Portuguese Tax Authorities Told to Return Tax Charged to Owners of Imported Used Cars
The Portuguese Tax and Customs Authority (AT) have been told to return the Vehicle Tax ISV (Imposto Sobre Veículos) charged in excess by owners of used imported cars. The decision was made by the Constitutional Court, which rejected the appeals presented by the AT.
It concerns individuals who purchased a vehicle in another country, brought it to Portugal, and paid the Portuguese Vehicle Tax ISV.
This vehicle import tax is usually 10% at most. Payable on the purchase of the following types of vehicles:
- light-duty passenger vehicles
- passenger vehicles
- light-duty mixed vehicles
- light-duty goods vehicles
- motor caravans
- mopeds, tricycles and quadricycles.
The complaint to the European Commission, which opened a non-compliance procedure against Portugal, had been filed by companies linked to the trade in imported used cars.
The case began in 2016 when a group of companies that import used cars from other EU countries filed a complaint with the European Commission. The companies argued that Portuguese law violated EU law by charging higher ISV rates on imported used cars than those purchased in Portugal.
The European Commission agreed with the companies and opened a non-compliance procedure against Portugal. The Portuguese government refused to change the law, and the case eventually went to the Court of Justice of the European Union (CJEU).
In 2021, the CJEU ruled in favour of the companies, finding that Portuguese law violated EU law. The CJEU said that the Portuguese government had failed to consider used car depreciation when calculating ISV.
The Portuguese government appealed the CJEU’s decision to the Constitutional Court, but the court upheld the decision. The court said that the CJEU’s decision was binding on the Portuguese government and that there was no basis for appeal.
The Portuguese Ministry of Finance refused to amend the law, and the case reached the TJUE. The Court of Justice of the EU makes sure EU law is applied the same way across the EU and that EU institutions and countries abide by EU law. They ruled that Portuguese legislation violated community treaties, as it called the principle of free movement into question.
The Tax and Customs Authority (AT) will be obliged to return the Vehicle Tax (ISV) charged in excess by owners of used imported cars, following a decision by the Constitutional Court. A constitutional court is a high court that deals primarily with constitutional law.
Its central authority is to decide and rule upon laws that are challenged and deemed unconstitutional, In other words, whether they conflict with constitutionally established rules, rights, and freedoms, among other things. They rejected the appeals presented by the AT.
The Portuguese State had already lost the case at the Court of Justice of the European Union (CJUE), which considered that the Portuguese law violated the community treaties. The Constitutional Court (TC) confirmed this understanding.
Community legislation enshrines that the tax on vehicles applicable to second-hand cars purchased in other Member States has an environmental component resulting from the number of years of use and a reduction in the tariff.
Subsequently, the Ministry of Finance refused to change the law. The case reached the TJUE, which decided that Portuguese legislation violated community treaties, as it called into question the principle of free movement.
AT did not agree with this decision and filed cases at the Arbitration Court at the Administrative Arbitration Centre. However, the outcome was the same. The AT then tried again, resorting to the TC, who disagreed.
The TC judges upheld the CJUE’s decision, claiming that, given that decision, there was no basis for an appeal to the TC.
The Portuguese Tax and Customs Authority (AT) has been told to return the Vehicle Tax (ISV) charged in excess by owners of used imported cars. The decision was made by the Constitutional Court, which rejected the appeals presented by the AT.
The AT is now required to return the ISV charged in excess to all owners of used imported cars. The amount of ISV refunded will vary depending on the vehicle and the date it was imported.
The decision by the Constitutional Court is a victory for consumers who purchased used imported cars in Portugal. It is also a victory for the European Union, which has been working to ensure that EU law is applied equally across all member states.
The decision is also a reminder that the Portuguese government is not always willing to comply with EU law. In this case, the government was forced to change its law after the European Commission and the CJEU challenged it.
This shows that the EU is committed to ensuring its rules are applied equally across all member states and is willing to act against governments that do not comply.
So hopefully, all those who bought and imported used cars from abroad will receive some good news very soon. However, as we all know, Portugal’s legal and justice system always seems to be a law unto itself, so I, for one, will not won’t holding my breath.