Process: 777/2014-T

Date: July 17, 2015

Tax Type: Valor do pedido:

Source: Original CAAD Decision

Summary

This arbitral decision (Process 777/2014-T) addresses the subjective incidence of Portugal's Single Vehicle Circulation Tax (IUC) and challenges the legal presumption of vehicle ownership for tax purposes. A financing and leasing company contested 61 IUC assessments totaling €10,234.98 for tax years 2009-2013 concerning 26 vehicles. The central dispute concerns whether Article 3(1) of the IUC Code establishes a rebuttable presumption or an irrebuttable legal fiction regarding taxpayer identification. The Claimant argued it was not the taxable person because: (1) it did not use the vehicles—customers did under leasing contracts; (2) for some vehicles it held only retention of title as security, not full ownership; (3) other vehicles had already been sold and transferred; and (4) IUC should burden actual users based on the equivalence principle and environmental/road costs caused. The Tax Authority countered that: (1) the law establishes a legal fiction, not a presumption—those registered as owners are considered taxable persons; (2) the vehicle register has dispositive effect for tax purposes; (3) failure to update registration records places tax liability on the registered owner; (4) the Claimant failed to prove compliance with ancillary obligations under Article 19 CIUC; and (5) unilateral documents like invoices cannot rebut register records. The tribunal must determine whether registration creates an irrebuttable fiction or whether financing/leasing contracts, purchase agreements, and invoices can prove that economic ownership and vehicle use had transferred to third parties, thus rebutting the presumption that the registered owner is the taxable person. This case has significant implications for financing companies, leasing entities, and the evidential value of vehicle registration for IUC liability.

Full Decision

ARBITRATION DECISION

I. REPORT:

A… (PORTUGAL), LDA., a company with registered office at …, Building no. … …-B, -… …, holder of the single registration and identification number for a legal person …, hereinafter simply referred to as the Claimant, filed a request for the establishment of an arbitration tribunal in tax matters and a request for arbitral pronouncement, under the terms of paragraph a) of no. 1 of Article 2 and paragraph a) of no. 1 of Article 10, both of Decree-Law no. 10/2011, of January 20 (Legal Regime for Arbitration in Tax Matters, hereinafter briefly referred to as RJAT), requesting the declaration of illegality of the acts of dismissal of gracious objections nos. … 2014 … and … 2014 … and consequent declaration of illegality and annulment of 61 (sixty-one) acts of assessment of Single Vehicle Circulation Tax (IUC) and compensatory interest relating to the years 2009 to 2013, concerning 26 (twenty-six) motor vehicles, in the total amount of €10,234.98, as well as the condemnation of AT to refund to the Claimant the tax and compensatory interest paid, plus compensatory interest.

To support its request, it alleges, in summary:

a) The Claimant is a company whose principal activity is the granting of financing to the public with a view to the acquisition of motor vehicles of the brands "A1" and "B";

b) For that purpose, the Claimant acquires from the dealers selling the said brands the vehicles which will be the subject of the contracts, subsequently delivering them to the respective customer, who assumes the status of lessee and user of the vehicle;

c) At the end of 2013, the Claimant was notified of the official assessments of IUC and compensatory interest relating to the years 2009 to 2013;

d) At the date of the occurrence of the taxable event of the tax in question in the present proceedings, the Claimant was not a taxable person, since it did not have the use of the vehicles in question;

e) At the date of the taxable event of the tax, the Claimant was financing and leasing entity of the vehicles with the registration numbers …-…-…, …-…-… and …-….-…, not being the owner of the last two vehicles - even though it appears as such in the register - possessing only a retention of title over the same, as security for the performance of the contracts entered into;

f) At the date of the taxable event of the tax, the Claimant was only a financing and leasing entity of the vehicles with the registration numbers …-…-…, …-…-… and …-…-…, not being their owner;

g) At the date of the taxable event of the tax, the ownership of the vehicles with the registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-…, had already been transferred by the Claimant;

h) AT proceeded with the IUC assessments on the grounds that the Claimant still appeared as the owner of the vehicles in the motor vehicle register;

i) Under Article 1 of the CIUC, "the single vehicle circulation tax complies with the principle of equivalence, seeking to burden taxpayers in proportion to the environmental and road cost that they cause, in implementation of a general rule of tax equality";

j) No. 1 of Article 3 of the CIUC establishes a mere presumption that the owner of the vehicle – as it appears in the motor vehicle register - will be its user;

k) Whenever the legal ownership of the vehicle does not coincide with its economic ownership, it is the user of the vehicle who will be the taxable person subject to IUC;

l) The registration of motor vehicle ownership has merely a declarative character, aiming only to give publicity to juridical facts;

m) AT does not consider itself a third party for the purposes of registration;

The Claimant attached 7 documents and did not identify any witnesses.

In the request for arbitral pronouncement, the Claimant chose not to appoint an arbitrator, wherefore, under the terms of Article 6 no. 1 of the RJAT, the signatory was appointed by the Ethics Committee of the Administrative Arbitration Center, the appointment having been accepted in accordance with legal provisions.

The arbitration tribunal was established on February 3, 2015.

Notified in the terms and for the purposes of Article 17 of the RJAT, the Respondent presented its reply, alleging, in summary, the following:

a) The legislator expressly and intentionally established that taxable persons for IUC are the owners, being considered as such the persons in whose name the vehicles are registered;

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

c) The failure to register changes of ownership in the register has the consequence that the obligation to pay IUC falls on the registered owner, and AT cannot assess the tax based on elements not appearing in the register;

d) IUC is due by the persons who appear in the register as owners of the vehicles;

e) Even if the vehicles in question were subject to financial leasing contracts, it was incumbent on the Claimant to demonstrate compliance with the ancillary obligation imposed in Article 19 of the CIUC;

f) The invoice is not apt to prove the conclusion of the purchase and sale contract, as it is a document issued unilaterally;

g) The Claimant did not attach a copy of the official form for registration of motor vehicle ownership, nor did it prove the receipt of the price in relation to any of the vehicles;

h) The presentation of the purchase and sale contract is also not sufficient to undermine the public faith on which the register is based;

i) The failure to comply with the obligation to update the registers places on the Claimant the responsibility for the arbitration costs.

The Respondent attached a copy of the administrative file and did not identify any witnesses.

Following the notification issued for that purpose, the Claimant proceeded to attach to the file the financial leasing, leasing and renting contracts and consumer credit contracts concerning the vehicles in question, a total of 17 documents.

Given the position assumed by the parties and there being no need for the meeting to which Article 18 of the RJAT refers, the same was dispensed with, with the parties presenting written pleadings, in which they maintained the positions initially upheld.

II. SANITATION:

The Arbitration Tribunal is regularly constituted and is materially competent.

The parties enjoy personality and legal capacity, are legitimate and are regularly represented.

The proceedings do not suffer from defects that affect its validity.

III. QUESTIONS TO BE DECIDED:

Given the positions assumed by the Parties, set forth in the arguments put forward, it is necessary to:

a. Determine whether the rule of subjective application provided for in Article 3 no. 1 of the CIUC provides for a rebuttable presumption or, instead, a legal fiction, incapable, for that reason, of being rebutted by proof to the contrary;

b. Determine who is the taxable person for IUC when, at the date of the occurrence of the taxable event, the motor vehicles have been subject to financial leasing or any other contract that grants a purchase option or concluded with retention of title;

c. Determine what is the legal value of the motor vehicle register for purposes of IUC, particularly for purposes of the subjective scope of the tax;

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

e. Determine whether the contracts attached by the Claimant are or are not apt to rebut the presumption provided for in no. 2 of Article 3 of the CIUC;

f. Determine whether the invoices attached by the Claimant are or are not apt to prove the alleged alienation of the vehicles.

IV. MATTERS OF FACT:

a. Proven facts

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

  1. The Claimant is a company whose principal activity is the granting of financing to the public with a view to the acquisition of motor vehicles of the brands "A1" and "B";

  2. For the purpose of the foregoing, the Claimant acquires from the dealers selling the said brands the vehicles which will be the subject of the contracts, subsequently delivering them to the respective customer, who assumes the status of user of the vehicle;

  3. The Claimant was notified of 61 assessments of IUC and compensatory interest concerning the vehicles with the registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-…, relating to the tax years 2009 to 2013, in the total amount of €10,234.99;

  4. None of the twenty-six vehicles to which the assessments now in question relate belong to categories F or G, to which Article 4 of the CIUC refers;

  5. The vehicle with registration number …-…-… was, at the date of the occurrence of the taxable event relating to the tax year 2009, subject to a lease, and no purchase option was granted to the lessee with respect to the vehicle;

  6. At the date of the occurrence of the taxable event relating to the tax year 2010, an invoice for the sale of the vehicle with registration number …-…-… had been issued by the Claimant;

  7. At the date of the occurrence of the taxable event, the vehicle with registration number …-…-… was subject to a lease, and no purchase option was granted to the lessee with respect to the vehicle;

  8. The vehicle with registration number …-…-… was, at the date of the occurrence of the taxable event relating to the tax year 2009, subject to a financial leasing regime;

  9. At the date of the occurrence of the taxable event relating to the tax year 2010, an invoice for the sale of the vehicle with registration number …-…-… had been issued by the Claimant;

  10. The vehicle with registration number …-…-… was, at the date of the occurrence of the taxable event relating to the tax year 2010, subject to a financial leasing regime;

  11. At the date of the occurrence of the taxable event relating to the tax year 2011, an invoice for the sale of the vehicle with registration number …-…-… had been issued by the Claimant;

  12. At the date of the occurrence of the taxable event, a consumer credit contract was in force, expressly providing for the retention of title of the vehicles with registration numbers …-…-… and …-…-… in favor of the Claimant;

  13. On the date of the occurrence of the taxable event relating to the tax year 2011, an invoice for the sale of the vehicle with registration number …-…-… had been issued by the Claimant;

  14. On the date of the occurrence of the taxable event relating to the tax years 2010 and 2011, an invoice for the sale of the vehicle with registration number …-…-… had been issued by the Claimant;

  15. On the date of the occurrence of the taxable event, an invoice for the sale of the vehicles with the registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… had been issued by the Claimant;

  16. The Claimant filed a gracious objection with respect to all the assessments now being challenged;

  17. By official letters dated 08/20/2014 and 10/27/2014, the Claimant was notified of the decisions dismissing the gracious objections filed;

  18. The request for establishment of the arbitration tribunal in tax matters and for arbitral pronouncement was filed on 11/21/2014;

  19. The Claimant paid the taxes and compensatory interest assessed by the Respondent and reflected in the assessments now being challenged.

b. Unproven facts

With relevance to the proceedings, it was not proven that, at the date of the occurrence of the taxable event, the Claimant was not the owner of the vehicle of …-…-….

c. Basis for the findings of fact

The conviction regarding the facts deemed proven was formed on the basis of the documentary evidence attached by the Claimant, indicated with respect to each of the points, and whose correspondence to reality was not questioned, as well as the matter alleged and not disputed appearing in the requests attached to the file.

The conviction regarding the facts deemed unproven was based on the total absence of proof furnished by the Claimant with respect to the alleged facts.

V. ON THE LAW:

Having established the matters of fact, it is now necessary, by reference to those matters, to determine the applicable law.

Upon examination of the arguments put forward by the Parties, it is readily understood that the underlying question is whether the rule contained in no. 1 of Article 3 of the CIUC contains or does not contain a legal presumption.

That question has been abundantly raised, giving rise to extensive case law – including arbitral – which will be appropriately brought in here; it is advanced from now that no substantial reasons are discerned for reversing what has hitherto been said on the present matter. Let us see.

As is known, under the heading of subjective scope, Article 3 of the CIUC provides that:

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

  1. – Equated to owners are financial lessees, purchasers with retention of title, as well as other holders of purchase option rights by virtue of the leasing contract".

Now, to dispel doubts about the meaning and scope to be attributed to a particular legal rule implies carrying out an interpretive task that allows extracting from the linguistic statement a specific meaning or "content of thought"([1]). However, such a task can only be accomplished – thus achieving an apprehension of the vis ac potestas legis – through the use of a specific method, which is based on literal interpretation, on the one hand, and on logical or rational interpretation, on the other.

Let it be recalled, before we proceed, that in accordance with the terms of no. 1 of Article 11 of the General Tax Law, tax rules are interpreted in accordance with the principles of legal hermeneutics commonly accepted, particularly those set forth, among us, in Article 9 of the Civil Code. Let us continue.

Literal interpretation then presents itself as the first stage of the interpretive activity. As FERRARA states, "the text of the law forms the substrate from which the interpreter must depart and on which he must rely"([2]).

In truth, since the law is expressed in words, the verbal significance they contain must be extracted from them, according to their natural connection and the rules of grammar. However, if the words employed by the Legislator are equivocal or indeterminate, it will be necessary to resort to logical interpretation, which attends to the spirit of the disposition being interpreted.

Logical interpretation, as is peacefully conceived by doctrine([3]), is based on the rational element, the systematic element, and the historical element; weighing them and deducing from them the value of the legal rule in question.

By rational element is to be understood the raison d'être of the legal rule, that is, the purpose for which the legislator established it. The discovery of the ratio legis presents itself, thus, as a factor of undoubted importance for the determination of the meaning of the rule.

It happens, however, that a particular rule does not exist in isolation, but rather coexists with other rules and legal principles in a systematic and complex manner. Thus, it naturally follows that the meaning of a concrete rule becomes clear from the comparison of this rule with others. As BAPTISTA MACHADO states, "this element comprises the consideration of other provisions that form the complex of norms of the institute in which the rule being 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 further comprises the systematic place that belongs to the rule being interpreted in the global legal order, as well as its consonance with the spirit or intrinsic unity of the entire legal order."([4]).

As for the historical element, in turn, it must be reported and include materials related to the history of the rule, such as "the evolutionary history of the institute, the figure or the legal regime in question (...); the so-called sources of the law, that is, the legal or doctrinal texts that inspired the legislator in the preparation of the law (...); the preparatory works."

Let us apply what has been said to the case at hand.

Upon examination of the arguments of Claimant and Respondent, and with respect to the literal element, it is readily understood that the focus of disagreement resides in the expression "(…) being considered as such (…)", contained in no. 1 of Article 3 of the CIUC.

The question is asked – as indeed was done in the Arbitration Decision delivered in the framework of Case no. 73/2013-T([5]): "Does the fact that the legislator opted for the word 'being considered' destroy the possibility of our being faced with a presumption?". No. It is the answer that is required. And let it not be said that such conclusion is impaired by the circumstance that the legislator did not use the word "presumed", which he employed in the ancient Regulations of the Tax on Vehicles.

Also here we cannot fail to follow what was said in that decision: "examining the Portuguese legal order, we find countless rules that establish presumptions using the verb 'to consider', many of which employed in the gerund form ('considering' or even 'being considered'). Examples of this are the rules enumerated below: In the Civil Code, among others, Articles 314, 369 no. 2, 374 no. 1, 376 no. 2, 1629 (...). Also in the tax legal order one can find the verb 'to consider', namely the term 'is considered' with a presumptive sense. And there it adds the teaching of LEITE DE CAMPOS, SILVA RODRIGUES and LOPES DE SOUSA which, for the clarity of exposition, is equally transcribed. Thus, the Authors write that 'presumptions in matters of tax scope can be explicit, revealed by the use of the expression 'is presumed' or similar (...). However, presumptions can also be implicit in scope rules, particularly objective scope, when certain values of movable or immovable property are considered as constituting taxable matter, in situations where it is not unfeasible to determine the actual value'.

To this regard, JORGE LOPES DE SOUSA([6]) refers that in no. 1 of Article 40 of the IRS Code the expression "is presumed" is used, whereas in no. 2 of Article 46 of the same statute the term "is considered" is employed, there being no difference whatsoever between one and the other expression, both signifying, after all, the same thing: a legal presumption.

And what is to be said of no. 4 of Article 89-A? Can there be any doubt that this is a presumption? And is such conclusion weakened by the fact that the verb 'to consider' is employed there? It does not seem to us so.

Thus, and insofar as it concerns us here, it is admissible to assimilate the verb 'to consider' to the verb 'to presume'. Indeed, we can be faced with a presumption even when the legislator has opted for other verbs, namely 'to consider'. In truth, and contrary to what is advocated by the Respondent, it is this conclusion that least undermines the systematic coherence postulated by the legal order as a whole.

But more: the rational element also authorizes such a conclusion.

Let us call upon the explanatory statement of Bill no. 118/X, of 03/07/2007, which resulted in Law no. 22-A/2007, of June 29. The ratio legis becomes clear.

It was intended to undertake a "comprehensive and coherent reform of the taxes linked to the acquisition and ownership of motor vehicles" in function of the "imperative need to bring clarity and coherence to this area of the fiscal system and the even more imperative need to subordinate it to the principles and concerns of an environmental and energy nature that today mark the discussion of automobile taxation".

Thus, "the two new taxes that are now being created, the tax on vehicles and the single vehicle circulation tax, constitute much more than the technical continuation of the figures created in the 70s and 80s that preceded them, turned predominantly toward the raising of revenue, 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 intended, certainly, to raise public revenue, but to raise it in proportion to the cost that each individual imposes on the community."

In a manner congruent with that motivation, the legislator came to establish, in Article 1 of the CIUC, the principle of equivalence, making clear "that the tax, in its entirety, is subordinate to the idea that taxpayers should be burdened in proportion to the cost they impose on the environment and on the road network, this being the raison d'être of this tax figure. It is this principle that dictates the burdening of vehicles in function of their respective ownership and until the moment of scrapping".

One might indeed say that the environmental and energy concerns are so impressive in the context of IUC that the principle of equivalence shapes not only the taxable base, but also, and above all, the very subjective scope, provided for in Article 3.

Once again we call upon the Arbitration Decision delivered in the framework of Case no. 73/2013-T: "Taking into account both the systematic place that the principle of equivalence occupies (Article 1 of the CIUC) – systematic element – as well as the historical element embodied in Bill no. 118/X (source of law), as well as the rational (or teleological) element just analyzed, all point in the direction of the preliminary conclusion we reached when analyzing the grammatical element, only making sense to conceive in the context of Article 3 of the CIUC the expression 'being considered as such' as revealing the presence of a rebuttable presumption (...). In truth, the ratio legis of the tax rather points in the direction that the users of the vehicles should be taxed, the economic owner, in the words of DIOGO LEITE DE CAMPOS, the effective owners or the financial lessees, since these are the ones that have the polluting potential causing the environmental costs to the community".

Having established the legal nature of the rule contained in no. 1 of Article 3 of the CIUC, it is now necessary to clarify the question of the subjective scope of the tax when vehicles have been subject to financial leasing or any other contract that grants a purchase option or concluded with retention of title.

Before, however, and in order to better elucidate the question that now concerns us, it should be noted that, in the course of a financial leasing contract or any other contract that grants a purchase option or concluded with retention of title, notwithstanding the active party to the contract maintains in its legal sphere the ownership of the asset, only to the passive party to the contract does there belong the right to enjoy, in an exclusive manner, the asset, which results from the combined reading of Article 1, of paragraph b) of no. 1 of Article 9 and of paragraph a) of no. 2 of Article 10, all of Decree-Law no. 149/95, of June 24.

Now, since it is to the passive party to these contracts that there belongs the potential for use of the vehicle, and mindful of the principle guiding IUC – established in Article 1 of the respective Code – it is readily understood that it is the passive party to the contract that is burdened with the obligation to pay tax by virtue of his qualification as a taxable person, through his equation with an owner. It is this, insofar as it concerns us here, the meaning to be drawn from nos. 1 and 2 of Article 3 of the CIUC.

In light of the foregoing and in accordance with the terms of no. 2 of Article 3 of the CIUC, no doubt remains: if on the date of the occurrence of the taxable event a financial leasing contract or any other contract that grants a purchase option or concluded with retention of title, whose object is a motor vehicle, is in effect, the taxable person for the tax is the passive party to that contract; never the active party.

And what is to be said if, on the date of the occurrence of the taxable event, the motor vehicle that is the object of the financial leasing contract or any other contract that grants a purchase option or concluded with retention of title has been alienated?

It must be said, by way of preliminary remark, that the sale to the passive party to these contracts is a situation that occurs frequently in the economy of this type of contracts, as indeed also occurs in the present case.

Now, if the purchase and sale is concluded, the passive party to these contracts will be instituted, ex contractu, in the position of owner, consequently the rule provided for in no. 1 of Article 3 of the CIUC will become applicable to him; that is, the new owner maintains, for purposes of IUC, the status of taxable person, but no longer by virtue of the rule that conferred such quality on him while he was a lessee (no. 2 of Article 3 of the CIUC).

And such a solution is required from the moment of the perfection of the purchase and sale contract, not only because the Code of IUC determines it – by stating that taxable persons for the tax are the owners – but also by the fact that among us the principle of consensuality prevails, which means that the transfer of ownership occurs by mere effect of the contract, as results in the first place from no. 1 of Article 408 of the Civil Code.

Nor let it be said, as the Respondent does, that the conclusion of the contract could be proven through proof of the receipt of the price.

With all due respect, it seems to us that the Respondent here incurs in a manifest begging of the question.

Indeed, contrary to what is advocated by the Respondent – and, moreover, also by case law which we cannot subscribe to – the receipt of the price or, better stated, the payment of the price, is not an essential element of the purchase and sale contract, but rather an effect of the same, as results from the terms of Article 879 of the Civil Code.

And what has just been said is relevant to support our position with respect to the legal value of the motor vehicle register. Let it be recalled, however, that in accordance with the general rule just seen, the transfer of the right occurs ex contractu, without the need for any material act or publicity([7]).

Given the silence of Decree-Law no. 54/75, of February 12, as to the question of the legal value of the motor vehicle register, it becomes necessary to resort to the rules governing land registration; an operation moreover authorized by Article 29 of that Decree-Law.

Now, taking into account the Land Registration Code – approved by Decree-Law no. 125/13, of August 30 – particularly its Article 7, and combining this rule with Article 1 of Decree-Law no. 54/75, it is quickly inferred the primary function of the (motor vehicle) register: 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 rather merely a declarative one, serving only to presume the existence of the right and its ownership. Note: to presume and not to create a legal fiction, and thus can be rebutted by proof to the contrary.

And this is so precisely because, under the terms of Article 408 of the Civil Code, and except for the exceptions provided by law, the constitution or transfer of real rights in a determined thing occurs by mere effect of the contract, with its validity not depending on any subsequent act, e.g., registration in the register.

In this manner, since the law does not provide any exception for the purchase and sale contract of a motor vehicle, the real effects normally produce their effects, with the purchaser becoming its owner, independently of the register.

Now, if independently of the register the purchaser becomes the owner, the registered holder simultaneously ceases to be so; despite the fact that he appears as such in the register.

In the present case, and notwithstanding the failure to register in the register, the transfers effected are opposable to the Respondent, and the latter cannot avail itself of the provisions of no. 1 of Article 5 of the Land Registration Code.

Firstly, by the fact that the Respondent is not, for purposes of the terms of that rule, regarded as a third party for purposes of registration.

The notion of third parties for purposes of registration is given to us by no. 4 of the same Article 5: third parties, for purposes of registration, are those who have acquired from a common author rights that are incompatible with one another; from which it necessarily follows that this is manifestly not the case in the present proceedings.

And the same reasoning will apply, naturally, to the hypotheses of financial leasing or any other contract that grants a purchase option or concluded with retention of title, with respect to which the register also has no constitutive effect whatsoever, being nothing more than a presumption that the right exists. A rebuttable presumption, in the same manner, through proof to the contrary.

And, in the same way, the failure to register in the register these contracts does not mean that these contracts do not exist.

Now, although on the date of the tax assessments the Claimant could still appear in the register as the owner of the vehicles, the truth is that it alleges that it was, on the date of the taxable event, only (i) their financial lessee; (ii) having only registered in its favor the retention of title; or (iii) no longer being, in any way, their owner, having already alienated them.

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 fulfill such a purpose.

As for the leasing contracts attached by the Claimant, it is found that the same do not result in any purchase option right in favor of the lessee, and that the same have not been concluded with retention of title.

Thus, mindful of the wording of no. 2 of Article 3 of the CIUC, one cannot consider the simple lessee without a purchase option as the owner of the vehicle, for the purpose of making him taxable for IUC.

For that reason, the request formulated with respect to the tax relating to the vehicle with registration number …-…-… must be wholly dismissed, since, as to this vehicle, on the date of the occurrence of the taxable event, only a leasing contract with no purchase option in favor of the lessee was in effect.

The same is to be said with respect to the vehicle with registration number …-…-…, insofar as the tax relating to the year 2009 is concerned, since, on the date of the occurrence of the taxable event relating to this year, only a leasing contract with no purchase option in favor of the lessee was in effect over this vehicle.

As for the vehicles with registration numbers …-…-… and …-…-…, leasing contracts were attached to the file, from which it is found that the Claimant obligated itself, in consideration of payment, to cede to the lessee the temporary enjoyment of the vehicle acquired by the latter at the lessee's direction, with a purchase option right of the vehicle having been established for the lessee, by means of the price fixed in the special conditions.

It is thus found that a financial leasing contract was concluded between the parties, as to these vehicles, contracts that were in effect on the date of the occurrence of the taxable event.

Wherefore, in relation to these vehicles, the taxable person for the tax is the lessee, as expressly provided in no. 2 of Article 3 of the CIUC.

As for the vehicle with registration number …-…-…, a consumer credit contract was attached to the file by the Claimant, from which it is found the establishment of a retention of title in favor of the Claimant – cf. fifth clause of the contract attached.

Wherefore, in relation to this vehicle, there is no doubt that the third party is a purchaser with retention of title, being thus this third-party purchaser the taxable person for the tax, under the terms of the provisions of Article 3 no. 2 of the CIUC.

As for the vehicle with registration number …-…-…, a credit contract was attached to the file that was concluded between the Claimant and a third party.

From the analysis of this contract, it is found that, underlying the same, is a purchase and sale contract, concluded between the same third party and the supplier of the vehicle, under the terms of which the latter reserves for itself the ownership of the vehicle.

The retention of title in favor of the supplier was transmitted to the Claimant, by subrogation, which results from clause 12 of the credit contract attached.

Wherefore, in a manner similar to the vehicle with registration number …-…-…, the third party is nothing more than a purchaser with retention of title, being thus this third party the taxable person for the tax, under the terms of the provisions of Article 3 no. 2 of the CIUC.

For its part, invoices for the sale of vehicles with registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-… are attached to the file, all issued on dates prior to the date of the occurrence of the taxable event.

There are also attached to the file invoices for the sale of vehicles with registration numbers …-…-…, …-…-… and …-…-… issued, respectively, on 07/13/2009, 02/12/2009 and 01/29/2010.

Let us now consider the probative value of the invoices attached by the Claimant.

As results from the proven facts – cf. point 4 -, none of the vehicles in question in the present proceedings belong to categories F or G to which Article 4 of the CIUC refers, wherefore the taxable event occurs on the date of its registration or on each one of its anniversaries.

The Respondent maintains that the invoice is not a document apt to prove the conclusion of a synallagmatic contract such as the purchase and sale, since such a document does not itself reveal an essential and unequivocal declaration of will on the part of the alleged purchaser.

Adding that "there is no shortage of cases of issuance of invoices relating to transfers of goods and/or provision of services that never occurred".

It is true, as the Respondent invokes, that many situations exist in which invoices do not constitute evidence of any juridical transaction. In the case at hand, however, no element permits forming the conviction that the invoices attached do not constitute evidence of any transaction, and it is certain that their falsity was not even argued by the Respondent, which limited itself to invoking the existence of various such situations, without concretely referring to the situation in the present case as being subsumed thereto.

In this manner, and in the absence of any elements that permit concluding otherwise, the veracity of the documents attached must be accepted.

Having established the veracity of the invoices attached by the Claimant, as well as their content, we must consider, without need of any further inquiry, that these are documents apt to prove the alienation of the vehicles in question.

Indeed, since the law does not provide any specific form for the conclusion of a purchase and sale contract for a movable good, it will be necessary to accept the invoice issued in accordance with legal terms as proof of the said contract.

We have, thus, that on the date of the occurrence of the taxable event (date of registration or of each one of its anniversaries), the Claimant had already alienated the vehicles with registration numbers …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-…, …-…-… and …-…-….

In the same manner, on the date of the occurrence of the taxable event relating to the tax year 2010, the vehicle with registration number …-…-… had already been alienated. Note that the sales invoice relating to this vehicle was issued on 07/13/2009, and the date of the occurrence of the taxable event occurring in April (anniversary of the registration), it cannot, with respect to the year 2009, be considered that the vehicle was not the property of the Claimant.

The same is to be said with respect to the vehicles with registration numbers …-…-… and …-…-…, the sales invoices relating to which were issued, respectively, on 02/12/2009 and 01/29/2010.

Thus, with respect to the vehicle with registration number …-…-…, the Claimant was not its owner on the date of the occurrence of the taxable event relating to the tax years 2010 and 2011, although it was with respect to the year 2009, given the fact that the vehicle was alienated on a date subsequent to the date of the occurrence of the taxable event (January).

In the same manner, with respect to the vehicle with registration number …-…-…, the Claimant was not its owner on the date of the occurrence of the taxable event relating to the tax year 2011, although it was with respect to the year 2010, given the fact that the vehicle was alienated on a date subsequent to the date of the occurrence of the taxable event (January).

Still with respect to this vehicle, it is only important to note that, although the sales invoice was issued on 01/29/2010, the truth is that, mindful of the provisions of no. 3 of Article 6 of the CIUC, the tax is due on the first day of the month of anniversary, in this case, January 1. Wherefore, the Claimant being, on January 1, 2010, its owner, it is upon this entity that the obligation to pay the tax relating to this year falls.

As for the vehicle with registration number …-…-…, although it is alleged by the Claimant that it was alienated on a date prior to the occurrence of the taxable event, the fact is that no document is attached to the file proving the alleged alienation. Wherefore, the Claimant not having succeeded in proving that this vehicle had been alienated on a date prior to the occurrence of the taxable event, this tribunal cannot consider as proven that it is not the taxable person for the tax.

In summary, the Claimant is the taxable person for the tax relating to the following vehicles and tax years:

a) Vehicle with registration number …-…-…: tax year 2009;

b) Vehicle with registration number …-…-…: tax year 2009;

c) Vehicle with registration number …-…-…: tax years 2009 and 2010;

d) Vehicle with registration number …-…-…: tax years 2010, 2011 and 2012;

e) Vehicle with registration number …-…-…: tax year 2010.

Not being the taxable person for the tax relating to the remaining tax years and vehicles.

Let us now focus on the question raised by the Respondent, relating to Article 19 of the CIUC, which establishes the following:

"For purposes of the provisions of Article 3 of this Code (...) entities that proceed with financial leasing, operational leasing or long-term leasing of vehicles are obligated to furnish to the General Directorate of Taxes the data relating to the fiscal identification of the users of the vehicles leased".

The Respondent, sustaining that the Claimant breached the declarative obligation arising from Article 19 of the CIUC, comes to sustain that consequences should be drawn from such fact both intra and extraprocessually. The former would result in the accountability of the Claimant for the arbitration costs inherent to the present process; the latter would materialize in the accountability of this entity under the heading of minor violation.

It should be stated, in the abstract, that the non-observance of the provisions of Article 19 of the CIUC can, indeed, configure the minor violation p. e p. in Article 117 of the General Regime for Tax Violations. This is not, however, what is being discussed in the present proceedings.

To the side, it will always be said that the cited Article 19 is contained in Chapter III of the CIUC, relating to ancillary obligations, supervision and minor violation regime, and the obligation resulting therefrom is merely declarative and has no effect on altering the rules of subjective scope of the tax, provided for in Chapter I under the heading of "Principles and general rules".

And that this is so results, also, from the fact that Article 19 itself does not provide for this sanction for its non-compliance. From which it is extracted, without any margin for doubt, that non-compliance with this obligation does not determine, without more, that the taxable person for the tax becomes the lessor.

From all that has been set forth, it becomes clear that there is a legal basis for the assessments of single vehicle circulation tax and compensatory interest relating to the vehicles with registration numbers …-…-… – insofar as the year 2009 is concerned -; …-…-… – insofar as the year 2009 is concerned; …-…-… – insofar as the year 2010 is concerned – and …-…-…; …-…-….

As for the remaining assessments challenged, there is no legal basis for the same, requiring, by virtue of that fact, their annulment, with the remaining legal consequences.

VI. OPERATIVE PART

In light of the foregoing, it is decided:

a) To judge the request for annulment of the assessed IUC assessment acts as unfounded with respect to the following vehicles and tax years

(i) Vehicle with registration number …-…-…: tax year 2009;

(ii) Vehicle with registration number …-…-…: tax year 2009;

(iii) Vehicle with registration number …-…-…: tax years 2009 and 2010;

(iv) Vehicle with registration number …-…-…: tax years 2010, 2011 and 2012;

(v) Vehicle with registration number …-…-…: tax year 2010.

b) To judge the request for annulment of the remaining assessed IUC assessment acts as well-founded and in consequence to condemn the Respondent to proceed with the refund to the Claimant of the amount unduly paid, in the total amount of €8,401.06;

c) To judge the request for condemnation to the payment of compensatory interest as well-founded.

The value of the case is fixed at €10,234.98, under the terms of paragraph a) of no. 1 of Article 97-A of the Code of Procedure and Tax Procedure, applicable by force of paragraphs a) and b) of no. 1 of Article 29 of the RJAT and of no. 2 of Article 3 of the Regulation of Costs in Tax Arbitration Proceedings.

The value of the arbitration fee is fixed at €918.00, under the terms of Table I of the Regulation of Costs of Tax Arbitration Proceedings, as well as of no. 2 of Article 12 and of no. 4 of Article 22, both of the RJAT, and of no. 4 of Article 4, of the cited Regulation, to be paid by the parties in proportion to their respective defeat (17.92% for the Claimant and 82.08% for the Respondent).

Register and notify.

Lisbon, July 17, 2015.

The Arbitrator,

Alberto Amorim Pereira

Text prepared by computer, under the terms of no. 5 of Article 131 of the CPC, applicable by referral of paragraph e) of no. 1 of Article 29 of Decree-Law no. 10/2011, of 01/20.

Frequently Asked Questions

Automatically Created

Who is the subjective taxpayer for IUC when a vehicle is under a financing or leasing contract in Portugal?
Under Portuguese law, the subjective taxpayer for IUC when a vehicle is under financing or leasing depends on whether Article 3 of the IUC Code establishes a rebuttable presumption or legal fiction. The Tax Authority position is that whoever appears as owner in the vehicle register is the taxable person, regardless of contractual arrangements. However, taxpayers argue that when legal ownership diverges from economic ownership, the actual user should be liable based on IUC's equivalence principle—taxing those who cause environmental and road costs. In financial leasing with transfer of use to the lessee, the lessee as actual user may be the proper taxable person, but this requires rebutting the registration-based presumption with evidence of the leasing contract and compliance with Article 19 CIUC ancillary obligations.
Can the Portuguese Tax Authority (AT) assess IUC against a financing company that holds only a reservation of ownership over a vehicle?
The Tax Authority can and does assess IUC against financing companies holding only reservation of ownership (retention of title) when they appear as registered owners in the vehicle register. The AT's position is that registration creates a legal fiction making the registered owner the taxable person, regardless of whether they hold full ownership or merely security rights. However, this is legally controversial. Financing companies argue that retention of title is merely a security interest, not ownership, and they lack use of the vehicle—the essential element triggering IUC liability under the equivalence principle. The outcome depends on whether courts or arbitral tribunals interpret Article 3 CIUC as an irrebuttable fiction or a rebuttable presumption that can be overcome by proving the financing company is not the economic owner or user.
What is the legal presumption of vehicle ownership for IUC purposes and how can it be rebutted?
Article 3(1) of the IUC Code establishes that persons registered as vehicle owners in the motor vehicle register are considered taxable persons for IUC. The legal debate centers on whether this is a rebuttable presumption or an irrebuttable legal fiction. Taxpayers argue it's a mere presumption (iuris tantum) that can be rebutted by proving: (1) sale contracts showing transfer of ownership; (2) financial leasing or renting contracts proving transfer of use to third parties; (3) invoices and payment receipts; and (4) that the registered owner no longer has economic ownership or use of the vehicle. The Tax Authority argues it's a legal fiction that cannot be rebutted—only register updates change tax liability. To rebut successfully, taxpayers must provide comprehensive evidence including contracts, official ownership transfer forms, proof of price payment, and demonstration of compliance with registration update obligations under Article 19 CIUC.
How does CAAD arbitral proceedings work for challenging multiple IUC tax assessments in Portugal?
CAAD (Administrative Arbitration Center) arbitral proceedings for challenging multiple IUC assessments work as follows: (1) The taxpayer files a single arbitration request under Article 2(1)(a) and Article 10(1)(a) of the RJAT (Legal Regime for Arbitration in Tax Matters) challenging the dismissal of administrative objections and the underlying tax assessments; (2) Multiple assessment acts concerning different vehicles and tax years can be consolidated in one proceeding if they share common legal questions; (3) The taxpayer may choose an arbitrator or have one appointed by the Ethics Committee; (4) An arbitral tribunal is constituted, typically as a sole arbitrator; (5) The Tax Authority files a response with the administrative file; (6) Parties may submit additional evidence and written pleadings; (7) An oral hearing may be held or dispensed with by agreement; (8) The tribunal issues a binding decision on legality and can order refunds of amounts paid plus interest.
Are compensatory interest and indemnity interest applicable when IUC assessments are annulled by an arbitral tribunal?
Yes, both compensatory interest and indemnity interest are applicable when IUC assessments are annulled by an arbitral tribunal, but they serve different purposes. Compensatory interest (juros compensatórios) is charged by the Tax Authority on late tax payments and becomes illegally collected if the underlying assessment is annulled—the taxpayer is entitled to refund of these amounts. Indemnity interest (juros indemnizatórios) is owed BY the Tax Authority TO the taxpayer on illegally collected amounts from the date of payment until refund, compensating the taxpayer for being deprived of those funds. Article 43 of the General Tax Law (LGT) and Article 61 of the Tax Procedure Code (CPPT) govern indemnity interest calculation. In this case, the Claimant specifically requested condemnation of AT to refund the tax and compensatory interest paid, plus indemnity interest on those amounts, which is standard practice when assessments are annulled and amounts must be returned to the taxpayer.