The novel against the Portuguese tax authorities and taxpayers importing foreign vehicles is not over! Indeed, the dispute over the collection of the ISV tax on the import of foreign cars is now before the Constitutional Court. The Portuguese State was ordered in September to return the excess ISV tax on the importation of a foreign vehicle. This conviction has finally been challenged by the Portuguese tax authorities who decide to go to the end of their possible remedies in order to annul this decision which opened the way to remedies by many taxpayers who imported foreign vehicles. What are the consequences of this decision? Is this appeal from the Portuguese tax authorities likely to succeed? Lisbob, the expatriate's assistant in Portugal, tells you all about this turnaround on the ISV tax in Portugal.
Portuguese tax authorities dispute condemnation to refund ISV
An endless novel
The Portuguese tax authorities had already lodged an appeal with the Supreme Administrative Court seeking an arbitration order ordering the State to return the surcharged ISV to a taxpayer, without success, as the court refused the taxman's request.
Indeed, the ruling of the Supreme Administrative Court was rendered on 18 September last and was a victory for importers of foreign cars against the tax authorities in a dispute that has lasted since 2017, when the law on ISV was amended.
In the 2017 Portuguese State Budget, the ISV calculation method had been modified and its result is now higher for imported used cars than for taxation on vehicles sold on the domestic market. This situation creates, according to the European Commission, a distortion of competition and violates the rules of free movement of goods and people.
Will the ISV tax be cancelled ?
Portugal, condemned, remains on its positions
At the time, the European Commission had opened an infringement procedure against Portugal, which is still pending, given the new rules considered discriminatory.
What is at issue is the fact that the calculation of the ISV tax does not take into account the age of the imported vehicles. Brussels considers that Portuguese law infringes Article 110 of the Treaty on the Functioning of the European Union, since second-hand vehicles imported from other Member States are subject to a higher tax burden than second-hand vehicles purchased from Portuguese territory.
The Portuguese tax authorities have already tried to justify this difference by environmental criteria, which has not convinced the European Commission to insist on the discriminatory nature of the calculation of the ISV for imported cars. The decision of the Tax Arbitral Tribunal was in line with the European Commission, but the Portuguese tax authorities had not complied with it.
This case concerns one taxpayer in particular, but there would be several identical cases in the courts.
