.2 UNPROVEN FACTS

  • There are no facts deemed as unproven, given that all facts deemed relevant to the assessment of the petition were proven.

4 LEGAL GROUNDS

3.2 The Tribunal is materially competent and is regularly constituted, in accordance with articles 2º no. 1, paragraph a), 5º no. 2, paragraph a), 6º no. 1, 10º no.1, paragraph a) and no. 2 of the RJAT:

  • The parties enjoy legal personality and capacity and are legitimate, ex vi, articles 4º and 10º, no. 2, of the RJAT and article no. 1 of Ordinance no. 112-A/2011, of 22 March;

  • The process does not suffer from nullities;

  • There is no preliminary question on which the Tribunal must pronounce itself.

  • The petition, subject matter of the present process, is the declaration of annulment of the IUC assessment acts relative to the motor vehicles better identified in the case file.

3.2.1 Condemnation of the AT to reimburse the amount of the tax relative to such assessments in the amount of € 19,685.19;

3.2.2 Condemnation of the AT to the payment of compensatory interest on the same amount.

3.3 According to the AT's understanding, it is sufficient that in the registration, the vehicle appears as property of a determined person, for that person to be the passive subject of the tax obligation.

3.4 The matter of fact is fixed, as appears in no. 3.1 above, it now being important to determine the applicable Law to the underlying facts, in accordance with the issues for decision, identified in no. 2.1 above, it being certain that the central issue, in question, in the present case file, relative to which there are absolutely opposing understandings between the Applicant and the AT, consists in knowing whether no. 1 of article 3º of the CIUC relative to the subjective incidence of the single circulation tax enshrines or does not enshrine a rebuttable presumption.

3.5 Everything analyzed and, having considered, on one hand, the positions of the parties in confrontation, mentioned in points 1.3 and 1.4 above and, considering, on the other hand, that the central issue to be decided is whether no. 1 of article 3º of the CIUC enshrines or does not enshrine a legal presumption of tax incidence, it is proper, in this context, to assess and render a decision.

4 ISSUE OF THE INCORRECT INTERPRETATION AND APPLICATION OF THE RULE OF SUBJECTIVE INCIDENCE OF THE IUC

4.1 Considering that it is uncontroversial in doctrine that in the interpretation of fiscal laws the general principles of interpretation apply fully, which will be, only and naturally, limited by the exceptions and particularities dictated by the Law itself, subject matter of interpretation. This is an understanding that has been welcomed in the General Tax Laws of other countries and that has also found place in article 11º of our General Tax Law, which has, moreover, been frequently emphasized by jurisprudence.

It is consensually accepted that with a view to grasping the meaning of the law, interpretation resorts, a priori, to reconstructing the legislative thought through the words of the law, which means, seeking its literal sense, valuing it and assessing it in light of other criteria, the so-called elements of a logical, rational or teleological nature and of a systematic order intervening:

  • Regarding the interpretation of fiscal law, jurisprudence is to be considered, namely, the Judgments of the STA of 05-09-2012, case no. 0314/12 and of 06-02-2013, case 01000/12, available at www.dgsi.pt, the importance of the provisions in article 9º of the Civil Code (CC), as a fundamental element of legal hermeneutics;

  • The provisions of no. 1 of article 3º of the CIUC state 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 name the same are registered";

  • The formulation used in the said article, resorts to the expression "considering-se" which raises the question of whether, to such expression, a presumptive sense can be attributed, equating it to the expression "presuming-se", these are expressions frequently used, with equivalent senses;

  • As teaches Jorge Lopes de Sousa, in Code of Tax Procedure and Process, Annotated and Commented, volume I, 6th Edition, Area Publisher, SA, Lisbon 2011, p. 589, that in matters of tax incidence, presumptions can be revealed by the expression "presume-se" or by similar expression, there being mentioned various examples of such presumptions, referring to that contained in article 40º, no. 1 of the CIRS, in which the expression "presume-se" is used and that contained in article 46º no. 2, of the same Code, in which use is made of the expression "consider-se", as an expression with an effect similar to that and embodying, equally, a presumption;

  • In the legal formulation set forth in no. 1 of article 3º of the CIUC, in which a presumption was enshrined, revealed by the expression "considering-se", of similar meaning and of equivalent value to the expression "presuming-se", in use since the creation of the tax in question;

  • The use of the expression "considering-se" aimed at nothing more than the establishment of a more marked and clear approximation between the passive subject of the IUC and the actual owner of the vehicle, which is in harmony with the reinforcement given to vehicle ownership, which came to constitute the taxable event of the tax, in accordance with article 6º of the CIUC;

  • The relevance and interest of the presumption in question, which was historically revealed through the expression "presuming-se" and which now, makes use of the expression "considering-se", resides in the truth and justice that, by this means, is conferred on fiscal relations and, that embody fundamental fiscal values, permitting the taxation of the real and actual owner and not the one who, by circumstances of diverse nature, at times, amounts to nothing more than an apparent and false owner. If the case were not thus considered, not admitting and revealing the presentation of probative elements intended to demonstrate that the actual owner is, in fact, a person different from the one registered and, who initially, and in principle, was supposed to be the true owner, those values would be objectively postponed.

4.2 There is also to be considered, the principle of equivalence, inscribed in article 1º of the CIUC, which has underlying the polluter-pays principle and, concretizes the idea inscribed in it that, whoever pollutes must, therefore, pay. The said principle has constitutional basis, insofar as it represents a corollary of the provisions in paragraph h) of no. 2 of article 66º of the constitution, having also basis in community law, whether at the level of primary law, article 130º-R, of the Maastricht Treaty (Treaty on European Union, of 07-02-1992), where the mentioned principle came to appear as support of Community Policy, in the field of environmental matters and which aims to hold responsible those who contribute with the damages that befall the community, arising from the use of motor vehicles, are assumed by their owner-users, as costs that only they should bear.

4.3 Attending the facts above described, it is important to note that the already mentioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, whether those respecting the logical elements of interpretation, of a historical nature or of a rational order, all point in the direction that the expression "considering-se" has a sense equivalent to the expression "presuming-se", and should thus be understood that the provisions in no. 1 of article 3º of the CIUC enshrine a legal presumption which, in light of article 73º of the LGT, where it is established that "The presumptions enshrined in the rules of tax incidence always admit proof to the contrary", will necessarily be rebuttable, which means that the passive subjects are, in principle, the persons in whose name such vehicles are registered. These persons, identified under such conditions, shall thus be those to whom the AT must necessarily address itself;

  • But it shall be, in principle, given that in the context of prior hearing, of mandatory character, in light of the provisions of paragraph a) of no. 1 of article 60º of the LGT, the tax relationship may be reconfigured, validating the passive subject initially identified, or redirecting the procedure toward the one who is, in fact, the true and actual, passive subject of the tax in question.

  • The taxpayer has the right to be heard, by means of prior hearing (José Manuel Santos Botelho, Américo Pires Esteves and José Cândido de Pinho, in Code of Administrative Procedure, Annotated and Commented, 4th edition, Almedina, 2000, annotation 8 of article 100º).

  • The prior hearing which, naturally, must be realized at a moment immediately preceding the assessment procedure, corresponds to the seat and proper moment for, with certainty and security to identify the passive subject of the IUC.

5 ON THE LEGAL VALUE OF REGISTRATION

5.1 Regarding the legal value of registration, it is important to note what is established in no. 1 of article 1º of Decree-Law no. 54/75, of 12 February (amended various times, the last being by way of Law no. 39/2008, of 11 August), when it provides that "vehicle registration has essentially as its purpose to publicize the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce":

  • Article 7º of the Real Property Registration Code (CRP), applicable, supplementarily, to motor vehicle registration, by force of article 29º of the CRA, provides 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 definitive registration constitutes nothing more than a rebuttable presumption, admitting, therefore, counter-proof, as derives from the law and jurisprudence has been indicating, being able to see, among others, the Judgments of the STJ no. 03B4369 of 19-02-2004 and no. 07B4528, of 29-01-2008, available at: www.dgsi.pt;

  • Therefore, the function legally reserved to registration is on one hand that of publicizing the legal situation of the goods, in the case in question, of the vehicles and, on the other hand, allows us to presume that the right exists over those vehicles and that the same belongs to the holder, as such inscribed in the registration, it does not have a constitutive nature of the right of ownership, but only declarative, hence the registration does not constitute a condition of validity of the transmission of the vehicle from seller to buyer;

  • The acquirers of the vehicles become owners of those same vehicles by means of the celebration of the corresponding contracts of purchase and sale, with registration or without it;

  • In this context it is worth recalling that, in light of the provisions in no. 1 of article 408º of the CC, the transfer of real rights over things, in the case sub judice, motor vehicles, is determined by mere effect of the contract, and that in accordance with the provisions in paragraph a) of article 879º of the CC, among the essential effects of the contract of purchase and sale, stands out the transmission of the thing;

  • In light of what is set forth, it becomes clear that the legislative thought points in the direction that the provisions in no. 1 of article 3º of the CIUC, enshrine a presumption "juris tantum", consequently rebuttable, permitting thus, that the person who, in the registration, is inscribed as owner of the vehicle, may present probative elements intended to demonstrate that such ownership is inserted in the legal sphere of another person, to whom the ownership was transferred.

6 THE PRESUMPTION OF ARTICLE 3º OF THE CIUC AND THE DATE ON WHICH THE IUC IS PAYABLE

6.1 THE PRESUMPTION OF ARTICLE 3º OF THE CIUC

  • The AT considers that the presumption that exists in no. 1 of article 3º of the CIUC derives from an interpretation contra legem, deriving from a biased reading of the letter of the law and, therefore, violating the unity of the legal system, however, and saving the respect due, the understanding of jurisprudence goes in the direction that one must consider the existence of a legally rebuttable presumption, whereby consequently it serves the values and interests questioned, whether at the level of material fiscal justice, whether at the level of the environmental purposes aimed at by the IUC;

  • Regarding the unity of the legal system it is important to emphasize everything that was cited above, namely, on the ratio of article 1º of the CIUC; on the norms and principles of the LGT; on the pertinent norms and applicable to the registration of motor vehicles, on the interpretation that better serves and achieves the mentioned unity and ensures the connection of those same norms, considering the legal presumption that is provided in article 3º of the CIUC.

6.2 DATE ON WHICH THE IUC IS PAYABLE

  • The IUC is a tax of periodic taxation, whose periodicity corresponds to the year which begins with the act of registration or in each of its anniversaries, as provided in nos. 1 and 2 of article 4º of the CIUC;

  • It is payable in accordance with no. 3 of article 6º of the said Code;

  • It being important to note that, as to the assessment of the IUC taxed to the Applicant on the vehicles above-mentioned, in the year 2014, are not to be considered, because at the moment of the tax facts the vehicles did not belong to it, since the said vehicles when imported are already destined to be sold, immediately, to the respective concessionaries of brand B…, and, it is these who request the respective registration that title the vehicles, so they can be sold to final customers.

6.2.1 In relevance regarding the burden of proof, article 342º no. 1 of the CC stipulates "the one who invokes a right it is incumbent to make proof of the facts constitutive of the right alleged";

6.2.2 Also article 346º of the CC (counter-proof) determines, that "to the proof that is produced by the party on whom the burden of proof falls may the opposing party oppose counter-proof with respect to the same facts, intended to render them doubtful; if it succeeds, the question is decided against the party burdened with the proof." (As states Anselmo de Castro, A., 1982, ED. Almedina Coimbra, "Civil Procedural Law Declaratory", III, p. 163, "falling on one of the parties burden of proof, to the opposing party it is sufficient to oppose counter-proof, this being a proof intended to render doubtful the facts alleged by the first").

Thus, in the case of the file, what the Applicant has to prove, in order to rebut the presumption that derives either from article 3º of the CIUC, or from the Motor Vehicle Registration itself, is that it, the Applicant, could never be the owner of the vehicles in question, since the Applicant only limits itself to Importing the vehicles of brand B…, which it then sells, immediately, to the respective concessionaries, fact verified in the period to which the impugned assessments relate. What it proposes to prove, as appears from the case file, is that the ownership of the vehicles, did not belong to it in the periods to which the assessments relate, cfr., documents attached to the Gracious Complaint, contained in the PA (docs nos. no. 1), which are hereby reproduced in their entirety for all legal purposes.

6.3 REBUTTAL OF THE PRESUMPTION

  • The Applicant, as referred to in 3.1., regarding the proven facts, alleged, with the purpose of setting aside the presumption, not to be owner of the vehicles, at the time of the occurrence of the tax facts, offering for this effect the following documents:

  • Copies of sales invoices to the corresponding concessionaries of brand B…;

  • In this way, the ownership of the said vehicles, did not belong to it, because the Applicant is only the Importer of cars of brand B…, for the national territory and, immediately, transfers them to the respective concessionaries of the brand, cfr., sales invoices, with the denomination of the corresponding chassis, since the number of the respective registration plates are requested by the same concessionaries, who will then sell them to final customers;

  • It follows from this, that at the date on which the IUC was payable, who held the ownership of the motor vehicles could not be the Applicant!

7 OTHER ISSUES RELATING TO THE LEGALITY OF THE ASSESSMENT ACTS

  • Regarding the existence of other issues relating to the legality of the assessment acts, having in mind that it is implicit in the establishment of an order of knowledge of the defects, such as provided in article 124º of the CPPT, that proceeding the request for arbitral pronouncement based on defects that prevent the renewal of the impugned assessments, becomes prejudiced, because useless, the knowledge of other defects, it does not appear necessary to know of the other issues raised.

8 REIMBURSEMENT OF THE TOTAL AMOUNT PAID

  • Pursuant to the provisions of paragraph b) of no. 1 of article 24º of the RJAT and, in conformity with what is established therein, the arbitral decision on the merit of the claim for which no appeal or challenge is allowed, binds the tax administration as of the end of the deadline provided for the appeal or challenge, and this, in the exact terms of the success of the arbitral decision in favor of the passive subject and until the end of the deadline provided for the spontaneous execution of the sentences of the judicial tax tribunals "Restore the situation that would exist if the tax act, subject matter of the arbitral decision, had not been carried out, adopting the acts and operations necessary for this effect"

  • These are legal commands that are in complete harmony with the provisions in article 100º of the LGT, applicable to the case, ex vi, of the provisions in paragraph a) of no. 1 of article 29º of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial success of complaints or administrative appeals or of judicial process in favor of the passive subject, to the immediate and full restoration of the situation that would exist if the illegality had not been committed, corresponding the payment of compensatory interest, in the terms and conditions provided for in law".

  • The case contained in the present case file, raises the manifest application of the mentioned norms, given that, following the illegality of the assessment acts, referenced, in this process, there will, by force of these norms, have to be reimbursement of the amounts paid, whether as title of the tax paid, whether of the corresponding compensatory interest, as a way to achieve the restoration of the situation that would exist if the illegality had not been committed.

9 RIGHT TO COMPENSATORY INTEREST

  • The declaration of illegality and consequent annulment of an administrative act confers on the addressee of the act the right to reintegration of the situation in which the same would find itself before the execution of the annulled act.

  • In the context of the assessment of the tax, its annulment confers on the passive subject the right to restitution of the tax paid and, as a rule, the right to compensatory interest, in accordance with no. 1 of article 43º of the LGT and article 61º of the CPPT.

  • Whereby, the Applicant has, the right to compensatory interest on the amount of tax paid, concerning the annulled assessment.

10 DECISION

In light of what is set forth, this Arbitral Tribunal decides:

  • To adjudge as successful the petition for declaration of illegality of the IUC assessment, concerning the year 2014, relative to the motor vehicles identified in the present process, consequently annulling, the corresponding tax acts;

  • To adjudge as successful the petition for condemnation of the Tax Administration to reimburse the amount unduly paid, in the amount of 19,685.19 Euros, plus the respective legally due compensatory interest, condemning the Tax and Customs Authority to effect these payments.

VALUE OF THE CASE:

  • In conformity with the provisions in articles 306º no. 2 of the CPC and 97º-A, no. 1 of the CPPT and in article 3º, no. 2 of the Regulation of Costs in Tax Arbitration Processes, the value of the case is fixed at € 19,685.19 (nineteen thousand, six hundred and eighty-five euros and nineteen cents).

COSTS:

  • In accordance with no. 4 of article 22º of the RJAT, the amount of costs is fixed at € 1,224.00, in accordance with Table I, attached to the Regulation of Costs in Tax Arbitration Processes, charged to the Tax and Customs Authority.

Let the parties be notified.

Lisbon, 23-04-2016

The Arbitrator

Maria de Fátima Alves

(the text of the present decision was elaborated by computer, in accordance with article 131, no. 5 of the Code of Civil Procedure, applicable by reference of article 29º, no. 1 paragraph e) of Decree-Law 10/2011, of 20 January (RJAT), being governed in its drafting by current orthography)

Frequently Asked Questions

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Who is liable for IUC payment when vehicles are registered in the name of an importer but ordered by dealership concessionaires?
Under Article 3(1) of the Single Circulation Tax Code (CIUC), the person registered as the vehicle owner is legally presumed to be liable for IUC payment. In this case, despite the importer's argument that vehicles were ordered by and immediately sold to dealership concessionaires, the Tax Authority maintained that registration in the importer's name creates the tax obligation. The importer argued this formal registration was merely administrative, necessary for customs clearance (completing the Vehicle Customs Declaration as Registered Operator), and that actual ownership transferred to dealerships before circulation commenced. However, Portuguese tax law applies a strong legal presumption linking registration to tax liability, which the tribunal must assess against evidence of immediate sale and the lack of actual vehicle possession or use by the importer for circulation purposes.
How do legal presumptions under Portuguese tax law apply to the subjective incidence of IUC on vehicle importers?
Portuguese tax law establishes legal presumptions regarding IUC's subjective incidence through Article 3(1) CIUC, creating a rebuttable presumption that the registered owner is the taxpayer. For vehicle importers, this presumption operates regardless of whether registration serves merely formal administrative purposes (customs clearance, ISV assessment) versus reflecting actual circulation ownership. The Tax Authority argues this presumption must be applied systematically within the entire CIUC regime and broader tax system, rejecting interpretations that focus solely on economic substance. Importers may rebut this presumption by demonstrating that registration does not correspond to the legal concept of ownership for circulation purposes, particularly when vehicles are sold before registration completion and never enter the road circuit in the importer's interest, account, or possession. The presumption's application must respect both the letter and ratio legis of tax provisions.
Can a vehicle importer challenge IUC assessments through CAAD arbitration when it does not hold ownership for circulation purposes?
Yes, vehicle importers can challenge IUC assessments through CAAD (Administrative Arbitration Center) arbitration under Article 2(1)(a) and Article 10 of the Tax Arbitration Legal Regime (RJAT), combined with Articles 99(a) and 102(1) CPPT and Article 95(1) and (2)(d) LGT. The right to arbitration exists independently of whether the importer held ownership for circulation purposes, as the challenge addresses the legality of tax assessments. In this case, the importer successfully initiated arbitration despite the Tax Authority's position that registration creates liability. The arbitral tribunal has jurisdiction to examine whether the assessment acts violate law by incorrectly identifying the passive subject, analyzing whether registration alone suffices for IUC incidence or whether actual ownership and circulation possession are required. Importers must demonstrate that vehicles were not detained, possessed, or owned for road circuit purposes, supporting claims through sales invoices, delivery documentation, and proof that dealerships requested registration plates.
What are the conditions for obtaining a refund and compensatory interest under Article 43 of the LGT in IUC disputes?
Under Article 43(1) LGT and Article 61 CPPT, taxpayers who successfully challenge illegal tax assessments are entitled to reimbursement of amounts paid plus compensatory interest. The conditions require: (1) successful annulment of the assessment acts through administrative or judicial proceedings; (2) proof that tax was actually paid or collected; (3) calculation of interest from the payment date until reimbursement; and (4) demonstration that the assessment violated legal provisions governing tax incidence, calculation, or procedure. In IUC disputes, the taxpayer must prove the assessment incorrectly identified the passive subject or applied the wrong tax base. Compensatory interest accrues automatically upon successful challenge without requiring separate administrative request. The interest rate and calculation method follow the legal regime established in Article 43 LGT, compensating taxpayers for the temporary unavailability of funds due to illegal taxation. Reimbursement includes both principal and interest as an integral remedy.
How does the CAAD arbitral tribunal assess the distinction between registered vehicle owner and actual taxpayer for IUC purposes?
The CAAD arbitral tribunal assesses this distinction by examining whether Article 3(1) CIUC's registration-based presumption reflects substantive ownership for circulation purposes or merely formal administrative status. The tribunal analyzes: (1) the systematic interpretation of CIUC within the broader tax system, distinguishing ISV (incidence on importation/acquisition) from IUC (incidence on circulation); (2) the teleological purpose of IUC as a tax on vehicle use and road circulation, not mere importation; (3) evidence of actual possession, detention, or economic interest in vehicle circulation; (4) the temporal relationship between registration, sale, and commencement of circulation; and (5) whether registration under Decree-Law 54/75 serves only publicity purposes without constituting property transmission. The tribunal must balance the legal certainty provided by registration-based taxation against principles of economic reality and substance-over-form, considering whether the importer's role was exclusively administrative (customs clearance, ISV compliance) versus actual vehicle ownership for circulation. This assessment determines whether the legal presumption in Article 3(1) CIUC can be rebutted by proving immediate sale to dealerships before circulation commenced.