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Brussels loses patience over Portugal’s tax rate for imported used cars

Published on 25/01/2019

Brussels again is asking Portugal to amend its legislation that taxes imported used cars as such an astronomical rate.

“The European Commission has decided this Thursday to start an infringement procedure against Portugal since it does not consider the environmental component of the registration tax applicable to used cars imported from other member states for depreciation purposes,” according to a typically convoluted statement from Brussels.

“The Community executive understands that the Portuguese legislation is not compatible with article 110 of the Treaty on the Functioning of the European Union, as the used vehicles imported from the other Member States into Portugal are subject to a higher tax burden than used vehicles purchased locally, since their depreciation is not fully considered.”

Brussels also would like to see Portugal amend the restrictive provisions on the taxation of capital gains, “aligning them with the relevant rulings of the European Court of Justice.”

Portugal has introduced an option whereby non-residents can be equated to resident taxpayers, and 50% of these capital gains from Portuguese sources may be taxed at progressive tax rates, however, according to Brussels, “EU ruling considers that the mere existence of a treatment option equivalent to resident taxpayers’ does not correct the infringement if, by default, taxation continues to impose a higher burden on non-resident taxpayers.”

This reasoned opinion was sent by Brussels and is the second step in the infringement procedures against Portugal, decided by the Commission.

If Portugal does not act within two months, the commission may send a ‘reasoned opinion’ on this matter to Portuguese authorities – and so these subjects drift on.

Regarding the capital gains tax, the Commission may refer the matter to the European Court of Justice, if Portugal does not respond.