Road Service Contribution

The Road Service Contribution (CSR) was created by Law no. 55/2007, of August 31 and its purpose was to finance the national road network, currently under the responsibility of Infraestruturas de Portugal, S.A. It was levied on gasoline, diesel and liquefied petroleum gas.

The Court of Justice of the European Union (CJEU), in case no. C-460/21 of February 7, 2022, found the CSR to be contrary to European law. The CSR was abolished by Law no. 24-E/2022, of December 30. Infraestruturas de Portugal, S.A. now receives part of the revenue from the ISP (the tax from which the CSR was originally created and from which it has since been emancipated).

Between the end of 2023 and the beginning of 2024, there were more than a dozen contradictory and conflicting arbitration decisions on this issue*.

In addition to the contradictions found (which will be detailed below) with regard to the dilatory exceptions incessantly invoked by the AT, namely: (1) ineptitude of the initial petition due to lack of purpose (2) lack of jurisdiction of the Arbitral Tribunal on the grounds of the matter and (3) on the grounds of the cause of action and (4) illegitimacy of the claimant/passive party, there was also a high degree of unpredictability and legal uncertainty with regard to the substantive merit of the decisions made by the Court.

Dilatory exceptions

Ineptitude of the initial petition for lack of purpose

This exception is based on the argument that, since the contested tax acts were not identified in the request for arbitration, it is not possible to establish a correlation between the upstream tax assessments made by the fuel supplier (the taxable person) and the purchase invoices mentioned by the end customer - the taxpayer who actually bears the tax burden.

In its various decisions, the Arbitration Court disagreed with the AT's argument, considering that the tax assessment acts are duly identified and that "the taxpayer cannot see his tax situation worsened by the fact that he is unable to present specific documentary evidence to which he cannot have access, when the Tax Authority has failed to obtain this evidence by its own means."

Incompetence of the Arbitral Tribunal on the grounds of the matter

This exception is related to a disagreement over the more nuclear nature of the classification of taxes, given that, according to the AT's interpretation, the CSR should be classified as a financial contribution, and not as a tax, and is therefore excluded from tax arbitration (under the terms of the binding ordinance no. 112-A/2011, of March 22).

The doctrine defines financial contributions as a tertium genus of tax revenue, which can be classified as collective fees, insofar as they are intended to compensate for the services provided by a public entity to a certain group of individuals.

The Road Service Contribution was intended to finance the national road network under the responsibility of Infraestruturas de Portugal, S.A., and the financing of the national road network under the responsibility of this entity was ensured by the respective users and, subsidiarily, by the State - the contribution corresponds to the consideration for the use of the national road network, as it is verified by the consumption of fuels, and constitutes a source of financing for the national road network.

In the opinion of the Court, in most of the decisions analyzed, since there is no specific link between the benefit derived from the activity of the public entity that is the holder of the contribution and the group of taxable persons, CSR should not be qualified as a financial contribution, so the dilatory exception invoked by the AT is unfounded.

Lack of jurisdiction of the Arbitral Tribunal on the grounds of the cause of action

Although this exception is not raised in all the decisions mentioned, it is based on the erroneous assumption that the legality of the CSR regime as a whole is being discussed, as well as its own lack of conformity with European law. As the Court mentions, rules of secondary European law, like rules of conventional international law, have direct effect in the domestic legal order with the same relevance as rules of domestic law, immediately binding the state and citizens (Article 8 of the Constitution). Thus, a judicial challenge to an act of assessment can be brought on the grounds of any illegality, and there is no distinction between illegality resulting from rules of domestic law or conventional law - this exception is thus ruled out. 

Illegitimacy of the applicant

As enshrined in article 18(4)(a) of the LGT, anyone who bears the burden of the tax due to legal repercussion, even if they are not a taxable person in the tax relationship, retains the right to complain, appeal, challenge or request an arbitration ruling under the terms of the tax laws against the acts of assessment that generate the (economic) repercussion.

According to some of the arbitration case law, both fuel suppliers (as taxpayers) and users of the national road network (as the entities that bear the tax burden) have legal standing to challenge, in the first case, CSR assessments and, in the second case, the acts of economic repercussion of the contribution - the entities that are passed on and those that are passed on have different interests in suing and none of the legal criteria that justify the necessary joint venture apply to them, i.e. the intervention of the fuel suppliers is not mandatory, nor does their failure to intervene imply that the necessary joint venture has been waived or constitute grounds for the taxpayers' illegitimacy.

According to the case law of the CJEU, if there has been pass-on, only the person who has been passed on has standing to challenge the acts that give rise to it or those that precede it, since only the person who has been passed on is affected in their legal sphere by the harmful act and the substitute only has standing insofar as they have not fully passed on the tax they have borne in that capacity.

Nonetheless, in several arbitration decisions (albeit in some of them with losing votes), the Court has accepted as well-founded the dilatory plea of illegitimacy of the claimant, considering that only the taxable person has legal standing, also justifying it with European case law that "a Member State may oppose a claim for reimbursement of an undue tax, by the purchaser on whom that tax has been passed on, on the grounds that it was not that purchaser who paid it to the tax authorities, provided that, under national law, that purchaser can bring a civil action for recovery of the undue tax against the taxable person and that reimbursement of the undue tax by the latter is not, in practice, impossible or excessively difficult".

Merits of the case

In arbitration decisions that do not have their path prematurely interrupted by prior dilatory exceptions, the merits are discussed considering the conformity of the Road Service Contribution with European law, and the right to reimbursement of unduly paid tax is assessed.

Thus, the question arises as to whether it is admissible to reimburse the CSR unduly assessed to the taxpayer when the tax burden resulting from the incidence of the tax is passed on to final consumers through the corresponding price increase, generating a situation of unjust enrichment.

According to settled case law of the CJEU, the obligation to reimburse taxes levied in a Member State in breach of EU provisions can only be excepted if it leads to unjust enrichment of the holders of the right, i.e. when it is proven that the taxable person responsible for paying those duties actually passed them on to other persons or entities.

Thus, a Member State can only oppose the reimbursement of a tax unduly levied under EU law when the national authorities prove that the tax was borne in full by a person other than the taxable person and when the reimbursement of the tax would lead to unjust enrichment for that taxable person.

Since this exception (to the principle of refunding taxes incompatible with EU law) is a restriction on a subjective right resulting from the EU legal order, it must be interpreted in a restrictive way, particularly in view of the fact that passing on a tax to the consumer does not necessarily neutralize the economic effects of taxation on the taxable person. Thus, it cannot be accepted that, in the case of indirect taxes, there is a presumption that the pass-on has taken place and that it is up to the taxpayer to prove the contrary. The same applies when the taxpayer has been obliged by the applicable national legislation to incorporate the tax into the cost price of the product in question.

EU law therefore precludes the application of any presumption or rule of evidence designed to place the burden of proving that taxes unduly paid have not been passed on on to other persons on the operator concerned, and which is intended to prevent the presentation of evidence designed to contest an alleged pass-on. Furthermore, even if it is proven that the undue tax has been passed on to third parties, reimbursing the operator does not necessarily imply unjust enrichment on the part of the operator, since incorporating the amount of the said tax into the prices charged may result in losses associated with a reduction in the volume of sales.

Therefore, the refusal to reimburse unduly assessed tax, in violation of European Union law, is only admissible if the Tax Administration proves that the tax was borne, in full or in part, by a person other than the taxable person and that, furthermore, it did not have a negative impact on the taxable person's sales margins or turnover, so that the reimbursement could generate unjust enrichment, which cannot be proven by mere presumptions.

*Processo nº 374/2023-T de 2023-12-14; Processo nº 465/2023-T de 2023-12-14; Processo nº 534/2023-T de 2023-12-20; Processo nº 298/2023-T de 2024-01-04; Processo nº 408/2023-T de 2024-01-08; Processo nº 375/2023-T de 2024-01-15; Processo nº 523/2023-T de 2024-01-24; Processo nº 372/2023-T de 2024-01-25; Processo nº 296/2023-T de 2024-02-01; Processo nº 332/2023-T de 2024-02-01; Processo nº 490/2023-T de 2024-02-09; Processo nº 409/2023-T de 2024-02-09 e Processo nº 486/2023-T de 2024-02-14.