Portuguese tax on imported secondhand vehicles is illegal

In a death blow to the long running and illegal Portuguse practice of stiffing people who import secondhand cars, the European Union's Court of Justice finally has decided that Portugal’s taxation policy is breaking EU rules.

The Tax Authority’s insistence that a vehicle ceased to depreciate after five years has ensures those planning to import a vehicle are deterred due to the cost of the tax which often is more than the vehicle is worth.

The Court of Justice has ruled that the tax on used cars imported from another member state to Portugal "violates the rules of free movement of goods."

At issue is, in particular, Article 11 of the Vehicle Tax Code (MIC), where Portugal clearly discriminates against imported used vehicles by its use of home grown depreciation tables.

"Portugal applies a system of taxation in which the tax liability of a vehicle used for less than one year is equal to the tax on a new vehicle in Portugal and, secondly, the depreciation of used motor vehicles more than five years old is limited to 52% for the purposes of calculating the amount of this tax, regardless of the actual condition of the vehicles," considers the court in a ruling that many residents had given up waiting for.

The judgment states that the tax payable in Portugal "is calculated without taking into account the actual depreciation of these vehicles, which does not guarantee that such vehicles are subject to an equal amount of tax to the tax on similar used vehicles available in the domestic market."

Following this judgment, the European Commission will now impose a deadline for Portugal to change the legislation, a deadline that will be ignored for as long as possible.

The government said that it will analyse the Court’s decision and is likely simply to adjust other elements of the importation tax bundle to make up for the loss.

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