Portuguese tax authorities have decided to review the way they have calculated the single circulation tax (IUC) levied on used cars imported from the European Union so far, without taking into account that they already had first registration in another country. Basically, when the car arrived in Portugal, it was treated as if it were registered for the first time, regardless of its actual age for tax purposes. However, the Portuguese tax authorities now recognize that this method of calculation was illegal and, moreover, that the owners of vehicles in these cases have the right to recover the tax collected in excess during the last four years, provided that the law authorizes the revision of a tax law.
Portuguese tax authorities decide to reimburse four years of IUC tax for certain imported cars
The decision appeared in an order of the tax and customs administration at the end of December 2019 and follows a legal action filed with the arbitral tribunal of the Administrative Arbitration Center (CAAD) by an injured taxpayer who, in addition to the tax, also applied for compensatory interest from the date of payment. According to the law, before such a process, the tax authorities can revoke or voluntarily correct the acts that are challenged, and this is what happened in this case.
At issue were the regulations of the IUC from 2016 to 2019 of a used car imported from Germany where it was registered for the first time in 1996. Arrival in Portugal in May 2008, it was registered in Portugal but for the UIC tax it was treated as if it were a new car and the first registration in Germany was ignored. This is not the only case and the consequence of this method of calculation was that "those whose vehicles were registered abroad before 2007 paid a higher tax when in fact they should pay less or even pay nothing at all, "says Paulo Carido, a lawyer in Porto, who sponsored the CAAD process that led to this decision by the tax authorities.
Portugal condemned by the European Court
The law was hotly contested and the case reached the Court of Justice of the European Union in April 2018 thanks to a taxpayer from Coimbra, who challenged the IUC charged by the tax authorities. The Court then ruled that Portugal accorded differential treatment to imported used cars to "encourage the sale of national used vehicles and thus discourage the importation of similar used vehicles", in violation of the European treaties. In other words, the Portuguese law should be changed, which really happened in September 2019, with the same treatment in terms of IUC for used cars imported from other EU countries and those registered for the first time in Portugal. The bill is now the same for everyone, because in one case as in another the real age of the car is taken into account for the calculation of the IUC.
From now on it will be "the date of the first registration of a vehicle, whether it has been granted on national territory or in another EU Member State", which will be taken into account.
IUC tax is a polemic topic between Brussels and Lisbon
By deciding to refund the overcharged tax in the last four years, the Portuguese tax authorities "recognize that in recent years the IUC tax has been calculated in violation of European law. The four-year period is explained because you cannot return behind that four years in the revision of fiscal acts ", underlines Paulo Carido.
With this decision, other car owners in the same circumstances will now be able to "question the liquidation of the IUC in the past four years and they will surely have a decision in their favor," he said. "It is not a court decision, it is the Portuguese taxman himself who, in similar cases, should take the same conclusions," he added.
It is not possible to have an exact idea of the number of owners who can be covered by this reimbursement, since everything will depend on the date of initial registration in the countries of origin before registering the vehicle. However, this is a relatively common thing: in 2018 77,241 foreign used cars were legalized in Portugal.
Although figures are not yet available for all of 2019, industry professionals have reported some shrinkage in the auto market. They explain this by the fact that, no longer in the UIC, but in the ISV, Portuguese law continues to penalize these vehicles, without taking into account their age in the calculation of the environmental component.
Article translated from Jornaldenegocios.pt
