Process: 742/2016-T

Date: June 21, 2017

Tax Type: IUC

Source: Original CAAD Decision

Summary

This CAAD arbitration case (Process 742/2016-T) addresses the critical question of IUC (Imposto Único de Circulação) tax liability on vehicles subject to financial leasing contracts in Portugal. A credit institution challenged 162 IUC assessments totaling €10,853.21 plus interest, arguing that under Article 3 of the CIUC (Código do IUC), lessees should be considered taxpayers rather than lessors. The claimant contended that despite being the legal owner, it never possessed the vehicles, which remained in the lessee's exclusive possession throughout the leasing period. The company argued that the legislator privileged economic ownership over legal ownership, equating lessees to owners for IUC purposes. The Portuguese Tax Authority countered that IUC liability falls on registered owners, emphasizing that Article 3 does not establish a mere presumption but rather a legal determination. The AT maintained that without proper registration of financial leasing contracts, the tax authority cannot deviate from registry information when assessing IUC. The Respondent further argued that failure to comply with registration obligations under Article 19 of CIUC results in the registered owner remaining liable. The case also involved procedural complexities regarding the claimant's standing to challenge assessments originally issued to affiliated companies (B… and C…) whose assets and liabilities had been absorbed by the claimant through corporate restructuring. The arbitral tribunal had to address both the substantive tax law question of who qualifies as the IUC taxpayer under financial leasing arrangements and the procedural question of legitimacy when challenging assessments after corporate succession. This decision carries significant implications for financial institutions engaged in vehicle leasing operations and clarifies the application of legal versus economic ownership criteria in Portuguese IUC taxation.

Full Decision

ARBITRAL DECISION

I. REPORT:

A…, S.A., a company with registered office at Rua …, no. …, …-… Lisbon, holder of the single registration and identification number for a legal entity…, hereinafter simply referred to as the Claimant, filed a petition for the constitution of an arbitral tribunal in tax matters and a petition for an arbitral pronouncement, pursuant to Articles 2, paragraph 1, section a) and 10, paragraph 1, section a), both of Decree-Law no. 10/2011, of 20 January (Legal Framework for Tax Arbitration, hereinafter abbreviated as RJAT), requesting the revocation of the decision refusing the hierarchical appeal filed and the consequent declaration of illegality and annulment of 162 (one hundred and sixty-two) tax acts assessing the Unique Tax on Circulation (IUC) referring to the fiscal years 2010, 2011 and 2012, in the total amount of € 10,853.21 and respective compensatory interest, in the amount of € 854.89, as well as the condemnation of the Respondent to reimburse an equal amount, further requesting the payment of corresponding indemnity interest.

To substantiate its petition, it alleges, in summary:

a) The Claimant is a credit institution, and within the scope of its activity, financing to the automobile sector assumes special relevance;

b) At the date of the tax assessment, in relation to each one of the vehicles, there were in force financial leasing contracts for said vehicles;

c) Despite being the owner of said vehicles, the Claimant never enjoyed the same, these being, throughout the entire period of validity of the contract, in the exclusive possession of the lessee;

d) The Claimant could never be regarded as a taxpayer of the IUC, inasmuch as the vehicles in question were subject to financial leasing contracts, which implies that the lessee is the taxpayer and, consequently, the responsible party for payment of the tax;

e) The AT (Tax Authority) knew – or should have known, since financial leasing is subject to registration – that the motor vehicles in question were subject to financial leasing contracts, knowing the identity of the lessees;

f) The AT considers that the Claimant, as the lessor entity of the vehicles, is responsible for the payment of the IUC;

g) Pursuant to Article 3 of the CIUC (Code of the Unique Tax on Circulation), the lessee is equated to the owner of the vehicle;

h) The legislator chose to privilege the criterion of economic ownership, in detriment of legal ownership;

i) In the case of the 162 assessments in dispute, the Claimant is not a taxpayer of the IUC.

The Claimant attached 4 annexes (A, B, C and D) and 184 documents, and listed two witnesses.

In the petition for arbitral pronouncement, the Claimant chose not to appoint an arbitrator, whereby, pursuant to Article 6, paragraph 2, section a) of the RJAT, the undersigned was appointed by the Deontological Council of the Administrative Arbitration Centre.

Although the Respondent requested the "exemption" by the Deontological Council of the CAAD of the arbitrator appointed in these proceedings, such request was judged to be without merit, with the appointment of the undersigned being maintained by the President of the Deontological Council of the CAAD.

The arbitral tribunal was constituted on 15 March 2017.

Notified pursuant to the terms and for the purposes of Article 17 of the RJAT, the Respondent presented a response, defending itself by way of exceptions and by contestation.

By way of exception, it invoked that the Claimant is not a legitimate party to challenge the assessments issued in the name of the companies "B…, S.A. – Branch in Portugal" (hereinafter, abbreviated as B…), attached with the petition for arbitral pronouncement under numbers 1 to 34, and "C…, S.A." (hereinafter, abbreviated as C…), attached with the petition for arbitral pronouncement under numbers 80 to 92.

By way of contestation, it alleged in summary the following:

a) The legislator expressly and intentionally established that the taxpayers of the IUC are the owners, considering as such the persons in whose names the vehicles are registered;

b) Article 3 of the CIUC does not establish any presumption of ownership – the legislator does not say that they are presumed to be owners, but that they are considered to be owners;

c) From the documents attached by the Claimant, it does not result that the vehicles in question were subject to financial leasing at the date of the occurrence of the taxable fact;

d) The failure to register the financial leasing contracts has as a consequence that the obligation to pay the IUC falls upon the registered owner, and the AT cannot assess the tax based on elements not contained in the register;

e) The IUC is due by the persons appearing in the register as owners of the vehicles;

f) The failure to comply with the obligation provided for in Article 19 of the CIUC causes the responsibility for payment of the IUC and arbitral costs to fall upon the Claimant;

g) The interpretation of Article 3 of the CIUC advocated by the Claimant violates the constitutional principles of confidence, legal certainty, efficiency of the tax system and proportionality.

The Respondent attached a copy of the administrative file, having listed no witnesses.

Duly notified to do so, the Claimant responded to the exception invoked by the Respondent, having attached 4 documents, on which the AT commented.

In summary, the Claimant invoked, regarding the assessments issued in the name of the company B…, a branch in Portugal of the company formerly called "D…, S.A.", that the set of assets and liabilities held by this company, currently already extinct, was incorporated in the Claimant, as the performance in kind of an increase in capital, with the Claimant assuming the position previously assumed by this company in the financial leasing contracts celebrated by it.

With respect to C…, the Claimant alleged that, on 31/12/2008, in its capacity as sole shareholder, it decided to proceed with the dissolution and immediate liquidation of C…, with the Claimant, in its capacity as the dominant company of C… and responsible for its dissolution and liquidation, assuming the position previously assumed by this company in the financial leasing contracts celebrated by it.

The Claimant further invoked that, in the course of the administrative proceedings, the Respondent did not raise any lack of legitimacy on the part of the Claimant regarding the assessments remitted to C… and B…, whereby the conduct of the AT, in invoking the lack of legitimacy of the Claimant at this stage, constitutes an abuse of right.

It further invoked that the position defended by the AT contradicts its previous conduct, since, whenever the Claimant needs a certificate of non-existence of debts, the same is denied to it when there are debts of the aforementioned C… and B….

Given the position assumed by the parties and there being no need for additional production of evidence, the holding of the meeting referred to in Article 18 of the RJAT was dispensed with, as well as the presentation of arguments, written or oral.

II. EXAMINATION OF THE EXCEPTIONS INVOKED:

The Respondent raised exceptions which, as they may prevent the examination of the merits of part of the petition, must be known beforehand.

The AT invokes that the Claimant does not have the legitimacy to challenge the assessments issued in the name of the companies B… and C….

In turn, the Claimant defends its lack of legitimacy to challenge said assessments, invoking that the position of lessor in the financial leasing contracts relating to the vehicles whose IUC is at issue here has come to be assumed by it.

It is necessary to examine:

Regarding the assessments issued in the name of B…:

As for the assessments issued in the name of B…, attached with the petition for arbitral pronouncement under numbers 1 to 34, the Claimant alleges that the set of assets and liabilities held by this company, currently already extinct, was incorporated in the Claimant, as the performance in kind of an increase in capital, with the Claimant assuming the position previously assumed by this company in the financial leasing contracts celebrated by it.

To prove the alleged, it attached a copy of a certificate issued on 30/09/2011, of the content of the registration and all current and non-current entries of the company B… (document 2 attached with the response to the exceptions) and a copy of a deed of increase of capital and partial amendment of the contract of the company E…, S.A.", the former name of the Claimant (document 3 attached with the response to the exceptions).

From the document attached under number 2 with the response to the exceptions, only results, with interest for the proceedings, that the registration of the said company is cancelled.

In turn, from the document attached under number 3 with the response to the exceptions, it results, with interest for the proceedings, that on 02/01/2007 the Claimant, then called "E…, S.A.", decided to increase its capital, part of which increase being subscribed in kind by the company "B…, S.A., through the transfer to the Claimant of the assets relating to the business unit of B….

It does not result, however, from this document, that the financial leasing contracts relating to the motor vehicles whose assessments are at issue in the present proceedings formed part of the business unit of B… and, consequently, that such contracts were transferred, following said capital subscription, to the Claimant.

It should be noted that, although it is not questioned that the said company celebrated the contracts attached with the petition for arbitral pronouncement under numbers 1 to 34, the truth is that those contracts could, for the most diverse reasons, no longer be in force at the date of said transmission.

The burden of proof of such fact fell upon the Claimant, as it is a fact alleged by it and constitutive of its right, it being certain that the Claimant had the opportunity to attach sufficient proof of such fact.

Having failed to meet this burden, this tribunal cannot judge it proven that the financial leasing contracts celebrated by B… and at issue in the present proceedings were transmitted to the Claimant.

Thus, the exception of lack of active legitimacy is upheld in relation to the acts of assessment of IUC attached with the petition for arbitral pronouncement under numbers 1 to 34.

Regarding the assessments issued in the name of C…:

Regarding the assessments remitted to C…, attached with the petition for arbitral pronouncement under numbers 80 to 92, the Claimant alleges that, on 31/12/2008, in its capacity as sole shareholder, it decided to proceed with the dissolution and immediate liquidation of C…, with the Claimant, in its capacity as the dominant company of C… and responsible for its dissolution and liquidation, assuming the position previously assumed by this company in the financial leasing contracts celebrated by it.

Although alleged by the Claimant, the truth is that, despite having had the opportunity to do so, no documentary evidence was attached of the alleged transmission to the Claimant of the contractual position assumed by C… in the said financial leasing contracts.

In fact, the Claimant attached only a printout from the Justice Portal, from which it results that, by Order … of 09/01/2009, the dissolution and closing of the liquidation of C… was registered, with the Claimant as the depository.

Nothing more results from the documents attached by the Claimant.

Once again, as it is a fact constitutive of the right alleged by the Claimant, the burden of proof of such fact would fall upon it, a burden which it failed to meet.

Thus, this tribunal cannot deem it proven that the financial leasing contracts celebrated by C… and at issue in the present proceedings were transmitted to the Claimant, as alleged.

Hence the lack of legitimacy of the Claimant to challenge the acts of assessment of IUC issued in the name of C… and attached with the petition for arbitral pronouncement under numbers 80 to 92.

Thus, the exception of lack of active legitimacy is upheld in relation to the acts of assessment of IUC attached with the petition for arbitral pronouncement under numbers 80 to 92.

Neither should it be said, as the Claimant does, that, as the Respondent, in the course of the administrative proceedings, did not raise any lack of legitimacy on the part of the Claimant regarding the assessments remitted to C… and B…, it cannot do so at this stage, constituting such conduct an abuse of right.

This is because active lack of legitimacy is a dilatory exception of ex officio knowledge (Articles 577(e) and 578, both of the Code of Civil Procedure), whereby, even if the AT had not invoked such exception, this tribunal would always be bound to examine it.

And, following the same line of reasoning, there is no contradictory conduct on the part of the AT in raising such exception, all the more so because, despite what the Claimant alleges, no evidence was attached demonstrating that the AT refuses to issue negative certificates of debt requested by the Claimant when there are debts of the companies B… and C….

Furthermore, contrary to what the Claimant alleges, it is not true that the assessments in question have been sent to its registered office, which results without any margin for doubt from the analysis of said assessments.

Given this, this Tribunal will only examine the petition formulated in relation to the assessments attached with the petition for arbitral pronouncement under numbers 35 to 79.

III. SANATION:

The Arbitral Tribunal was regularly constituted and is materially competent.

There are no nullities that invalidate the proceedings.

The parties have legal personality and capacity and are legitimate, with no defects in representation.

There are no other nullities, exceptions or preliminary questions that prevent the examination of the merits and which must be examined ex officio.

IV. QUESTIONS TO BE DECIDED:

Having regard to the positions assumed by the Parties, set out in the arguments advanced, it is necessary to:

a. Determine whether the norm of subjective incidence provided for in Article 3, paragraph 1 of the CIUC provides for a rebuttable presumption or, instead, a legal fiction;

b. Ascertain who is the taxpayer of the IUC if, on the date of the occurrence of the taxable fact, a financial leasing contract applies which has as its object a motor vehicle;

c. Ascertain what legal value the motor vehicle register has in the matter of the IUC, especially for purposes of the subjective incidence of the tax;

d. Determine whether the failure to update the motor vehicle register allows considering, as IUC taxpayers, the persons in whose names the vehicles are registered;

e. Ascertain what the consequences are of non-compliance with the provisions of Article 19 of the CIUC.

V. FINDINGS OF FACT:

a. Proven facts:

With relevance for the decision to be rendered in the present proceedings, the following facts were deemed proven:

  1. The Claimant is a credit institution;

  2. Within the scope of its activity, financing to the automobile sector assumes special relevance;

  3. Said financing is, most often, formalized through the celebration of leasing contracts;

  4. During the period of execution of those contracts, the Claimant maintains the legal position of lessor;

  5. The Claimant was notified of the acts of assessment of IUC attached with the petition for arbitral pronouncement under numbers 35 to 79, relating to the years 2010, 2011 and 2012, in the global amount of € 10,853.21 and respective compensatory interest, in the amount of € 854.89;

  6. The Claimant filed a request for official revision of the assessments referred to in 5) above, which was subject to an order refusing it;

  7. The Claimant filed a hierarchical appeal of the order refusing the request for official revision;

  8. By letter dated 20/09/2016, the Claimant was notified of the order refusing the hierarchical appeal filed;

  9. The assessments in dispute relate to vehicles in relation to which the Claimant had celebrated financial leasing contracts;

  10. The Claimant paid the tax assessed by the Respondent and reflected in the assessments now being challenged, as well as respective compensatory interest.

b. Facts not proven:

  1. The assessments attached with the petition for arbitral pronouncement under numbers 35 to 79 relate to vehicles that were subject to financial leasing at the date of the occurrence of the taxable fact;

  2. The financial leasing agreements and the identification of the lessees were registered in the Motor Vehicle Register.

c. Justification of the findings of fact:

The conviction regarding the facts deemed proven was formed based on the documentary evidence attached by the parties, indicated in relation to each of the points and whose correspondence with reality was not questioned.

With respect to the findings of fact not proven, they were based on the total absence of evidence in that sense.

VI. THE LAW:

Having established the findings of fact, it now remains, by reference to those, to determine the applicable law.

The first of the issues to be analyzed concerns the interpretation of the norm contained in paragraph 1 of Article 3 of the CIUC and, more specifically, in knowing whether it contains or does not contain a legal presumption.

Paragraph 1 of Article 3 of the CIUC in force at the date of the facts provided:

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

From the simple reading of paragraph one of the said provision, it is evident, without great difficulty, that the key lies in the expression "considering as", used by the legislator.

Having regard to the terminology used, should it be understood that the legislator intended to establish an implicit presumption or a true legal fiction?

For the assessment of this issue, it is necessary, first of all, to bring here some legal concepts and legal definitions.

Thus, pursuant to Article 349 of the Civil Code, presumptions are the inferences which the law or the judge draw from a known fact to establish an unknown fact.

Regarding legal presumptions, paragraph 2 of Article 350 of the same Code prescribes that these can be rebutted by contrary proof, except in cases where the law prohibits it.

As for, specifically, presumptions of tax incidence, Article 73 of the General Tax Law establishes that these always admit contrary proof.

Beyond presumptions, the legislator also resorts to the so-called "legal fictions", which translate into "a legal process that considers a situation or a fact as distinct from reality in order to attribute legal consequences to it"[1].

According to the thesis advanced by the Respondent, the fact that Article 3, paragraph 1 of the CIUC establishes that persons are "considered" as owners, rather than "presumed" as owners, reveals that the legislator, within its freedom of legislative formation, expressly intended to determine that the persons in whose names the vehicles are registered are considered, without admissibility of any contrary proof, as owners of the same.

Also according to the Respondent, if the legislator intended to create a presumption and not a legal fiction, it would have written, as it does in various other statutes, that they are presumed to be owners and not that they are considered to be owners.

From the outset, we can state that this tribunal does not share the understanding defended by the Respondent.

This is because, by analyzing the historical and teleological elements, in addition, naturally, to the literal element of legislative interpretation, we will inevitably reach the conclusion that the legislator did not intend to establish any legal fiction but only and solely a presumption, rebuttable by contrary proof pursuant to Article 73 of the General Tax Law.

Let us see:

As for the historical element, it is important to note that the current IUC had its genesis in the creation, through Decree-Law 599/72, of 30 December, of the tax on vehicles.

This tax on vehicles, which remained in force until the creation of the current IUC, expressly established that the tax is due by the owners of the vehicles, it being presumed that such are the persons in whose name the same are registered or matriculated – see Article 3 of the Regulation of the Tax on Vehicles, attached to the said Decree-Law 599/72, of 30 December.

When the new CIUC was approved, the legislator substituted the expression "presumed as such" with the expression "considered as such", but nor can it be defended that such alteration means a true substitution of a presumption (rebuttable) by a legal fiction (non-rebuttable).

This is because, as JORGE LOPES DE SOUSA teaches[2], in the matter of tax incidence, presumptions can be revealed by the expression "it is presumed" or by similar expression. By way of example, the author advances that in Article 40, paragraph 1 of the CIRS (Personal Income Tax Code) the expression "it is presumed" is used, whereas in Article 46, paragraph 2 of the same Code the expression "is considered" is used, there being no difference between one and the other expression, both ultimately meaning the same thing: a legal presumption.

The same occurred with the CIUC in which, despite the expression "it is presumed" being altered, in relation to the original wording, by the expression "is considered", no substantive change occurred, the different expressions having exactly the same meaning.

We arrive at exactly the same conclusion by analyzing the teleological element.

In fact, it is important to keep in mind the explanatory statement of Bill no. 118/X of 07/03/2007, underlying Law no. 22-A/2007, of 29 June.

Upon analysis of this explanatory statement, it appears that what was intended was to undertake a "comprehensive and coherent reform of taxes linked to the acquisition and ownership of motor vehicles" which results from the "imperative need to bring clarity and coherence to this area of the tax system and the need, even more imperative, to subordinate it to the principles and concerns of an environmental and energy nature that today mark the discussion of automobile taxation".

Continuing, the said explanatory statement explains that "the two new taxes that are now being created, the tax on vehicles and the unique tax on circulation, constitute much more than the technical extension of the figures created in the 70s and 80s that preceded them, primarily focused on revenue raising, indifferent to the social cost resulting from automobile circulation. They constitute something different, figures already of the century in which we live, with which it is certainly intended to raise public revenue, but to raise it in the measure of the cost that each individual causes to the community."

Which led, moreover, to the establishment of the equivalence principle, inscribed in Article 1 of the CIUC, "thus making it clear that the tax, as a whole, is subordinate to the idea that taxpayers should be burdened in the measure of the cost they cause to the environment and the road network, this being the reason for existence of this tax figure. It is this principle that dictates the burdening of vehicles depending on their respective ownership and up until the moment of scrapping".

The IUC, as a true environmental tax, thus has, as its taxpayer, the polluter, being nothing more, after all, than the establishment of the polluter-pays principle.

Thus it is verified that the structural principle of the reform of automobile taxation is precisely the incidence of taxation on the true user of the vehicle, this principle not being compatible with a "blind" reading of the letter of the law, which could lead, after all, to taxing the person who is not the owner and, in this way, the person who is not the subject causing the "environmental and road cost" caused by the vehicle, to which Article 1 of the CIUC alludes.

From all that has been set out, it results that the literal, historical and teleological elements of interpretation of the law necessarily lead to the conclusion that the expression "considering as" has exactly the same meaning as the expression "presuming as", and therefore, it should be understood that Article 3, paragraph 1 of the CIUC establishes a true presumption of ownership and not any fiction, and therefore such presumption is rebuttable.

Pursuant to paragraph 1 of Article 3 of the CIUC, the taxpayer of the tax is, in principle, the owner, since the law presumes that it is he who uses the asset. But if it is proven that, after all, it is not the owner who makes use of the vehicle, but a third party, then it will be this party, inevitably, who is the taxpayer of the tax.

This is, in our opinion, the interpretation that is in harmony, on the one hand, with the principle stated in Article 11, paragraph 3 of the General Tax Law, according to which, in cases of doubt about the interpretation of tax norms "attention should be paid to the economic substance of the tax facts" and, on the other hand, with the principle of equality in the distribution of public burdens, which requires that the taxation of the generality of taxpayers, whenever possible, be based on the economic reality underlying the tax facts[3].

Indeed, any other interpretation would violate, from the outset, the principle of equivalence established in Article 1 of the CIUC, according to which the IUC seeks to "burden taxpayers in the measure of the environmental and road cost that they cause, in implementation of a general rule of tax equality".

Having established the legal nature of the norm contained in paragraph 1 of Article 3 of the CIUC, it now remains to clarify the issue of the subjective incidence of the tax during the period of validity of a financial leasing contract.

Before, however, and to better elucidate the issue which now concerns us, it should be underlined that, during the validity of a financial leasing contract, despite the lessor maintaining in its legal sphere the ownership of the leased asset, it is only to the lessee that the right to enjoy, exclusively, the leased asset appertains; which results from the joint reading of Article 1, section b) of paragraph 1 of Article 9 and section a) of paragraph 2 of Article 10, all of Decree-Law no. 149/95, of 24 June.

Now, since it is to the lessee that the potential for use of the vehicle appertains, and having regard to the informing principle of the IUC – established in Article 1 of its Code –, it is easily understood that it should be the lessee who is burdened with the tax obligation through its qualification as a taxpayer, through its equation to an owner. It is this, as far as we are concerned, the meaning to be drawn from paragraphs 1 and 2 of Article 3 of the CIUC.

Thus, as the lessee is the potential responsible party for the road and environmental costs, it is well understood that it is he, and only he, who is responsible for payment of the tax.

In light of the foregoing and in accordance with paragraph 2 of Article 3 of the CIUC, no doubts remain: if at the date of the occurrence of the taxable fact a financial leasing contract applies, the object of which is a motor vehicle, the taxpayer is the lessee; never the lessor.

And what has just been said is relevant to support our position regarding the legal value of the motor vehicle register.

Given the silence of Decree-Law no. 54/75, of 12 February, on the question of the legal value of the motor vehicle register, it becomes necessary to resort to the discipline of the land register.

Now, having regard to the Land Registry Code – approved by Decree-Law no. 125/13, of 30 August –, particularly its Article 7, and combining this norm with Article 1 of Decree-Law no. 54/75, it is quickly inferred that the primary function of the register (motor vehicle): to give publicity to the legal situation of motor vehicles.

It can then be stated that the register does not have a constitutive nature, but merely a declarative one.

Whereby, the fact that no financial leasing contract relating to the vehicles in question is registered in the register, does not have as an inevitable consequence that such contract does not exist, the proof of the existence of that contract being able to be made in any manner permitted by law.

Now, although at the date of the tax assessments no financial leasing agreement was registered in the register, the Claimant alleges that it is not a taxpayer of the tax, due to the fact that the vehicles were subject to financial leasing.

Thus, and since the presumption resulting from the register is, as we have seen, rebuttable, let us see whether the documents attached by the Claimant are apt to accomplish such objective.

In order to prove that the vehicles referred to in the present proceedings were placed by it in financial leasing on a date prior to the occurrence of the taxable fact, the Claimant attached financial leasing contracts having as their object each one of the vehicles whose assessments are at issue here.

The Respondent challenged the financial leasing contracts attached, expressly invoking that it does not result from the documents attached that the contracts were in force at the date of the occurrence of the taxable fact.

Although the Respondent challenged the contracts attached by the Claimant, the truth is that, as it is a private document, it was incumbent upon the Respondent to challenge the truthfulness of the writing or the signature.

Having not done so and having not alleged the forgery of said documents, the documents attached by the Claimant have full probative force, pursuant to Article 376 of the Civil Code, reason for which this tribunal deemed proven that the assessments in dispute relate to vehicles in relation to which the Claimant had celebrated financial leasing contracts – see proved fact 9.

But from this does not result the proof, which was necessary, that such contracts were in force at the date of the occurrence of the taxable fact.

This is because the said contracts could have ceased before that date for the most varied of reasons, it being certain that the Claimant, despite alleging that all contracts were in force at the date of the occurrence of the taxable fact, failed to demonstrate it.

As it is a fact constitutive of the right invoked by the Claimant, the burden of proof thereof would fall upon it, which it failed to discharge.

Having failed to demonstrate that the financial leasing contracts celebrated were in force at the date of the occurrence of the taxable fact, the examination of the remaining questions is precluded.

In light of the foregoing, the petition to annul the assessments attached with the petition for arbitral pronouncement under numbers 35 to 79 must be dismissed.

From all that has been set out, there is clear the inexistence of any grounds for annulment of the assessments challenged, which must, therefore, remain in the legal order.

VII. OPERATIVE PART:

In light of the foregoing, it is decided:

a. To uphold the dilatory exception of lack of active legitimacy of the Claimant to challenge the assessments attached with the petition for arbitral pronouncement under numbers 1 to 34 and 80 to 92;

b. To dismiss the petition for annulment of the acts of assessment of IUC attached with the petition for arbitral pronouncement under numbers 35 to 79.

The value of the case is fixed at € 11,530.36, pursuant to section a) of paragraph 1 of Article 97-A of the Code of Procedure and Tax Process, applicable by virtue of sections a) and b) of paragraph 1 of Article 29 of the RJAT and paragraph 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The value of the arbitration fee is fixed at € 918.00, pursuant to Table I of the Regulation of Costs in Tax Arbitration Proceedings, pursuant to paragraph 2 of Article 12 and paragraph 4 of Article 22, both of the RJAT, and paragraph 4 of Article 4 of the aforesaid Regulation, to be paid by the Claimant as the party that lost.

Register and notify.

Lisbon, 21 June 2017.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, pursuant to paragraph 5 of Article 131 of the Code of Civil Procedure, applicable by reference of section e) of paragraph 1 of Decree-Law no. 10/2011, of 20/01.

[1] FRANCISCO RODRIGUES PARDAL, "The use of presumptions in tax law", in Science and Tax Technique, no. 325-327, page 20.

[2] In "Code of Procedure and Tax Process Annotated and Commented", Volume I, 6th Edition, Áreas Publisher, Lisbon, 2011, p. 589.

[3] JORGE LOPES DE SOUSA, op. cit, pp. 590 et seq.

Frequently Asked Questions

Automatically Created

Who is liable for IUC (Imposto Único de Circulação) on vehicles under a financial leasing contract in Portugal?
Under Portuguese tax law, Article 3 of the CIUC (Código do IUC) establishes that lessees in financial leasing contracts are equated to vehicle owners for IUC purposes, suggesting that the lessee should be the taxpayer. However, the Tax Authority maintains that registered owners remain liable when financial leasing contracts are not properly registered. The practical application depends on compliance with registration requirements under Article 19 of CIUC. When leasing contracts are duly registered, the lessee assumes IUC liability as the economic owner; when not registered, the lessor as legal and registered owner remains responsible for the tax.
Can a leasing company be required to pay IUC when the vehicle is in the exclusive possession of the lessee?
Yes, a leasing company can be required to pay IUC even when the vehicle is in the lessee's exclusive possession, particularly when the financial leasing contract has not been properly registered. The Portuguese Tax Authority argues that it cannot assess tax based on elements not contained in the vehicle registry, and therefore relies on registered ownership information. The failure to comply with registration obligations under Article 19 of CIUC results in the IUC liability falling upon the registered owner (the leasing company), regardless of who actually possesses and uses the vehicle. This underscores the importance of proper administrative compliance in financial leasing operations.
What does Article 3 of the Portuguese IUC Code say about the subjective incidence of tax on leased vehicles?
Article 3 of the Portuguese IUC Code addresses the subjective incidence of the tax by equating certain parties to vehicle owners. Specifically, it considers lessees in financial leasing contracts as owners for IUC purposes, reflecting a legislative choice to privilege economic ownership over mere legal title. However, interpretation of this provision is disputed: claimants argue it establishes that lessees are the taxpayers, while the Tax Authority contends the provision does not create a rebuttable presumption but rather a conditional rule that requires proper registration. The article embodies the principle that the party enjoying economic benefits and possession of the vehicle should bear the tax burden.
How does CAAD arbitration handle disputes over IUC tax assessments between financial institutions and the Portuguese Tax Authority?
CAAD (Centro de Arbitragem Administrativa) handles IUC disputes between financial institutions and the Portuguese Tax Authority through formal arbitration proceedings under the RJAT (Legal Framework for Tax Arbitration). In such cases, financial institutions can challenge IUC assessments by filing petitions contesting the tax authority's determination of taxpayer liability. The arbitration examines both substantive issues (such as interpretation of Article 3 CIUC regarding who qualifies as the taxpayer) and procedural matters (including legitimacy to contest assessments, proper registration of leasing contracts, and compliance with Article 19 CIUC). The process allows examination of exceptions before merit analysis and considers constitutional principles including legal certainty, confidence, and efficiency of the tax system.
What is the legal presumption of vehicle ownership for IUC purposes and how can it be rebutted under Portuguese tax law?
For IUC purposes, Portuguese tax law establishes that persons registered as vehicle owners in the official registry are considered taxpayers. While Article 3 of CIUC equates financial leasing lessees to owners, the Tax Authority maintains this is not a rebuttable presumption but a legal determination conditional on proper registration. To shift IUC liability from the registered owner (lessor) to the lessee, the financial leasing contract must be properly registered according to Article 19 of CIUC. Without such registration, the legal presumption that the registered owner is the taxpayer prevails, and the Tax Authority cannot assess tax based on unregistered contractual arrangements. Rebuttal therefore requires formal compliance with registration obligations rather than merely proving economic ownership.