Process: 830/2014-T

Date: March 30, 2015

Tax Type: IUC

Source: Original CAAD Decision

Summary

CAAD Process 830/2014-T addresses the subjective incidence of IUC (Single Vehicle Circulation Tax) on vehicles under financial leasing contracts. Bank A challenged 21 IUC additional assessments for 2013-2014, totaling €2,883.50 plus interest. The central dispute concerns whether the lessor-bank or the lessee bears IUC liability when vehicles are subject to financial leasing agreements. The Applicant bank acquired the vehicle portfolio from B… S.A. (a cancelled Portuguese branch) and argues it holds merely instrumental ownership as lessor, without actual use of the vehicles. Citing Article 3(2) CIUC and expert opinion from Diogo Leite de Campos, the bank contends that IUC, as an environmental tax based on presumed vehicle use, should burden the lessee who exclusively uses the vehicle and causes environmental impact, not the legal owner. The Tax Authority raised a preliminary legitimacy objection regarding assessments 4-18, which were issued to C… S.A., arguing the bank lacks standing for these claims. The AT challenged the sufficiency of documentation proving B… branch's extinction and portfolio transfer. The arbitral tribunal must resolve: (1) whether financial leasing arrangements alter the standard IUC subjective incidence rule placing liability on registered owners; (2) the Applicant's legitimacy for all contested assessments; and (3) entitlement to compensatory and indemnity interest under Articles 43 LGT and 61 CPPT if assessments are annulled. This case clarifies IUC liability boundaries in complex ownership structures involving financial institutions and leasing operations.

Full Decision

ARBITRAL TAX DECISION

REPORT

– Bank A…, S.A., with NIP: …, Claimant in the tax procedure, above and as referenced, hereinafter, called "Applicant", came, invoking the provisions of paragraph 1 and 2 of article 10 of Decree-Law no. 10/2011, of January 20 (hereinafter RJAT), of article 99 of the Code of Tax Procedure and Process (CPPT) and of paragraph 1 of article 95 of the General Tax Law (LGT), to request the constitution of a Singular Arbitral Tribunal, with a view to:

The annulment of 21 acts of additional assessment, relating to the Single Vehicle Circulation Tax (hereinafter designated as IUC), carried out by the Tax and Customs Authority (hereinafter AT), referring to the years of: 2013 and 2014, concerning the vehicles listed in Annex A, which forms an integral part of the Request for Tax Arbitral Pronouncement.

To the request for reimbursement of the total amount of € 2,883.50, plus the respective compensatory interest wrongly paid by the Applicant and indemnity interest provided for in articles 43 of the LGT and article 61 of the CPPT.

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

On 10-02-2015, the parties were duly notified of this appointment, having not expressed a wish to reject the appointment of the arbitrator, in accordance with the combined provisions of article 11 paragraph 1 subparagraphs a) and b) of the RJAT and articles 6 and 7 of the Code of Ethics.

Therefore, the arbitral tribunal was constituted on 25-02-2015, as required by subparagraph c) of paragraph 1 of article 11 of Decree-Law no. 10/2011, of January 20, in the wording introduced by article 228 of Law 66-B/2012, of December 31.

The Applicant, in the substantiation of its request for arbitral pronouncement, states, in summary, the following:

The acts of assessment, to which the single vehicle circulation tax applies, liquidated and identified in lines no. 1 to 16, contained in ANNEX A, were directed directly to the Applicant, and the remaining cases, namely, no. 17 to 21, were directed to the company "B… S.A, Branch in Portugal" holder of NIPC: …, hereinafter, "B…".

  • The B…, consisted of a branch in Portugal, "which, as appears from documentation on the portal "Publications of the Ministry of Justice", which is attached and reproduced, for all legal purposes, as ANNEX B (with the registration cancelled on 10-01-2007)

  • Meaning, therefore, that the Applicant assumed the portfolio of assets of B….

  • Leasing, which was in force in the month in which the obligation to pay the IUC associated with the respective vehicles became due;

  • The legal ownership belonged, in fact, to the Applicant, as lessor entity, "however, it never enjoyed the use of the vehicles, which were, from the moment of their acquisition, being used (only and exclusively) by the lessees";

Therefore, at the date of the tax events, the Applicant could not be considered a subject to the tax, a fact that prevents any subjective liability for its payment;

The Applicant bases its position on the fact that the taxed motor vehicles are included within the scope of financial lease contracts, which, in our legal system, presupposes exclusive use of the leased asset by the lessee;

Adding that within the scope of financial lease contracts, the ownership of vehicles is merely instrumental, as, according to Diogo Leite de Campos: "in financial leasing only the lessor is owner of the vehicle as a guarantee" "(in Opinion attached as Annex C, of the PI)";

"Not only does the lessor become owner with the purpose, assumed, ab initio, of ceding the use of the asset,

As it is the lessee, and not the lessor, that exercises the typical powers of ownership"

Emphasizing the fact that the legal qualification of the lessor (in this case, the Applicant) clearly goes beyond the qualification of owner, since: the lessor is merely an instrumental owner (as already mentioned above) and whose rights and duties are very different from those typically associated with the legal figure of ownership;

"The same applies to the purchaser with reservation of ownership, who exercises the faculties and powers inherent to the condition of owner, including the right to use the asset with exclusivity, practically without limits, and also to the lessee with option to purchase, to whom likewise assistance the exclusive use of the leased asset";

Also, according to Diogo Leite de Campos (in the Opinion aforementioned): "The IUC is an environmental tax that takes into account the use of the asset which is presumed. The owner is a subject to the tax because it is presumed that the owner uses the asset. But, by way of proof to the contrary, in the sense that the owner does not use the asset, there being another with title to such use, the subject to the tax becomes this one, and only this one";

"It is this one that is the effective responsible for the damage caused to the environment and to the roads"

Considering the facts presented, at the date of the occurrence of the tax event there was a financial lease contract, as shown by the evidence presented in Annex A of the PI, therefore the Applicant cannot be a subject to the tax, as it holds the legal figure of lessor, which, given the letter and spirit of paragraph 2 of article 3 of the Code of Single Vehicle Circulation Tax (hereinafter designated as CIUC), the subject to the tax will be the lessee, as it has the use of the vehicle and as such is the potential polluter;

The Respondent, Tax and Customs Authority (hereinafter designated as AT), presented a reply, from which it appears that the disputed tax acts do not suffer from any defect of violation of Law, ruling in favor of the non-compliance of the claim and the maintenance of the questioned assessment acts, defending, summarily, the following:

It questions the legitimacy of the Applicant with respect to the vehicles listed in the documents with numbers: 4 to 18 attached to the PI, considering that such assessments were sent to the commercial company "C…, S.A.";

Therefore, requesting the recognition of the partial illegitimacy of the Applicant;

It does not consider Annex B, attached to the PI, as a suitable document to demonstrate the alleged extinction of "C…"

The Applicant being, in this context, an illegitimate party, constituting a dilatory exception to which the provision of article 577, subparagraph e) of the CPC refers, in the wording given by Law no. 41/2013, of June 26;

Requesting the dismissal of the case, under article 278, paragraph 1, subparagraph b) of the same law;

The arbitral process should continue in its precise terms, until its conclusion.

The meeting provided for in article 18 of the RJAT took place on 02-03-2015, where it was decided, by the Tribunal, with the agreement of the parties, to dispense with the examination of witnesses;

The Illustrious Attorneys of the parties presented, orally, their allegations;

The Tribunal, in compliance with the provision of article 18, paragraph 2 of the RJAT, set the deadline until 30-03-2015 for the pronouncement of the arbitral decision.

QUESTIONS TO BE DECIDED

Given the foregoing in the previous paragraphs, with respect to the exposition of the parties and the arguments presented, the main questions to be decided are the following:

The allegation made by the Applicant relating to the material assessment of the assessment acts, relating to the years 2013 and 2014 concerning IUC on the vehicles above-mentioned in the PI;

The preliminary question of legitimacy, invoked by the AT;

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

The legal value of the registration of motor vehicles.

FINDINGS OF FACT

In matters of fact, relevant to the decision to be rendered, this Tribunal considers as established, in view of the elements existing in the case file, the following facts:

The Applicant presented probative elements contained in Annexes A and B, attached to the PI, which are hereby fully reproduced for all legal purposes;

4.1.1 SUBSTANTIATION OF THE PROVEN FACTS

The facts held as proven are based on the documents attached to the request for arbitral pronouncement of the aforementioned PI, which are hereby fully reproduced for all legal purposes.

3.1.2 UNPROVEN FACTS

There are no facts held as unproven, since all facts deemed relevant for the assessment of the request were proven.

GROUNDS OF LAW

The Tribunal is materially competent and is regularly constituted, under articles 2 paragraph 1 subparagraph a), 5 paragraph 2 subparagraph a), 6 paragraph 1, 10 paragraph 1 subparagraph a) and paragraph 2 of the RJAT:

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

The process does not suffer from nullities;

There is a preliminary question on which the Tribunal must rule.

PRELIMINARY QUESTION

1st – The Tax Authority, Respondent in the aforementioned process, comes, within its Reply, presented in accordance with the provisions and for the purposes provided in paragraph 1 and 2 of article 17 of the RJAT, to invoke the partial illegitimacy of the Applicant (Bank A…, S.A.), concerning the tax acts contained in Annex A, expressed in documents no.: 4 to 18, attached to the PI;

2nd – That the respective assessments were sent to the Commercial Company "C…, S.A."

3rd – Therefore, they were presented to an entity different from the Applicant;

4th – Requesting the dismissal of the case, under subparagraph d) of paragraph 1 of article 278 of the CPC, and the arbitral process should continue in its terms as to the request for arbitral pronouncement concerning the tax acts of the other five vehicles, contained in Annex A, attached to the PI;

5th – Now, in the Request for Arbitral Pronouncement, presented by the Applicant, it presents for consideration (in points 1 and 2 of the PI), 18 acts identified in the table of Annex A, which is an integral part of the request, sub judice;

6th – In points 9 and 10 of the PI, the Applicant states the reasons for its legitimacy, referring to Annex A (already mentioned above), where it alleges that in its capacity as sole shareholder, holder of 100% of the capital, it closed "C…";

7th – It proves that the company C…, ceased to exist in 2008, as shown by the elements contained in Annex B (copy of minutes no. 30 of "C…");

8th – That the motor vehicles whose IUC assessments are contested, under numbers 4 to 18 of Annex A, were the subject of financial lease contracts concluded by "C…" with the clients, also identified in Annex A, of the PI;

9th – The Applicant, in its capacity as the dominant company, with the extinction of "C…", assumed the financial lease contracts identified in the already mentioned Annex A under numbers 4 to 18, which became part of the portfolio of assets of the Applicant;

10th – Being, therefore, in the years 2013 and 2014, lessor of the vehicles in question;

11th – Thus choosing the Applicant, under articles 3 of the RJAT and 104 of the CPPT, to aggregate the additional assessments whose legality is contested in a single request for arbitral pronouncement;

12th – Considering the facts summarily described and, from the moment the Applicant bore the tax assessed by the AT, it has a legitimate interest in discussing its legality, under paragraph 1, in fine, of article 9 of the CPPT, therefore legally, the legitimacy of the Applicant is considered to contest the disputed tax acts.

The request, which is the object of the present process, is the declaration of annulment of the 18 acts of assessment of IUC relating to the motor vehicles better identified in Annex A of the PI;

Condemnation of the AT to reimburse the amount of tax relating to such assessments in the amount of € 1,270.93;

Condemnation of the AT to payment of indemnity interest on the same amounts.

The matter of fact is fixed, as stated in paragraph 3.1 above, and it is now important to determine the applicable Law to the underlying facts, in accordance with the questions to be decided, identified in paragraph 2.1 above, and it is certain that the central question at issue in the present case, with respect to which there are absolutely opposed understandings between the Applicant and the AT, consists in determining whether paragraph 1 of article 3 of the CIUC establishes or not a rebuttable presumption.

Everything analyzed, and taking into account, on one hand, the positions of the parties in confrontation, mentioned in points 1.3 and 1.4 above, and considering, on the other hand, that the central question to be decided is whether paragraph 1 of article 3 of the CIUC establishes or not a legal presumption of tax incidence, it is necessary, in this context, to appreciate and render a decision.

QUESTION OF THE INCORRECT INTERPRETATION AND APPLICATION OF THE NORM OF SUBJECTIVE INCIDENCE OF IUC

Considering it is undisputed understanding, in doctrine, that in the interpretation of tax laws the general principles of interpretation apply fully, which will be only and naturally limited by the exceptions and particularities dictated by the law itself which is the object of interpretation. This is an understanding that has come to be accepted in the General Tax Laws of other countries and which also came to be enshrined in article 11 of our General Tax Law, which is, moreover, frequently emphasized by jurisprudence.

It is consensually accepted that in order to grasp the meaning of the law, interpretation uses, a priori, to reconstruct the legislative intent through the words of the law, which means seeking its literal sense, weighing it and measuring it in light of other criteria, with the involvement of so-called elements of a logical, rational or teleological nature and of a systematic order:

With respect to the interpretation of tax law, the jurisprudence must be considered, namely, the Judgments of the STA of 05-09-2012, proceeding no. 0314/12 and of 06-02-2013, proceeding 01000/12, available at www.dgsi.pt, the importance of the provision of article 9 of the Civil Code (CC), as a fundamental element of legal hermeneutics;

Paragraph 1 of article 3 of the CIUC provides that "Are subjects to the tax the owners of the vehicles, considered as such natural or legal persons, of public or private law, in whose name the same are registered";

The formulation used in the aforesaid article uses the expression "considering oneself" which raises the question of whether such an expression can be given a presumptive sense, equating it to the expression "presuming oneself", these are expressions frequently used with equivalent meanings;

As taught by Jorge Lopes de Sousa, in Code of Tax Procedure and Process, Annotated and Commented, volume I, 6th Edition, Área Editora, SA, Lisbon 2011, p. 589, that in matters of tax incidence, presumptions can be revealed by the expression "is presumed" or by similar expression, there being mentioned various examples of such presumptions, referring to that contained in article 40, paragraph 1 of the CIRS, in which the expression "is presumed" is used and that contained in article 46, paragraph 2, of the same Code, in which use is made of the expression "is considered", as an expression with an effect similar to that one and also embodying a presumption;

In the legal formulation set forth in paragraph 1 of article 3 of the CIUC, in which a presumption was established, revealed by the expression "considering oneself", of meaning similar and equivalent value to the expression "presuming oneself", in use since the creation of the tax in question;

The use of the expression "considering oneself" was nothing more than the establishment of a closer and clearer approximation between the subject to the tax of the IUC and the effective owner of the vehicle, which is in line with the reinforcement given to the ownership of the vehicle, which came to constitute the tax event, under article 6 of the CIUC;

The relevance and interest of the presumption in question, which historically was revealed through the expression "presuming oneself" and which now uses the expression "considering oneself", lies in the truth and justice which, through that means, is conferred to tax relationships and which embody fundamental tax values, allowing the taxation of the real and effective owner and not that which, by circumstances of diverse nature, is sometimes nothing more than an apparent and false owner. If the case were not thus considered, not admitting and highlighting the presentation of probative elements intended to demonstrate that the effective owner is, in fact, a person different from that which appears in the register and which initially, and in principle, was presumed to be the true owner, those values would be objectively relegated.

Also to be considered is the principle of equivalence, inscribed in article 1 of the CIUC, which underlies the polluter-pays principle and concretizes the idea contained therein that whoever pollutes should, for that reason, pay. The said principle has constitutional basis, to the extent that it represents a corollary of the provision in subparagraph h) of paragraph 2 of article 66 of the Constitution, and also has basis in Community law, whether at the level of primary law, article 130-R, of the Maastricht Treaty (Treaty of the European Union, of 07-02-1992), where the aforementioned principle came to be included as the basis of the Community Policy in the field of environment and which aims to hold accountable those who contribute to the damages that ensue for the community, arising from the use of motor vehicles, should be assumed by their owner-users, as costs that only they should bear.

Considering the facts described above, it is important to emphasize that the already mentioned elements of interpretation, whether those related to literal interpretation, supported by the words legally used, whether those concerning the logical elements of interpretation, of a historical or rational nature and of a systematic order, all of them point in the direction that the expression "considering oneself" has a meaning equivalent to the expression "presuming oneself", and thus it should be understood that the provision of paragraph 1 of article 3 of the CIUC establishes a legal presumption which, given article 73 of the LGT, which establishes that "The presumptions established in the rules of tax incidence always admit proof to the contrary", will necessarily be rebuttable, which means that the subjects to the tax are, in principle, the persons in whose name such vehicles are registered. They will, therefore, be those persons, identified in those conditions to whom the AT must necessarily direct itself;

But it will be, in principle, given that within the framework of prior mandatory hearing, given the provision of subparagraph a) of paragraph 1 of article 60 of the LGT, the tax relationship could be reconfigured, validating the subject to the tax initially identified or redirecting the procedure towards the one who is, in fact, the true and effective subject to the tax in question.

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

Prior hearing which, naturally, must take place at a moment immediately prior to the assessment procedure, corresponds to the appropriate place and time to, with certainty and security, identify the subject to the IUC tax.

That in the case at hand, the Applicant demonstrated, to the AT, in prior hearing, that the facts fell within the scope of financial lease contracts, therefore, through documents contained in Annex A, it was the lessees who were responsible for payment of IUCs, under paragraph 2 of article 3 of the CIUC.

CONCERNING THE LEGAL VALUE OF REGISTRATION

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

Article 7 of the Property Registration Code (CRP), applicable, supplementarily, to motor vehicle registration, by virtue of article 29 of the CRA, provides that "The definitive registration constitutes presumption that the right exists and belongs to the registered holder, in the precise terms in which the registration defines it";

Definitive registration constitutes nothing more than a rebuttable presumption, admitting, therefore, contrary evidence, as follows from the law and jurisprudence has been noting, and may be seen, among others, the Judgments of the STJ no. 03B4369 of 19-02-2004 and no. 07B4528, of 29-01-2008, available at: www.dgsi.pt;

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

Acquirers of vehicles become owners of those same vehicles through the celebration of corresponding purchase and sale contracts, with or without registration;

In this context, it is worth recalling that, given the provision of paragraph 1 of article 408 of the CC, the transfer of real rights over things, in the case sub judice, motor vehicles, is determined by the mere effect of the contract, and pursuant to the provision of subparagraph a) of article 879 of the CC, among the essential effects of a purchase and sale contract, stands out the transmission of the thing;

Given the foregoing, it becomes clear that the legislative intent points in the direction that the provision of paragraph 1 of article 3 of the CIUC establishes a presumption "juris tantum", consequently rebuttable, thus allowing that the person who, in the register, is inscribed as owner of the vehicle, can present elements of proof intended to demonstrate that such ownership is situated in the legal sphere of another person, to whom ownership was transferred;

Which, with respect to the disputed facts, there are financial lease contracts, which were proven by the Applicant, both in prior hearing and in the request for arbitral pronouncement, configuring, therefore, the certainty that it is the respective lessees who hold the subjective responsibility for IUCs, under paragraph 2 of article 3 of the CIUC.

THE PRESUMPTION OF ARTICLE 3 OF THE CIUC AND THE DATE ON WHICH THE IUC IS EXIGIBLE

DATE ON WHICH THE IUC IS EXIGIBLE

The IUC is a periodically taxed tax, the periodicity of which corresponds to the year that begins at the time of registration or at each of its anniversaries, as provided in paragraphs 1 and 2 of article 4 of the CIUC;

It is exigible under paragraph 3 of article 6 of said Code;

It being important to note that, as regards the assessment of the IUC taxed to the Applicant on the vehicles aforementioned, for the years 2013 and 2014, they are not to be considered, because, as they are financial lease contracts, at the moment of the tax events, the vehicles in question were in the legal sphere of the lessees, therefore these hold the use and enjoyment of said vehicles, therefore, under paragraph 2 of the CIUC, they must be held responsible for the payment of the obligation of said tax.

Regarding the burden of proof, article 342, paragraph 1 of the CC stipulates "it is incumbent upon the one who invokes a right to prove the facts constitutive of the right alleged";

Also article 346 of the CC (contrary proof) determines that "to the evidence which will be produced by the party upon whom the burden of proof rests, the opposing party can present contrary evidence regarding the same facts, intended to make them doubtful; if it succeeds, the question is decided against the party burdened with the proof." (As states Anselmo de Castro, A., 1982, ED. Almedina Coimbra, "Civil Procedural Law – Declaratory", III, p. 163, "falling upon one of the parties the burden of proof, to the opposing party it is sufficient to present contrary evidence, this being evidence intended to cast doubt on the facts alleged by the first").

Thus, in the case at hand, what the Applicant has to prove, in order to rebut the presumption that arises from both article 3 of the CIUC and the Motor Vehicle Register itself, is that it, the Applicant, was not the owner of the vehicles in question during the period to which the disputed assessments relate. It proposes to prove, as appears from the case file, is that the ownership of the vehicles did not belong to it during the periods to which the assessments relate. Thus presenting the respective Total Loss Declarations, expressed by the corresponding insurance companies, since the motor vehicles were stolen from it, cf., documents attached to the Grace Claims, contained in the PA, which are hereby fully reproduced for all legal purposes.

REBUTTAL OF THE PRESUMPTION

The Applicant, as mentioned in 3.1., regarding the proven facts, alleged, with the purpose of overcoming the presumption, that it was not a subject to the tax, at the occurrence of the tax events, offering for that purpose the following documents:

Documents contained in Annex A;

As the Applicant was notified by the AT in its capacity as lessor of the 18 vehicles, better identified in Annex A of the PI; vehicles that form part of financial lease contracts, which it is presumed, under paragraph 2 of article 3 of the CIUC, that: "are equated to owners the financial lessees, the purchasers with reservation of ownership, as well as other holders of purchase option rights by force of the lease contract";

Now, those documents enjoy the presumption of truthfulness provided for in paragraph 1 of article 75 of the LGT. Arising from this that at the date when the IUC was exigible, those who held ownership of the motor vehicles were the legitimate lessees.

OTHER QUESTIONS RELATING TO THE LEGALITY OF THE ASSESSMENT ACTS

Regarding the existence of other questions relating to the legality of the assessment acts, taking into account that it is inherent in the establishment of an order of knowledge of the defects, as provided for in article 124 of the CPPT, that proceeding the request for arbitral pronouncement based on defects that prevent the renewal of the disputed assessments, becomes unnecessary, because useless, the knowledge of other defects, it does not seem necessary to address the other questions raised.

REIMBURSEMENT OF THE TOTAL AMOUNT PAID

Under the provision of subparagraph b) of paragraph 1 of article 24 of the RJAT, and in accordance with what is there established, the arbitral decision on the merit of the claim to which no appeal or objection may be lodged, binds the tax administration from the end of the period provided for appeal or objection, and it must, in the exact terms of the success of the arbitral decision in favor of the subject to the tax and until the end of the period provided for spontaneous execution of the sentences of the tax judicial courts "Reestablish the situation that would have existed if the tax act which is the subject of the arbitral decision had not been practiced, adopting the acts and operations necessary for that purpose"

These are legal commands that are in complete harmony with the provision of article 100 of the LGT, applicable to the case, ex vi, the provision of subparagraph a) of paragraph 1 of article 29 of the RJAT, in which it is established that "The tax administration is obliged, in case of total or partial success of complaints or administrative appeals or of judicial process in favor of the subject to the tax, to the immediate and full reestablishment of the situation that would have existed if the illegality had not been committed, corresponding the payment of indemnity interest in accordance with the terms and conditions provided for in the law".

The case contained in the present case file raises the manifest application of the aforementioned rules, given that following the illegality of the assessment acts referenced in this process, it will, by force of those rules, have to be a reimbursement of the amounts paid, whether as title of the paid tax, whether of the corresponding compensatory interest, as a means of achieving the reestablishment of the situation that would have existed if the illegality had not been committed.

OF THE RIGHT TO INDEMNITY INTEREST

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

In the context of the assessment of the tax, its annulment confers on the subject to the tax the right to the restitution of the paid tax and, as a rule, the right to indemnity interest, under paragraph 1 of article 43 of the LGT and article 61 of the CPPT.

Therefore, the Applicant has the right to indemnity interest on the amount of tax paid concerning the annulled assessments.

DECISION

Given the foregoing, this Arbitral Tribunal decides:

To declare the request procedent for the declaration of illegality of the assessment of the IUC, concerning the years of: 2013 and 2014, with respect to motor vehicles identified in the present process, thus annulling the corresponding tax acts;

To declare the request procedent for the condemnation of the Tax Administration to reimburse the amount wrongly paid, in the amount of 1,270.93 euros, condemning the Tax and Customs Authority to effect these payments.

VALUE OF THE CASE: In accordance with articles 306 paragraph 2 of the CPC and 97-A, paragraph 1 of the CPPT and article 3, paragraph 2 of the Regulation of Costs in Tax Arbitration Proceedings, the case is assigned a value of € 1,270.93.

COSTS: In accordance with paragraph 4 of article 22 of the RJAT, the amount of costs is fixed at € 306.00, under the terms of Table I, attached to the Regulation of Costs in Tax Arbitration Proceedings, charged to the Tax and Customs Authority.

Let the parties be notified.

Lisbon, 30-03-2015

The Arbitrator

Maria de Fátima Alves

(the text of this decision was prepared by computer, under the terms of article 131, paragraph 5 of the Code of Civil Procedure, applicable by reference of article 29, paragraph 1 subparagraph e) of Decree-Law 10/2011, of January 20 (RJAT), being its drafting governed by current orthography)

Frequently Asked Questions

Automatically Created

Who is liable for IUC payment when vehicle ownership transfers through a bank's asset portfolio acquisition?
When a bank acquires a vehicle portfolio through asset transfer from a cancelled branch (like B… S.A. in this case), IUC liability generally follows legal ownership under Article 3 CIUC. However, the acquiring bank may challenge this presumption by demonstrating that vehicles are subject to financial leasing contracts where lessees hold exclusive use rights. The bank must prove portfolio succession through proper documentation and may argue that instrumental ownership as lessor, without actual vehicle use, shifts IUC liability to the lessee under the environmental tax principles underlying IUC legislation.
Can a bank challenge IUC additional tax assessments issued for vehicles under leasing contracts at CAAD?
Yes, banks can challenge IUC additional assessments at CAAD for leased vehicles, as demonstrated in Process 830/2014-T. However, the bank must establish standing (legitimacy) by proving: (1) it is the addressee of the contested assessments or successor to the assessed entity; (2) proper documentation of portfolio transfers from cancelled entities; and (3) existence of financial leasing contracts at the time of tax event occurrence. The Tax Authority may raise preliminary objections regarding legitimacy if assessments were issued to different legal entities, requiring clear evidence of corporate succession and asset transfers.
What is the subjective incidence rule for IUC when a branch company's registration is cancelled in Portugal?
When a branch company's registration is cancelled in Portugal, IUC subjective incidence transfers to the entity that assumes the vehicle portfolio. In Process 830/2014-T, assessments issued to B… S.A. (cancelled 10-01-2007) were challenged by the successor bank. The key requirement is demonstrating valid portfolio transfer through official documentation. However, the successor entity can contest liability by proving vehicles were under financial leasing at the tax event date, arguing that lessees—not the instrumental owner—should bear IUC as the actual users and environmental impact generators under Article 3(2) CIUC.
How does CAAD handle arbitral proceedings involving 21 IUC additional assessments for multiple tax years?
CAAD handles multiple IUC assessments through consolidated arbitral proceedings when assessments share common factual and legal grounds. In Process 830/2014-T, 21 assessments for 2013-2014 were addressed in a single arbitration. The tribunal first examines preliminary issues like standing/legitimacy (particularly when assessments involve different legal entities), then addresses substantive issues including subjective incidence rules, financial leasing effects on tax liability, and portfolio succession. The procedure follows RJAT provisions, including appointment of a sole arbitrator, optional hearings under Article 18 RJAT, and decision deadlines. Parties may request consolidated reimbursement of all wrongly paid amounts plus interest.
Are compensatory and indemnity interest recoverable when IUC assessments are annulled under Articles 43 LGT and 61 CPPT?
Yes, compensatory and indemnity interest are recoverable when IUC assessments are annulled. Article 43 LGT mandates compensatory interest on amounts paid beyond legal deadlines for debt collection acts later declared illegal. Article 61 CPPT provides indemnity interest when taxpayers suffer prejudice from illegal acts or unjustified delays attributable to tax authorities. In Process 830/2014-T, the bank specifically requested €2,883.50 plus both interest types. Entitlement depends on: (1) successful annulment of assessments; (2) actual payment of contested amounts; and (3) demonstrating the assessments were illegal ab initio due to incorrect subjective incidence application. Interest calculation begins from payment date until effective reimbursement.