Process: 715/2015-T

Date: March 29, 2016

Tax Type: IUC

Source: Original CAAD Decision

Summary

This arbitration case (Process 715/2015-T) concerns the subjective incidence of Portugal's Single Circulation Tax (IUC) and whether legal presumptions of vehicle ownership can be rebutted. The claimant company, registered as the initial holder of five vehicles as the official brand operator in Portugal, challenged IUC assessments totaling €742.34 for 2015, arguing it had sold the vehicles and should not be liable for the tax. The central legal issue was the interpretation of Article 3(1) of the Single Circulation Tax Code (SCTC), which defines taxable persons as vehicle owners, specifically those in whose names the vehicles are registered. The claimant contended that vehicle registration creates only a rebuttable legal presumption under Article 7 of the Property Registration Code, and that sale invoices constituted sufficient proof of ownership transfer, thereby rebutting the presumption. The Tax Authority (AT) raised both procedural and substantive defenses. Procedurally, AT argued the arbitration request was untimely for failing to specifically contest the administrative complaint dismissal. Substantively, AT maintained that the SCTC constitutes special legislation where registration is determinative of ownership for tax purposes, not merely presumptive. Furthermore, AT challenged the probative value of the invoices, arguing they failed to demonstrate essential elements of a sales contract, particularly the buyers' acceptance, and thus were insufficient to prove ownership transfer. The case illustrates the tension between civil law property concepts and tax law definitions, highlighting that tax legislation may establish autonomous ownership criteria. While the decision text is incomplete, the case demonstrates that challenging IUC liability based on post-sale registration issues requires robust documentary evidence beyond simple commercial invoices to overcome the statutory registration-based ownership determination.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, Lda., corporate person number…, domiciled at Av…, Lot…, r/c, Wing…, Building…, in Lisbon, submitted a request for constitution of a singular Arbitral Tribunal, pursuant to the combined provisions of articles 2º and 10º of Decree-Law no. 10/2011, of 20 January (Legal Framework for Arbitration in Tax Matters, hereinafter referred to as LFATM), in which the Tax and Customs Authority (hereinafter AT or Respondent) is the Respondent, with the objective of obtaining a declaration of illegality of the acts of assessment of Single Circulation Tax (IUC) identified in the case files relating to the year 2015, in the amount of €742.34.

The request for constitution of the Arbitral Tribunal was accepted by the Esteemed President of CAAD on 10.12.2015 and automatically notified to AT.

In accordance with the provision of subparagraph c) of paragraph 1 of article 11º of the LFATM, the singular Arbitral Tribunal was constituted on 10.02.2016.

AT responded, defending the extinction of the arbitral instance, in light of the untimeliness of the request for arbitral ruling, or, if not so understood, the lack of merit of the request.

The meeting referred to in article 18º of the LFATM and the holding of final arguments were dispensed with, in view of the nature of the matter contained in the case files.

The Arbitral Tribunal is regularly constituted and is materially competent, in accordance with subparagraph a) of paragraph 1 of article 2º of the LFATM.

The parties enjoy legal personality and capacity, are legitimate and are represented (article 4º, and paragraph 2 of article 10 of the LFATM and article 1º of Ordinance no. 112/2011, of 22 March).

No nullities occur, and the exception invoked by the Respondent will be appreciated as a priority.

II. STATEMENT OF FACTS

Based on the elements contained in the case file, the following facts are considered proven:

A) The Claimant proceeded with the initial registration of vehicles with license plates …-… -…, …-… -…, …-… -…, …-… -… and …-…-… in the name of A…;

B) On 21 July 2015, the Claimant made payment of collection documents nos. 2015 … and no. 2015 … relating to IUC on the vehicles identified above, in the amount of €742.34;

C) On 14 September 2015, the Claimant filed an administrative complaint against the assessment acts sub judice;

D) On 23 November 2015, the Claimant was notified of the decision dismissing the administrative complaint filed;

E) The Claimant did not accept the decision of dismissal by AT of the administrative complaint filed, on the grounds of not being a taxable person for IUC purposes.

Taking into consideration the positions assumed by the parties, in light of article 110º, paragraph 7 of the Code of Tax Procedure (CTP) and the documentary evidence attached to the case files, the facts listed above are considered proven, with relevance to the decision.

III. LEGAL MATTERS

The main issue that arises in the present case is whether the Claimant should be qualified as a taxable person for IUC purposes, in relation to the year 2015, regarding the vehicles identified in documents no. 1 to 10.

A – THE POSITION OF THE PARTIES

In this regard, the Claimant alleges in its request for arbitral ruling the following:

  1. In accordance with the provisions of article 3º, paragraph 1 of the Single Circulation Tax Code (SCTC), "taxable persons of the tax are the owners of the vehicles, being considered as such, natural or legal persons, of public or private law, in whose names the same are registered";

  2. A… appears as the first holder in the Motor Vehicle Property Registry in relation to the vehicles in question, but the truth is that such registration stems from a legal imperative, insofar as A… is the registered operator of the A… brand in Portugal;

  3. It happens that, at the time of sale of the vehicles now in question, the burden of registration of property fell only on the buyer, leaving the now Claimant dependent on the good faith of the buyer, hoping that the buyer would proceed with the registration of the vehicles in question;

  4. The tax now in question cannot in any way be imputed to the now Claimant, since the sale of the same is evidenced by the respective invoices which, as previously stated, are sufficient proof of the transfer of ownership of the property, in addition to the fact that the now Claimant is not the user of the vehicles in question.

  5. Registration, as previously mentioned, has only a function of legal certainty, so, in light of the provisions of article 7º of the Property Registration Code, which is applicable ex vi article 29º of Decree-Law no. 54/75 of 12 February, 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.

  6. The now Claimant does not accept the actions of AT insofar as it imputes to it a tax which, we reiterate, is not its responsibility, since A… is not the owner for the purposes of IUC, nor is it the user of the vehicles in question, having thus rebutted the presumption that rested upon it.

In turn, AT alleges, in summary, the following:

  1. By exception: the Claimant did not formulate/specify in its request for arbitral ruling any request aimed at annulling what was decided in the Administrative Complaint.

  2. Indeed, from a reading of the request for arbitral ruling it appears that the Claimant did not raise a single argument against the reasoning expounded regarding the dismissal of the Administrative Complaint, nor contests the arguments invoked by the Respondent for its dismissal.

  3. Having the Claimant not raised any objection or contestation to the arguments made by the Respondent and which culminated in the dismissal of the said complaint, it is necessary to conclude that there is no basis for establishing the timeliness of the request and, consequently, the possibility of this singular Arbitral Tribunal to appreciate the request formulated regarding the assessment acts.

  4. By impugnation: article 3º of the SCTC does not contain any legal presumption, and it is certain that the strange thesis propounded by the Claimant directs its objective to the wrong target.

  5. Even accepting that, from the perspective of the rules of civil law and 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 the provisions established in the IUC Code (which in the case in question constitutes special law, which, according to the general terms of law, derogates from the general rule), the tax legislator intended and expressly wished that those considered as owners, lessees, acquirers with reservation of property, or holders of the right to purchase option in long-term rental be the persons in whose names the vehicles are registered.

  6. From all that has been set forth above, it is clear that the tax acts in question do not suffer from any defect of violation of law, insofar as in light of the provisions of article 3º, paragraphs 1 and 2, of the SCTC and article 6º of the same code, it was the Claimant, in the capacity of owner, the taxable person for IUC purposes.

  7. However, even if this were not so – which is admitted only by mere academic hypothesis – and accepting that it is admissible to rebut the presumption in light of the jurisprudence already established in this arbitration centre, it would still be necessary to appreciate the documents submitted by the Claimant and their probative value with a view to such rebuttal.

  8. Invoices are not apt to prove the conclusion of a synallagmatic contract such as a sale and purchase, since such documents do not in themselves reveal an essential and unequivocal declaration of will (i.e., acceptance) by the purported acquirers.

  9. In sum, the Claimant failed to prove the purported transfer of the vehicles listed in articles 1º and 2º of the arbitral petition.

B – THE EXCEPTION INVOKED

In the response presented, AT defends itself by exception that, if verified, leads to the dismissal of the instance.

In this regard, AT understands that the Claimant petitions (solely) for the declaration of illegality of the acts of assessment of IUC sub judice, whose period for voluntary payment ended on 30.06.2015. Consequently, AT considers that the arbitral petition presented on 30.11.2015 is untimely.

It happens that, as results from articles 6º to 12º of the arbitral petition, the Claimant intends to impugn the decision dismissing the administrative complaint filed, whose decision was communicated to the Claimant on 23.11.2015, which it understands to be insufficient and out of step with reality.

In this way, contrary to what was argued by AT, it is understood that from the arbitral petition presented it results that the act impugned is the act of dismissal of the administrative complaint notified on 23.11.2015, as a second-degree act, which appreciated the legality of the acts of assessment of IUC (first-degree acts).

Having the arbitral petition as its object the decision dismissing the administrative complaint, it is considered to be timely, in light of the combined provisions provided for in articles 10º, paragraph 1 a) of the LFATM and paragraph 1 of article 102º of the CTP.

C – THE REQUEST

In light of the above, regarding the position of the Parties and the arguments presented, to determine whether the acts of assessment of IUC, underlying the decision dismissing the administrative complaint, are or are not illegal, it will be necessary to verify:

a) Whether the rule of subjective incidence contained in article 3º, paragraph 1 of the IUC Code establishes or does not establish a presumption;

b) Whether the Claimant should be considered a taxable person for IUC purposes, in accordance with the provisions of article 3º, paragraph 1 of the IUC Code regarding the vehicles identified.

Let us see what should be understood.

a) Interpretation of paragraph 1 of article 3º of the IUC Code

Article 3º of the IUC Code establishes the following:

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

2 – Equated to owners are financial lessees, acquirers with reservation of property, as well as other holders of purchase option rights by virtue of the lease contract."

It results from article 11º of the General Tax Law (GTL) that the interpretation of tax law should be carried out taking into account the general principles of interpretation.

The general principles of interpretation are established in article 9º of the Civil Code (CC), in the following terms:

"1. The interpretation should not be confined to the letter of the law, but should reconstruct from the texts the legislative thought, taking above all into account the unity of the legal system, the circumstances in which the law was elaborated and the specific conditions of the time in which it is applied.

  1. However, the interpreter cannot consider legislative thought that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.

  2. In determining the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his thought in adequate terms."

It is thus established that there are three elements of interpretation of the Law, namely: the literal element, the historical and rational element, and the systematic element.

Taking into account the literal element of the rule here in question, it will be important, first of all, to reconstruct the legislative thought through the words of the law. It is stated in paragraph 1 of article 3º of the IUC Code that "taxable persons of the tax are the owners of the vehicles, being considered as such natural or legal persons of public or private law, in whose names the same are registered."

According to AT, the expression "being considered" does not constitute a legal presumption, the legislator's intention being to expressly and intentionally establish that those considered as such (as owners) are the persons in whose names the same (vehicles) are registered, since this is the interpretation that preserves the unity of the legal-tax system.

It happens that, from a literal point of view, it is verified that the expression "being considered" or "considers" is often used with a meaning equivalent to the expression "presumed to be" or "is presumed".

Thus, by way of example, see article 191º, paragraph 6, of the CTP, among other articles noted in the arbitral decisions handed down in processes nos. 14/2013-T, 27/2013-T, 73/2013-T or 170/2013-T.

Thus, it can be said that the expression "being considered" has "a minimum of verbal correspondence, even if imperfectly expressed", and such word should be recognized as having a current and normal correspondence to that presumptive meaning (See arbitral decision handed down in process no. 286/2013-T).

Nevertheless, and as emphasized by AT, the word "considering" is also used outside presumptive contexts – See article 12º of its response.

Therefore, it is important to submit to the control of the other elements of interpretation of a logical nature paragraph 1 of article 3º of the IUC Code.

Thus, taking into account the historical element of interpretation, it is important to consider that the bill no. 118/X, of 7.03.2007, underlying Law no. 22-A/2007, of 29.06 enshrines "as a structuring and unifying element (…) the principle of equivalence, thereby making it clear that the tax, as a whole, is subordinated to the idea that the Claimants should be burdened to the extent of the cost they cause to the environment and the road network, being this the reason for the existence of this tax figure."

In this context, it seems clear to us that the legislator intended to tax the real and effective taxable person causing road and environmental damage and not any holder of motor vehicle registration.

As has been emphasized several times in various arbitral decisions, the principle of equivalence aims to internalize the negative environmental externalities resulting from the use of motor vehicles, and was erected as a fundamental principle of taxation of motor vehicles in circulation.

As Sérgio Vasques argues, in Os Impostos Especiais de Consumo, Almedina, Coimbra, 2001, p. 122, "Thus, a tax on automobiles based on a rule of equivalence will be fair only if those who cause the same road wear and the same environmental cost pay the same tax; and those who cause different road wear and environmental cost, pay different tax as well", adding that the implementation of said principle "(…) dictates other requirements still with respect to the subjective incidence of the tax (…)".

Taking into account the grounds underlying the creation of the current IUC Code, in particular, the eruption of the principle of equivalence as a structuring and unifying principle of taxation of vehicles in circulation, it seems to us that paragraph 1 of article 3º of the IUC Code cannot be interpreted as a closed command, but rather as a rebuttable presumption, which is based on the assumption that in reality the agent responsible for environmental damage is, as a rule, the registered owner of the automobile. An assumption that cannot fail to be disregarded, if in reality it is another agent who is responsible, that is, the taxable person for IUC purposes.

From a systematic point of view, it is important to emphasize again that as early as article 1º of the IUC Code it is established that "The single circulation tax obeys the principle of equivalence, seeking to burden the Claimants to the extent of the environmental and road cost that these cause, in implementation of a general rule of tax equality."

As A. Brigas Afonso and Manuel T. Fernandes argue, in Imposto sobre Veículos e Imposto Único de Circulação, Códigos Anotados, pp. pag. 183, "the legislator seeks to legitimize the taxation of motor vehicles based on the negative externalities caused by them (on public health, on the environment, on road safety, on congestion of communication routes and on urban landscape) demystifying the idea that vehicle taxation is very high in Portugal."

According to Batista Machado, in Introdução ao Direito e ao Discurso Legitimador, p. 183, the systematic element "comprises the consideration of other provisions that form the normative complex of the institute in which the rule to be interpreted is integrated, that is, that regulate the same matter (context of the law), as well as the consideration of legal provisions that regulate parallel normative problems or related institutes (parallel places). It also comprises the systematic place that belongs to the rule to be interpreted in the overall legal order, as well as its consonance with the spirit or intrinsic unity of the entire legal order."

This is, moreover, the most just solution if we consider that the unity of the tax system cannot fail to be found in the principle of material truth and in the principle of proportionality (See Saldanha Sanches, in Princípios do Contencioso Tributário, pp. pag. 21, and Alberto Xavier, in Conceito e Natureza do Acto Tributário, pp. 147 et seq.).

For the reasons stated, AT's arguments do not hold, to the effect that the interpretation proposed by the Claimant is "an interpretation that fundamentally devalues the registered reality to the detriment of an 'informal reality' and not susceptible to minimal control by AT, (…) offensive of the basic principle of trust and legal certainty that should inform any legal relationship, including here the tax relationship."

In fact, the interpretation here defended is not only the one that best fits with the principle of material truth, but also the only one that serves the purposes of tax justice.

Equally, contrary to what AT argues, it does not seem defensible, in light of the constitutional principles in force, the predominance of the principle of efficiency of the tax system over the principle of material justice. Although one cannot fail to understand the practical difficulties that the rebuttal of the presumption established in article 3º, paragraph 1 of the IUC Code may cause in terms of immediate collection of revenues by AT, the interpretation of the Law cannot be adjusted to those needs, but rather the procedures associated with the collection of this tax should be altered efficiently and in accordance with the Law.

Considering that tax law exists to regulate conflicts of interest between the State's claims to pursue the public interest of obtaining revenues and the Claimants' claims to maintain the integrity of their assets, it should not, as a rule, serve as a criterion for interpretation of the tax rule, the safeguarding of the State's patrimonial or financial interest.

In sum: based on article 9º of the CC, it is considered that all elements of interpretation (literal, historical and systematic) point in the direction that article 3º, paragraph 1, of the IUC Code establishes a rebuttable presumption. This means that the taxable persons for IUC purposes being, in principle, the owners of the vehicles, being considered as such the persons in whose names the same are registered, may, in fact, be others, if it is effectively others who cause the environmental damage as users of the vehicles in circulation.

b) Should the Claimant be considered a taxable person for IUC purposes, in accordance with the provisions of article 3º, paragraph 1 of the IUC Code?

Taking into account the above in a), it is understood that the provision in question establishes a presumption of ownership in favor of the persons in whose names the vehicles are registered.

In accordance with article 73º of the GTL, "Presumptions enshrined in rules of tax incidence always admit proof to the contrary."

As argued by Diogo Leite Campos, Benjamim Silva Rodrigues and Jorge Lopes de Sousa, in Lei Geral Tributária, Anotada e Comentada, pp. pag. 652, 4th Edition, "what is intended 'always' is to tax real income and not non-existent income and it is for this reason, of wanting always to tax real values, that article 73º of the GTL allows 'always' to rebut presumptions.

This is the interpretation that is in harmony, on the one hand, with the principle enunciated in article 11º, paragraph 3, of the GTL that, in cases of doubt about the interpretation of tax rules, "the economic substance of the tax facts" should be taken into account and, on the other hand, with the principle of equality in the distribution of public charges, which requires that the taxation of the generality of taxpayers, whenever possible, be based on the reality underlying the tax facts and is not compatible with the existence of special cases of taxation based on fictitious values in situations in which the real value of the tax facts is known or can be ascertained.

In the case under analysis, the Claimant remained, in the registry, as the owner of the vehicles in question, and AT therefore intended to impute to it the responsibility for payment of the IUC relating to the year 2015, in accordance with article 3º, paragraph 1, of the IUC Code.

However, the Claimant alleges that the vehicles in question had already been transferred at the date of the occurrence of the tax event.

To prove such transfer of the right of ownership, the Claimant submitted only documents no. 1 to 10, which are invoices for the sale of the vehicles and customs declarations of vehicles, and subsequently, under the auspices of the principle of contradictory proceedings, requested that documents no. 1 to 5 be attached to the case files, which constitute, according to the Claimant, good collection documents and the respective assessment notes.

However, the Tribunal understands that such documents are not sufficient to demonstrate the transfer of the right of ownership over the vehicles, since no sales declarations or other documents demonstrating the transfer of ownership were submitted, which would allow the identification of the new owners of the vehicles in question, at the date of the occurrence of the tax event. Nor were witnesses presented who could assist in the production of such proof.

Consequently, based on the documents submitted, the Tribunal understands that, by virtue of the presumption established in article 3º, paragraph 1 of the IUC Code, the responsibility for payment of the assessment acts sub judice is imputable to the Claimant.

IV. DECISION

For these reasons, this Arbitral Tribunal decides:

A) To hold the exception of untimeliness of the arbitral request as entirely lacking in merit;

B) To hold the request for annulment of the decision dismissing the administrative complaint and consequently of the IUC assessment acts identified as entirely lacking in merit;

C) To condemn the Claimant to pay the costs of this proceeding, as the unsuccessful party.

V. VALUE OF THE CASE

In accordance with the provisions of article 306º, paragraph 2 of the Civil Procedure Code, 97º-A, paragraph 1 a) of the CTP and article 3º, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the request is fixed at €742.34.

VI. COSTS

In accordance with the provisions of articles 12º, paragraph 2 and 22º, paragraph 4, both of the LFATM, and article 4º, paragraph 4 of the Regulation of Costs in Tax Arbitration Proceedings, the value of the arbitration fee is set at €306, in accordance with Table I of the aforementioned Regulation, to be borne by the Respondent.

Let notification be made.

Lisbon, 29 March 2016.

The Arbitrator

Magda Feliciano

(The text of this decision was prepared by computer, in accordance with article 131º, paragraph 5, of the Civil Procedure Code, applicable by referral of article 29º, paragraph 1, subparagraph e) of Decree-Law no. 10/2011, of 20 January (LFATM) and its drafting is governed by the spelling prior to the 1990 Orthographic Agreement.)

Frequently Asked Questions

Automatically Created

Who is the taxable person (sujeito passivo) for IUC vehicle circulation tax in Portugal?
Under Article 3(1) of the Single Circulation Tax Code (SCTC), the taxable person (sujeito passivo) for IUC is the vehicle owner, defined as the natural or legal person in whose name the vehicle is registered. The tax legislation adopts a registration-based criterion for determining tax liability, meaning that the person appearing in the vehicle registry as the owner is presumed to be the taxable person, regardless of the actual economic or civil law ownership of the vehicle. This registration-based approach provides legal certainty and simplifies tax administration.
Can legal presumptions of vehicle ownership be challenged in IUC tax disputes?
Yes, legal presumptions of vehicle ownership can be challenged in IUC disputes, though the burden of proof is substantial. The claimant argued that registration creates a rebuttable presumption under Article 7 of the Property Registration Code (applicable via Article 29 of Decree-Law 54/75). However, the Tax Authority maintained that under the SCTC as special tax legislation, registration is more determinative than presumptive. Even accepting the possibility of rebuttal, taxpayers must provide convincing evidence of ownership transfer. Simple commercial invoices are generally insufficient, as they do not demonstrate essential contract elements like buyer acceptance. Comprehensive documentation proving the complete transfer of ownership rights and obligations is required to successfully rebut the registration-based presumption.
What is the procedure for filing an arbitration claim against IUC tax assessments at CAAD?
The procedure for filing an arbitration claim against IUC assessments at CAAD (Centro de Arbitragem Administrativa) involves several steps under the Legal Framework for Arbitration in Tax Matters (Decree-Law 10/2011). First, the taxpayer must submit a request for constitution of an arbitral tribunal pursuant to Articles 2 and 10 of the RJAT, identifying the contested tax acts and stating the grounds for challenge. The President of CAAD reviews and accepts the request, then automatically notifies the Tax Authority. Under Article 11(1)(c) of the RJAT, the arbitral tribunal is constituted, and the Tax Authority submits its response. The tribunal may hold hearings under Article 18 or dispense with them depending on the case nature. Parties must have legal standing, proper representation, and meet formal requirements under Article 4 and Ordinance 112/2011.
What are the deadlines for submitting a tax arbitration request after a denied gracious complaint (reclamação graciosa)?
After a denied gracious complaint (reclamação graciosa), taxpayers have specific deadlines to submit a tax arbitration request to CAAD. While the exact statutory deadline is not explicitly stated in this case excerpt, the timeline shows the administrative complaint was filed on September 14, 2015, dismissed on November 23, 2015, and the arbitration request was accepted on December 10, 2015—approximately 17 days later. Under the RJAT (Legal Framework for Arbitration in Tax Matters), taxpayers generally must file within the timeframes established for judicial appeals. The Tax Authority in this case raised timeliness as a procedural exception, arguing the claimant failed to properly challenge the administrative complaint dismissal, suggesting strict compliance with deadlines is essential for maintaining arbitration rights.
Can a company registered as the initial vehicle owner dispute IUC liability after selling the vehicles?
A company registered as the initial vehicle owner can attempt to dispute IUC liability after selling vehicles, but faces significant evidentiary challenges. As illustrated in this case, the registered brand operator argued it was only the initial registered holder due to legal requirements and had sold the vehicles, thus rebutting the ownership presumption. However, the Tax Authority strongly contested this position on two grounds: (1) under the SCTC as special tax legislation, registration is determinative of tax liability regardless of actual ownership, and (2) even if rebuttal were possible, the evidence (sale invoices) was insufficient to prove ownership transfer, as invoices alone do not demonstrate buyer acceptance or conclusive transfer of property rights. Success in such disputes requires comprehensive documentation of the sale transaction and, critically, evidence that buyers failed to register despite contractual obligations to do so.