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Brussels, 28 January 2010

Car taxation: The European Commission calls on Portugal to change its legislation on annual circulation tax on motor vehicles

The European Commission has called on to modify its provisions on annual circulation tax on motor vehicles. The Commission request was made through a reasoned opinion under Article 258 of the Treaty of the European Union, If the relevant national legislation is not amended in order to comply with the reasoned opinion, the Commission may decide to refer the matter to the European Court of Justice.

Under the provisions currently in force in Portugal, the annual circulation tax for two similar used cars will be calculated differently depending on whether these cars were registered in Portugal for the first time before or after 1 July 2007. Cars first registered in Portugal from 1st July 2007 are subject to a generally higher annual circulation tax than those registered before that date, due to a difference in the way the tax is calculated.

The differentiated annual circulation tax system was introduced in Portugal as a part of an overall reform of vehicle taxation, taking the vehicle's polluting capacity indicators as the criterion for determining the tax base. Registration tax on cars was diminished, whereas the annual circulation tax was raised. When introducing the new measures, the Portuguese legislator found that it would be unfair for cars registered in Portugal before 1 July 2007, and consequently subject to a higher registration tax, to have to pay the new and higher annual circulation tax.

The Commission appreciates and welcomes the Portuguese authorities' efforts to amend their car taxation legislation in order to take the pollution caused by CO2 emissions into account. In fact, the Commission itself put forward a proposal for a Directive on passenger car related taxes, which sought to make it compulsory for Member States to base the calculation of taxes on passenger cars on their emissions of carbon dioxide.

However, as far as the taxation of imported used vehicles is concerned, the EU Court of Justice has held that a car becomes a "domestic car" once it has been imported and placed on the domestic market.

According to the Court of Justice, Article 110 of the Treaty is infringed where the tax charged on imported cars and that charged on similar domestic cars are calculated in a different manner, on the basis of different criteria, leading to higher taxes being imposed on the imported product. The Commission believes that this is exactly what is happening in the Portuguese case.

The Commission's case reference number is 2008/4277.

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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