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The environmental component that makes up the vehicle tax calculation formula (ISV) will also be taken into account when calculating the tax to apply to used vehicles imported from the European Union. The measure appears in the proposed State Budget for 2021, in the preliminary version to which the Company had access and should lead to a reduction in the tax borne by these vehicles.
An arm is at stake between the tax authorities and the importers of used cars in the European Union that has already taken the country to the Court of Justice, at the initiative of the European Commission. The court’s decision has yet to come, but the government is now making a rule change.
Basically what happens is that The ISV has two components, one with displacement and the other with the so-called environmental component. However, according to Portuguese legislation currently in force, the reduction due to age only affects the cylinder capacity component, leaving it outside the environmental component. This causes the final price to skyrocket at times, which shoots up much higher than the effective market value and strongly discourages imports. And, above all, it causes cars from other European countries to receive unequal treatment, which violates European treaties.
Now, and according to the OE proposal, a Reduction factor of the environmental component, which was not foreseen, due to the number of years of the vehicle, which, explains Olga Esperança, PwC inspector, should reduce the final tax payable by those who choose to import used vehicles from the Union European hand.
As far as Business is concerned, it is about a compromise solution to respond to a dispute with Brussels, where Portuguese legislation is considered discriminatory, which has already led the Commission to proceed with a non-compliance procedure and, subsequently, as Portugal has not changed, with an action before the Court of Justice of the European Union. In practice, with this change that the Government now proposes, a discount is not given equal to the one that exists for the cylinder capacity, but the discount is made taking into account the useful life of the car (and not taking into account the useful life of car). In other words, in this way Portugal ensures the taxation of the environmental component, but it does so based on the useful life of the car and not, as with the displacement, based on the time the vehicle already has.
In Brussels and in court, where objections by importers have been The Government maintains that it is not trying to create any obstacle for the proper functioning of the single market, but that it is respecting the environmental commitments made by the country, as well as by the Member States in the Paris Agreement on climate change. And yet, to guarantee the “polluter pays” principle, considering that it would not make sense to attribute a tax relief to the import of more polluting used vehicles.
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