Imported Used Cars: Government Ends Discrimination In ISV – Cars

Used cars arriving in Portugal and imported from European Union countries will get the same treatment given to new cars registered in the country for the first time, according to the 2025 state budget proposal delivered on Thursday in Parliament. In this way, an end is put to the treatment that was considered discriminatory in court and for which the Court of Justice of the European Union also said that it favors the sale of national used vehicles and discourages the import of similar used vehicles.

Therefore, according to the proposal, the time of use will be harmonized for the purposes of applying the reduction percentage related to the cylinder capacity and environmental components of used vehicles bearing final community registrations granted by other EU Member States,” explained PwC inspectors. On the other hand, the vehicle owner « He is exempted from paying the tax recalculation request fee in cases where he does not agree to the temporary assessment issued by customs.

Hugo Salgirinho, a specialist at PricewaterhouseCoopers, explains that the goal is to “put an end to the litigation that is still ongoing” regarding this matter.

To better understand what is at stake, it is necessary to go back in time a little and understand how ISV is calculated. This tax has a cylinder capacity component and an environmental component depending on which vehicles are entitled to a reduction resulting from the number of years of use. The problem is that the tax calculation, for a long time, on the environmental side, did not take into account the age of the used cars that were imported, which led to the final tax due being sky-high. The sector complained to the European Commission, which opened a case of Portugal's non-compliance. The country did not change the law. The case reached the European Court of Justice and the result was clear: the Portuguese law violated the Community Treaties, calling into question the principle of freedom of movement.

In the state budget for 2021, the government changed the law, but kept the difference between devaluation of the currency depending on the engine capacity component and the environmental component. The automotive sector returned to the fore, insisting on the persistence of unequal treatment, and at the Center for Administrative Arbitration (CAAD), arbitration decisions were initiated in favor of taxpayers, considering that the new wording given to the law “because it distinguishes in the context of calculating the tax, the reduction rate applied to the component environment, compared to that applied to the cylinder capacity component, violates Article 110 of the TFEU” – in other words, the principle of freedom of movement.

With the change now proposed in OE 2025, imported vehicles will receive the same treatment as other vehicles. While this will avoid new challenges in court, it can also give strength to cases that are still unresolved or awaiting resolution.

On the other hand, the OE proposal also specifies that hybrid passenger cars registered between January 1, 2015 and December 31, 2020 benefit from an average rate of 25%, as long as they have a minimum driving range of 25 kilometers in electric mode.

In this way, these cars are equated with plug-in hybrids that have a range in electric mode of at least 50 kilometers and CO2 emissions of less than 50 grams of CO2 per kilometre.

It should also be noted that next year there will be no update to the ISV and individual road tax rates, unlike what usually happens.