European Commission issues an ultimatum and orders Portugal to modify ISV tax on imported vehicles
Brussels decided to step up against Portugal in the conflict between them over the ISV tax on foreign vehicles imported into Portugal. Indeed, Brussels has notified Lisbon that it must amend its rules on the taxation of second-hand vehicles imported from other Member States of the European Union. Even more threatening, the European Commission has issued an ultimatum of one month in Portugal and force it to change its rules, or having to go to the European Court of Justice. This procedure against Lisbon started in 2016 because Brussels considers that imported vehicles are discriminated against vehicles sold on Portuguese territory. Is this the end of the ISV tax for imported vehicles ? What is the detail of the communication from the European Commission ? Lisbob, the expatriate assistant in Portugal, tells you all about this ultimatum launched by Brussels on the ISV tax.
European Commission issues an ultimatum and orders Portugal to modify ISV tax on imported vehicles
ISV tax : a 4 year old conflict
The European Commission has notified Lisbon that tax legislation on second-hand vehicles imported from other Member States needs to be amended. Indeed, Brussels considers that the formula for calculating the vehicle tax (ISV) discriminates against imported vehicles, which pay more tax than used cars marketed on Portuguese national territory.
Brussels considers that this situation is contrary to European rules and that if Portugal does not correct this difference in taxation within one month, the Commission "may decide to refer to the Court of Justice of the European Union (CJEU)" , she said in a statement, published on Wednesday on its official website.
According to Brussels, "Portuguese legislation does not currently take into account the total depreciation of cars imported from other Member States and is therefore not compatible with Article 110 of the Treaty on the Functioning of the European Union".
It also recalls that the CJEU has already sentenced Portugal in June 2016 after concluding that an earlier version of Portuguese tax was contrary to EU law.
ISV tax is a very polemic topic
ISV tax attacked from the outside, but also from the inside
This is yet another defeat for the Portuguese government, which has defended the legitimacy of the ISV tax for used cars from Brussels, as well as the Portuguese courts. Indeed, more and more expatriates who imported their vehicle were inflicted incredible amounts and challenged the amounts in court.
The most recent situation concerns a Portuguese decision which gave importers of second-hand cars another victory, ordering the Portuguese State to refund the amount in question to a taxpayer. The dispute dates from 2017, when the law was amended in the state budget, now providing for a higher tax on imported used cars than for domestically-sold vehicles. Indeed, it was in this year that Brussels opened an infringement procedure against Portugal.
In the meantime, the Portuguese state has to appeal the decision of the Supreme Administrative Court to the Constitutional Court. In October of this year, the Portuguese tax authorities told Expresso that the tax and customs authorities had been mandated to defend the national interest as much as possible, using all means at its disposal to challenge any court decision that would cancel this ISV tax. There are several identical cases pending before the courts.
ISV tax ? Because of the global warming
The Portuguese state has justified the tax differential of imported vehicles by environmental problems and global warming. As hypocritical as it may seem, the Portuguese government does not hesitate to deny the financial interest of this ISV tax and is even hiding behind the Paris agreements.
"The aim is not to create obstacles to the proper functioning of the single European market, but to respect the environmental commitments made by the Portuguese Government (enshrined in the Constitution), as well as by the Member States of the Paris Agreement on climate change (especially carbon neutrality in 2050) ", said in October an official source of Finanças. "The statistical data on the issue of registrations show that there is no obstacle to the functioning of the internal market: between 2017 and 2018, the number of imported vehicles has increased by 14%, well above the growth rate of new car sales by only 2%. "
Lisbob insists that this is in no way a questioning of the ISV tax in its entirety, but only the difference between vehicles imported from abroad and vehicles sold in Portugal. The ISV tax brings a lot of money to the Portuguese state and its disappearance is absolutely not on the agenda.