Process: 699/2015-T

Date: October 5, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 699/2015-T) addresses the critical question of subjective IUC (Imposto Único de Circulação) incidence when vehicles are sold but remain registered in the seller's name. A vehicle rental and fleet management company challenged 26 IUC assessments totaling €1,788.98, arguing that the tax was levied on vehicles already sold before the taxable event occurred. The central legal dispute revolves around interpreting Article 3(1) of the CIUC, which defines taxpayers as persons in whose names vehicles are registered. The claimant contended this provision establishes a rebuttable legal presumption of ownership that can be overcome by proving actual sale through invoices and contracts. They argued that since vehicles were sold prior to the taxation period's commencement date, the tax should fall upon the actual new owners, not the former registered owners. The company emphasized it lacked legal standing to request registration changes before Decree-Law 177/2014. Conversely, the Tax Authority maintained that Article 3(1) represents a deliberate legislative policy choice, not a presumption, making registered ownership the definitive criterion for IUC liability. The AT challenged the probative value of the invoices submitted, noting inconsistent descriptions including 'residual values,' 'rescission,' 'total insurance loss,' and 'non-leased vehicle sales.' The Authority also invoked Article 19 CIUC declarative obligations, suggesting the claimant's non-compliance with notification requirements justified the assessments. This case highlights the tension between formal registration and economic reality in tax incidence, the evidentiary burdens in tax arbitration, and the practical difficulties facing vehicle rental companies in managing IUC obligations during the transition period before legislative reforms allowed sellers to initiate registration transfers.

Full Decision

ARBITRAL DECISION

The Arbitrator Raquel Franco, appointed by the Ethics Council of the Center for Administrative Arbitration (CAAD) to form the sole arbitral tribunal constituted on 9 December 2015, decides as follows:

I. REPORT

  1. On 25.11.2015, the company "A…, LDA.", tax identification number…, filed a request for the constitution of a sole arbitral tribunal, pursuant to Articles 2 and 10 of Decree-Law No. 10/2011, of 20 January (Legal Regime of Tax Arbitration, hereinafter "LRTA"), with the Tax and Customs Authority (AT) as the respondent.

  2. The request for constitution of the Arbitral Tribunal was accepted by the Esteemed President of the CAAD and automatically notified to the AT on 04.12.2015.

  3. Pursuant to Article 6(2)(a) and Article 11(1)(b) of Decree-Law No. 10/2011, of 20 January, as amended by Article 228 of Law No. 66-B/2012, of 31 December, the Ethics Council appointed as arbitrator of the sole arbitral tribunal the undersigned hereto, who communicated acceptance of the corresponding charge within the applicable timeframe.

  4. On 22.01.2016, the parties were duly notified of this appointment and did not manifest any intention to challenge the appointment of the arbitrator pursuant to the combined provisions of Article 11(1)(a) and (b) of the LRTA and Articles 6 and 7 of the Code of Ethics.

  5. Thus, pursuant to Article 11(1)(c) of Decree-Law No. 10/2011, of 20 January, as amended by Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 08.02.2016.

  6. In the present arbitral proceedings, the Claimant seeks that the Arbitral Tribunal declare the illegality of 26 acts of ex officio assessment of the Single Tax on Vehicle Circulation (IUC) in the total amount of €1,707.65, plus compensatory interest in the amount of €81.33, making up a total value of €1,788.98, and, consequently, order the restitution of this total amount, as well as the payment of indemnificatory interest pursuant to Article 43 of the General Tax Law (LGT).

  7. The Claimant supports its claim, in summary, on the following grounds:

  • The Claimant carries out the activity of motor vehicle rental and provides services related to fleet management.

  • The Claimant received 26 IUC assessment notes relating to vehicles connected with the above-mentioned activity, and proceeded to pay all of them, although considering them illegal for not meeting the subjective requirements of tax incidence.

  • In particular, the Claimant contends that, in all cases covered by the request for arbitral decision, the assessed tax concerns vehicles already sold by the Claimant on the date when the taxable event occurred, and therefore the subjective requirement of tax incidence regarding the taxpayer stated in the assessment is not fulfilled.

  • The Claimant contends that the fact that the vehicle in question was sold by it at a time prior to the occurrence of the IUC constitutes grounds for exclusion of tax incidence that should have been considered by the AT, insofar as, pursuant to Article 6(3) of the Single Tax Code on Vehicle Circulation (CIUC), the tax is deemed exigible from the owner (or other holders of the vehicle who are equivalent) on the first day of the vehicle's taxation period, which, according to Article 4(2) of the same Code, takes place on the date the registration is granted.

  • The fact that ownership of the vehicles was not registered in the motor vehicle register in favor of the new owner cannot be imputed to the Claimant, which, at the date when the facts occurred, did not have standing to request such registration (this possibility was only introduced into the Portuguese legal order by Decree-Law No. 177/2014, of 15 December).

  • On the other hand, the Claimant contends that, although Article 3(1) of the CIUC provides that the taxpayers of the tax are the owners of the vehicles, defined as natural or legal persons, of public or private law, in whose names the same are registered, the expression "considered as" should be understood as a rebuttable legal presumption capable of being overcome by contrary evidence provided by the vehicle transferor. Thus, in light of Article 3(1) of the CIUC, the tax should fall upon the new owners of the vehicles.

  1. In its Response, the AT invoked, in summary, the following:

  • The legislator expressly and intentionally established that [as owners or in the situations provided for in paragraph 2, the persons therein listed] are considered as such the persons in whose names the same [vehicles] are registered, because this is the interpretation that preserves the unity of the legal-fiscal system.

  • To understand that the legislator established here a presumption would unequivocally be to make an interpretation contrary to law; it is, rather, a clear legislative policy choice whose intention was that, for purposes of IUC, those appearing as such in the motor vehicle register be considered owners.

  • If the thesis defended by the Claimant regarding the fact that Article 3 of the CIUC establishes a rebuttable presumption were to be followed, then the rebuttal of the presumption depends on compliance with what is provided in Article 19 of the CIUC; the Claimant not having fulfilled the burden of proof imposed upon it, and the non-compliance with the declarative obligation provided in that legal provision being found, two consequences should be drawn: (i) the responsibility of the Claimant for the costs of arbitration relating to the present request for arbitral decision given that such non-compliance led to the issuance of part of the assessments in question; (ii) the determination of its responsibility in terms of contraventions under Article 117, combined with Article 26(4) of the General Tax Procedure Regulation (RGIT);

  • The interpretation given by the Claimant translates into an obstruction and increase in costs of the competencies assigned to the Respondent, with obvious prejudice to the interests of the Portuguese State;

  • The argument presented by the Claimant that the taxpayer of the tax is the effective owner, independently of not appearing in the motor vehicle register in that capacity, is incorrect in light of a teleological interpretation of the regime established in the CIUC insofar as the legislator intended to create a tax based on taxation of the owner of the vehicle as it appears in the motor vehicle register.

  • As regards the documents submitted by the Claimant as evidence of what it alleges, the AT contends that second copies of invoices are not capable of proving the conclusion of a synallagmatic contract such as that of purchase and sale, as they do not reveal in themselves an essential and unequivocal declaration of will (i.e., acceptance) by the alleged acquirer. It adds that the Claimant did not attach copies of the official form for registration of motor vehicle ownership when it could and should have done so in the filing of the request for arbitral decision, and likewise did not attach evidence of receipt of payments. It also argues that, with respect to the value or probative force of the invoices embodied in the documents attached to the case, doubts are raised, given the various references therein (rescission, total insurance loss, residual value, sale of non-leased vehicle). It refers, by way of example, to invoices relating to the vehicles …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, in which one can read "RESIDUAL VALUES", to the invoice relating to the vehicle …-…-…, …-…-…, …-…-…, in which one can read "PERC TOT CLIENTE" and to the vehicles …-…-…, …-…-…, …-…-… and …-…-…, in which one can read "SALE NON-LEASED VEHICLE", and to the vehicle …-…-…, in which one can read "EARLY RESCISSION". It concludes, on this point, that, in the face of a supposed single type of contract (i.e., contract of purchase and sale of motor vehicle), it would be expected to observe the existence of a uniform description, which is not the case here, given that the various invoices attached to the request for arbitral decision include different descriptions, and therefore the documents in question should not benefit from the presumption of truth referred to in Article 75 of the LGT.

  • Finally, the Respondent argues that, if the interpretation conveyed by the Claimant were to be accepted, it would be contrary to the Constitution, insofar as it constitutes a violation of the principle of confidence, the principle of legal certainty, the principle of efficiency of the tax system, and the principle of proportionality.

II. PRELIMINARY DETERMINATIONS

  1. The Tribunal is competent and regularly constituted, pursuant to Articles 2(1)(a), 5, and 6, all of the LRTA.

  2. The parties have legal standing and capacity, are entitled to participate, and are legally represented, pursuant to Articles 4 and 10 of the LRTA and Article 1 of Order No. 112-A/2011, of 22 March.

  3. The case does not suffer from defects that would invalidate it.

  4. Joint consideration is sought of the legality of 26 IUC assessments, for which the prerequisites provided in Article 3(1) of the LRTA and Article 104 of the Code of Tax Procedure and Process (CPPT) are met, and cumulation is admissible by virtue of the identity of the tax and the circumstance that the analysis of the tax acts in question depends on the consideration of the same factual circumstances and the application of the same rules of law.

IV. FACTS

IV.1. Proven Facts

Before entering into the consideration of the issues, it is necessary to present the factual matter relevant to its understanding and decision, which, having examined the documentary evidence and the administrative file (PA) attached to the case and having also taken into account the facts alleged, is established as follows:

  • The Claimant carries out the activity of motor vehicle rental and provides services related to fleet management.

  • The Claimant received 26 IUC assessment notes relating to vehicles connected with the above-mentioned activity, all identified in the Table Annexed to the arbitral request, which is here given as fully reproduced.

  • The ownership of these vehicles was, at the date of the taxable events, recorded in the motor vehicle register in favor of the Claimant.

  • The Claimant issued the following documents called "second copies of invoices", concerning the vehicles and with the dates indicated below:

a. Vehicle with registration …-…-…, invoice dated 2008-08-08, description "Residual values";

b. Vehicle with registration …-…-…, invoice dated 2003-11-23, description "Residual values";

c. Vehicle with registration …-…-…, invoice dated 2010-06-08, description "Residual values";

d. Vehicle with registration …-…-…, invoice dated 2007-01-29, description "Perc Tot Cliente";

e. Vehicle with registration …-…-…, invoice dated 2006-07-23, description "Residual values";

f. Vehicle with registration …-…-…, invoice dated 2009-10-01, description "Sale non-leased vehicle";

g. Vehicle with registration …-…-…, invoice dated 2007-07-23, description "Residual values";

h. Vehicle with registration …-…-…, invoice dated 2003-06-23, description "Residual values";

i. Vehicle with registration …-…-…, invoice dated 2006-07-08, description "Residual values";

j. Vehicle with registration …-…-…, invoice dated 2006-03-03, description "Perc Tot Cliente";

k. Vehicle with registration …-…-…, invoice dated 2009-02-23, description "Residual values";

l. Vehicle with registration …-…-…, invoice dated 2006-01-31, description "Vehicle sale";

m. Vehicle with registration …-…-…, invoice dated 2002-05-08, description "Residual values";

n. Vehicle with registration …-…-…, invoice dated 2009-06-23, description "IUC-SINGLE TAX ON CIRCULATION";

o. Vehicle with registration …-…-…, invoice dated 2007-05-23, description "Residual values";

p. Vehicle with registration …-…-…, invoice dated 2008-05-08, description "Residual values";

q. Vehicle with registration …-…-…, invoice dated 2009-05-08, description "Residual values";

r. Vehicle with registration …-…-…, invoice dated 2008-05-29, description "Sale Non-Leased Vehicle";

s. Vehicle with registration …-…-…, invoice dated 2008-05-23, description "Residual values";

t. Vehicle with registration …-…-…, invoice dated 2007-09-20, description "Perc Tot Cliente";

u. Vehicle with registration …-…-…, invoice dated 2007-06-01, description "SALE NON-LEASED VEHICLE";

v. Vehicle with registration …-…-…, invoice dated 2009-05-26, description "SALE NON-LEASED VEHICLE";

w. Vehicle with registration …-…-…, invoice dated 2008-05-23, description "RESIDUAL VALUES";

x. Vehicle with registration …-…-…, invoice dated 1992-06-24, description "EARLY RESCISSION";

y. Vehicle with registration …-…-…, invoice dated 1990-08-08, description "RESIDUAL VALUES";

z. Vehicle with registration …-…-…, invoice dated 1997-07-07, description "RESIDUAL VALUES".

  • All impugned assessments concern the year 2015, except for the one relating to the vehicle with registration …-…-…, which concerns the year 2012, and the one relating to the vehicle with registration …-…-…, which concerns the year 2011.

  • The Claimant made payment of all impugned assessments (although it did not attach documents proving payment for the vehicles …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, payment is considered proven by agreement since it was not specifically disputed by the Respondent).

  • The Claimant's accounting records do not show any debts relating to the vehicles identified in point 5.

IV.2. Facts Not Proven

There are no facts invoked by the Parties with relevance to the decision of the case that have not been considered proven.

V. ISSUE TO BE DECIDED

The fundamental question at issue in the present case is whether the facts alleged by the Claimant constitute grounds for exclusion of subjective tax incidence and whether, consequently, it should be considered that the impugned acts suffer from error regarding the presuppositions of the taxable event, which would constitute a defect of violation of law determining their annulment, with the due legal consequences.

VI. LEGAL REASONING

The Claimant bases its claim on the argument that the presuppositions of subjective incidence provided for in Article 3 of the CIUC are not fulfilled insofar as, at the date of the taxable events, it was no longer the owner of the said vehicles.

It invokes the provision of Article 3 of the CIUC, which, in its understanding, establishes an implicit presumption of ownership of vehicles in favor of whoever they are registered to, a presumption which, by virtue of the application of the general rule provided in Article 73 of the General Tax Law, is rebuttable by contrary evidence. For the Respondent, however, Article 3 of the CIUC does not establish any implicit presumption, but rather a true, irrebuttable legal fiction.

This issue has been extensively addressed by arbitral jurisprudence over recent years (cf. the decisions rendered in cases 286/2013-T, of 2 May 2014, 293/2013-T, of 9 June 2014, 46/2014-T of 5 September, 246 and 247/2014 T, of 10 October, among others), and has furthermore been the subject of a decision of the Central Administrative Court South rendered on 19-03-2015, case no. 08300/14. Following this court closely in the jurisprudential line delineated in the cases indicated above, only its most significant features will be indicated here.

Thus, Article 3(1) of the CIUC provides that:

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

The question discussed regarding this norm is as follows: should one understand that the legislator used the word "considered" as it could have used the word "presumed" or, on the contrary, that the legislator intended to establish a legal fiction, prohibiting the possibility of presenting contrary evidence?

Pursuant to 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." Furthermore, Article 350(2) of the Civil Code clarifies that legal presumptions may be rebutted by contrary evidence, except in cases where the law prohibits it.

Regarding presumptions of tax incidence, Article 73 of the General Tax Law provides that these always admit contrary evidence.

"Legal fictions" consist, differently, "of a legal process that considers a situation or a fact as distinct from reality in order to attribute legal consequences to it"[1].

Now, contrary to what the Respondent argues and as has already been recognized in the arbitral and judicial decisions referred to, the analysis of the literal element, as well as of the historical and teleological elements present in the norm in question, leads to the conclusion that the legislator did not intend to establish any legal fiction but only and solely a presumption, rebuttable by contrary evidence in accordance with and for the purposes of Article 73 of the General Tax Law. Since the norm of incidence provided for in Article 3(1) of the CIUC is a norm of tax incidence, any other understanding would be clearly contrary to the principles governing the legal tax relationship.

As to the historical element, it is important to note that the CIUC had its genesis in the creation, through Decree-Law 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, presumed as such the persons in whose names they were registered or recorded[2]. Furthermore, Article 2 of the Regulations on Road and Haulage Taxes (approved by Decree-Law No. 116/94) provided that: "the taxpayers of the circulation tax and haulage tax are the owners of the vehicles, presumed as such, subject to contrary evidence, natural or legal persons in whose names the same are registered".

It is true that, in the CIUC, the legislator substituted the expression "presumed" with the expression "considered", which, from the Respondent's perspective, represented the establishment of a legal fiction, irrebuttable. We do not consider, however, that this is the case. The change of verb does not constitute a substantive alteration in the rule of incidence, which, in our view, continues to establish a presumption rebuttable by contrary evidence – in accordance, moreover, with what is provided in Article 73 of the LGT.

As stated by Diogo Leite Campos, Benjamim Silva Rodrigues, and Jorge Lopes de Sousa, in the annotation to Article 73(3) of the LGT, "presumptions in matters of tax incidence can be explicit, revealed by the use of the expression 'presumed' or similar (…). However, presumptions may also be implicit in rules of incidence, in particular of objective incidence, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not impractical to ascertain the real value"[3].

In sum, in matters of tax incidence, presumptions may be revealed by the expression "presumed" or by similar expression[4]. By way of example, Jorge Lopes de Sousa notes that in Article 40(1) of the Personal Income Tax Code (CIRS), the expression "presumed" is used, whereas in Article 46(2) of the same Code the expression "considered" is used, with no difference between one and the other expression, both meaning, after all, the same thing: a legal presumption[5].

As to the teleological element, it is important to note that the structuring principle of the reform of vehicle taxation is precisely that of the incidence of taxation on the true user of the vehicle, which does not accord with the "blind" reading of the letter of the law, which could, after all, lead to taxing someone who is not the owner and, thus, someone who is not the subject causative of the "environmental and road cost" caused by the vehicle, to which Article 1 of the CIUC alludes.

Thus, regarding the subjective incidence of the tax, it is to be concluded that no changes are observed with respect to the situation previously in force in the scope of the Municipal Tax on Vehicles, Circulation Tax, and Haulage Tax, as is moreover widely recognized by legal literature, a rebuttable presumption continuing to apply in this matter. This understanding is, further, the only one that appears adequate and in accordance with the principle of material truth and justice, underlying legal tax relationships, with the aim of taxing the real and effective owner and not the one who, by circumstances of various 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, we are led to the conclusion that the expression "considered as" has exactly the same meaning as the expression "presumed as", and should therefore be understood as Article 3(1) of the CIUC establishing a true presumption of ownership and not any fiction, and therefore such presumption is rebuttable. Because this is so, the person inscribed in the motor vehicle register must be afforded the possibility of presenting sufficient evidential elements to demonstrate that the effective owner is, after all, a different person from the one appearing in the register.

Finally, it is necessary to consider, in the present analysis, the legal value of the motor vehicle register. Thus, pursuant to Article 1(1) of Decree-Law 54/75, of 12 February, which established the Motor Vehicle Property Register, "the registration of vehicles has essentially the purpose of giving publicity to the legal situation of motor vehicles and their trailers, with a view to the security of legal commerce". Article 7 of the Property Register Code further states that "definitive registration constitutes a presumption that the right exists and belongs to the person inscribed, in the precise terms in which the registration defines it". Motor vehicle property registration is, therefore, not constitutive in nature, but merely declarative, allowing only registration in the register to presume the existence of the right and its ownership. Therefore, the presumption resulting from registration may be rebutted by contrary evidence. And this is so precisely because, pursuant to Article 408 of the Civil Code, except for exceptions provided by law, the constitution or transfer of real rights over a determined thing occurs by mere effect of the contract, without its validity being dependent on registration in the register[6]. In sum, the motor vehicle register, in the economy of the CIUC, represents a mere rebuttable presumption of the taxpayers of the tax. In the case of a contract for the purchase and sale of a motor vehicle, the law providing no exception for it, the contract has real effect, the purchaser becoming its owner, independently of registration; similarly, the person inscribed in the register will cease to be the owner, despite the fact that they may still appear, for some time or even a great deal of time, in the register as such.

It should further be noted that the transfers made are opposable to the Respondent, despite what is provided in Article 5(1) of the Property Register Code, which states: "the facts subject to registration only produce effects against third parties when registered." The notion of third parties for purposes of registration is enshrined in Article 5(4) of the same article: third parties, for purposes of registration, are those who have acquired from a common author rights incompatible with each other, which, manifestly, is not the case with the AT. Thus, the AT is not a third party for purposes of registration.

As a consequence of the foregoing, the registered owner of an automobile may provide evidence, for purposes of taxation in the IUC context, that they are no longer the effective owner of the vehicle in question, namely by having proceeded with its sale. And the proof of the existence of a contract of purchase and sale may be made by any means, with the invoice being a suitable accounting document for this purpose, as for many others, in particular tax purposes. Invoices document sales, transactions, or provision of services which are presumed true by virtue of the presumption of truthfulness instituted in Article 75 of the LGT. In this sense, it is not accepted that their probative force be questioned solely for the purpose of proving the transfer of vehicle ownership, under pain of falling into the legal absurdity of, starting from the same document, recognizing that the transaction existed for purposes of income tax incidence, but did not exist for purposes of IUC. But, being a presumption, nothing prevents the demonstration of its falsity or inadequacy in light of the legal requirements established in Article 36 of the Value Added Tax Code (CIVA). This too is, in this case, a rebuttable presumption, with the burden of proof falling on the AT.

The Claimant alleges that, at the date when the taxable events occurred, it had already transferred ownership of the vehicles to third party purchasers. As evidence thereof, it submits second copies of invoices, in which are mentioned, among other elements, the vehicle registration, the customer number, identification of the recipient, the amount, a variable description – for example, "Residual values", "Perc Tot Cliente", "Sale non-leased vehicle", "Vehicle sale", "IUC-SINGLE TAX ON CIRCULATION", "EARLY RESCISSION" – as well as the mention "Valid after satisfactory collection."

The invoices presented by the Claimant benefit, as stated, from the presumption of truthfulness contained in Article 75 of the LGT, provided they meet legal requirements and demonstrate correspondence to the factual reality that the Claimant seeks to demonstrate in the case: the transfer of ownership of the vehicles.

However, the AT questions the "very validity of all the alleged second copies of the invoices for alienation of the vehicles, and for several reasons. In fact, with respect to all invoices identified as second copies, it is absolutely relevant what was already decided in the arbitral decision of 30.07.2015, rendered in Case No. 79/2015-T CAAD, by the same Claimant, with respect to the mention, appearing on all invoices, of the mention "valid after satisfactory collection" (…). That is, and in a preliminary and summary manner: if all invoices are only valid after the demonstration of their satisfactory collection, and if this evidence was not made, then all invoices are invalid for the intended purpose." (…) The invoices submitted by the Claimant present in their description different mentions. Thus, in some invoices submitted one can read in the description field the mention "SALE NON-LEASED", "TOTAL INSURANCE LOSS", "RESIDUAL VALUE", "RESCISSION", and "SALE OF ASSET IN CREDIT". That is, in the face of a supposed single type of contract (i.e., contract of purchase and sale of motor vehicle) it would be expected to observe the existence of a uniform description, which is not the case here, given that various invoices submitted to the request for arbitral decision include different descriptions, and thus one is forcibly led to conclude by the existence of various distinct realities."[7]

In fact, the documents submitted by the Claimant as evidence of the transfer of ownership raise some doubts as to the actual occurrence of the transfer that they purport to evidence. First, the descriptions do not permit the conclusion, without more, of the existence of underlying purchases and sales, given the diversity of situations described. Second, the indication of "valid after satisfactory collection" deprives the invoice of the capacity, by itself, to demonstrate the actual conclusion of the sale. However, the Claimant also submitted documents evidencing the accounting records relating to the vehicles in question, from which it appears that no amounts are outstanding regarding the same from the customers of the Claimant, further corroborating the sale at a time prior to the date of the IUC assessment. Now, with these records, the Claimant is able to prove the "satisfactory collection" and, in that measure, the validity of the invoices for purposes of proving alienation at a time prior to the date of the assessment of the tax.

Thus, the transfer of the vehicles at a time prior to the date of the assessment is considered proven, and therefore the error regarding the presuppositions of the assessment by virtue of the Claimant not being the taxpayer of the tax in question.

As to the request for indemnificatory interest, formulated in accordance with Article 43 of the LGT, it is understood that the same is not well-founded because the annulment is not based on error imputable to the services, since the Respondent issued the assessments taking into account the information it had, and is not responsible, nor can be held responsible, for the updating thereof. Thus, the presuppositions set forth in Article 43 of the LGT are not met.

VII. DECISION

In accordance with what is set forth above, it is decided:

(i) To uphold the request for arbitral decision as to the error regarding the presuppositions of subjective incidence of the impugned assessments and, consequently, to declare the illegality of the impugned assessments and their annulment, with the tax and compensatory interest paid to be refunded to the Claimant;

(ii) To reject the request for indemnificatory interest.

Value: In accordance with the provisions of Articles 97-A(1)(a) of the CPPT and Article 3(2) of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is fixed at €1,788.98.

Costs: Pursuant to the provisions of Article 22(4) of the LRTA and in accordance with Table I annexed to the Regulation of Costs in Tax Arbitration Proceedings, the amount of costs is fixed at €306.00, to be paid by the Respondent, in accordance with Articles 12(2) and 22(4), both of the LRTA, and Article 4(4) of the cited Regulation.

Register and notify.

Lisbon, 5 October 2016

The Arbitrator,

Raquel Franco

[1] Cf. F. Rodrigues Pardal, "The Use of Presumptions in Tax Law", in Tax Science and Technique, No. 325-327, page 20 et seq.

[2] Cf. Article 3 of the Regulations on the Tax on Vehicles, annexed to the aforementioned Decree-Law 599/72, of 30 December.

[3] Cf. General Tax Law – Annotated and Commented, 4th ed., 2012, Encontro da Escrita Editora, p. 651.

[4] Cf. Jorge Lopes de Sousa (2011), Code of Tax Procedure and Process Annotated and Commented. Volume I. 6th Edition. Áreas Editora: Lisbon, pp. 589 et seq.

[5] Cf. Ob. Cit., pp. 590 et seq.

[6] Cf. among others, the following Decisions of the Supreme Court of Justice: of 31.05.1966, Proc. No. 060727 (Rapporteur: Counselor Lopes Cardoso); of 05.05.2005 (Rapporteur: Counselor Araújo Barros) and of 14.11.2013, in Proc. No. 74/07.3TCGMR.G1.S1 (Rapporteur: Counselor Serra Baptista).

[7] Cf. the Response of the Respondent, articles 128 et seq.

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) when a vehicle has already been sold?
Under Portuguese law, IUC liability falls on the person registered as the vehicle owner in the motor vehicle register on the first day of the taxation period, regardless of whether the vehicle has been economically sold. Article 3(1) of the CIUC establishes that taxpayers are those in whose names vehicles are registered. The Tax Authority interprets this as a definitive legislative choice rather than a rebuttable presumption, meaning the registered owner remains liable even after sale until registration is officially transferred. Prior to Decree-Law 177/2014, sellers lacked legal standing to initiate registration changes, creating situations where rental companies remained liable for IUC on sold vehicles. To avoid liability, sellers must ensure timely registration transfer and comply with Article 19 CIUC declarative obligations by notifying tax authorities of ownership changes.
Can a vehicle rental company challenge IUC assessments on vehicles no longer in its fleet?
Yes, vehicle rental companies can challenge IUC assessments through CAAD arbitration proceedings, as demonstrated in Process 699/2015-T. To successfully contest assessments on vehicles no longer in their fleet, rental companies must provide robust evidence proving the vehicles were sold before the taxable event (the first day of the taxation period under Article 4(2) CIUC). However, challenges face significant evidentiary hurdles: invoices alone may be insufficient if they contain inconsistent descriptions (e.g., 'residual values,' 'rescission,' 'non-leased vehicle sales'), lack proof of payment, or don't demonstrate the acquirer's unequivocal acceptance. Companies must also prove compliance with Article 19 CIUC notification obligations. The legal dispute centers on whether Article 3(1) CIUC establishes a rebuttable presumption of ownership or a definitive criterion based solely on registration records.
How do legal presumptions of vehicle ownership affect IUC subjective incidence in Portugal?
Legal presumptions of vehicle ownership significantly impact IUC subjective incidence by creating a rebuttable connection between registration and tax liability. Article 3(1) of the CIUC states that owners are 'considered as such' those in whose names vehicles are registered, using language ('considerados como tal') that suggests a legal presumption. Taxpayers arguing this interpretation contend they can rebut the presumption by proving actual ownership transferred to third parties through sales contracts, invoices, and other documentary evidence. However, the Tax Authority maintains this is not a presumption but rather a deliberate legislative policy establishing registration as the sole criterion for determining the IUC taxpayer, ensuring administrative efficiency and legal certainty. This interpretation means that regardless of economic reality, registered owners remain liable until official registration transfer occurs. The practical consequence is that vehicle sellers, particularly rental companies with high fleet turnover, face continued IUC liability even after relinquishing economic ownership, especially during the period before Decree-Law 177/2014 when sellers couldn't initiate registration changes.
What is the CAAD arbitration procedure for contesting multiple IUC tax assessments?
The CAAD arbitration procedure for contesting multiple IUC assessments follows the Legal Regime of Tax Arbitration (LRTA - Decree-Law 10/2011). The process begins with filing a request for constitution of an arbitral tribunal identifying all contested assessments and their total value (in this case, 26 assessments totaling €1,788.98 including interest). After acceptance by the CAAD President, the Tax Authority is automatically notified. The Ethics Council appoints an arbitrator for the sole arbitral tribunal, and parties have the right to challenge the appointment under Articles 6 and 7 of the Code of Ethics. The tribunal is formally constituted after the challenge period expires. Claimants must provide comprehensive evidence supporting their claims, including invoices, contracts, payment receipts, and registration documents. The burden of proof includes demonstrating compliance with declarative obligations under Article 19 CIUC. The AT submits a Response challenging the claimant's arguments and evidence. The procedure culminates in an arbitral decision addressing the legality of the assessments and, if illegal, ordering restitution plus indemnificatory interest under Article 43 LGT.
Are compensatory interest and indemnity interest applicable when IUC liquidations are declared illegal?
Yes, both compensatory interest and indemnificatory interest are applicable when IUC liquidations are declared illegal in Portuguese tax arbitration. Compensatory interest (juros compensatórios) represents the amount already paid by the taxpayer alongside the principal tax debt when making payment under protest or before contesting the assessment. In this case, the claimant paid €81.33 in compensatory interest in addition to the €1,707.65 principal IUC amount. When assessments are declared illegal, this compensatory interest must be restituted along with the principal. Additionally, Article 43 of the General Tax Law (LGT) mandates payment of indemnificatory interest (juros indemnizatórios) on amounts unduly paid and subsequently restituted to taxpayers. Indemnificatory interest compensates taxpayers for the State's unlawful retention of funds from the payment date until restitution, calculated at the legal rate. The arbitral tribunal has authority to order both the restitution of all amounts paid (principal plus compensatory interest) and the payment of indemnificatory interest, ensuring taxpayers are fully compensated for illegal tax assessments and the time value of money during the period of unlawful retention.