Portuguese taxes on cars

Since 1988 there is in Portugal a tax called "Imposto Automóvel" (IA - Automobile Tax) that you indirectly have to pay when you buy a new car. The importer pays it to the government and includes it in the final price.

This tax is calculated multiplying the cubic centimeters (displacement) of the car's engine by a value minus a predefined value. You can see the current rates here (page 10).

One of the reasons why this tax is so criticized in Portugal is because IA is subject to Imposto Valor Acrescentado (IVA/VAT - Value Added Tax) at 21%.

When you buy a new car you pay: car's base price + IA + 21% IVA/VAT.

In 2006 the government in functions decided to add an "environment component" (Componente Ambiental) to the tax. It was still called IA (Imposto Automóvel), but 10% of the total tax income should be calculated regarding the car's CO2 emissions.

Next July (2007) this percentage will rise to 30%, and in January 2008 it should represent 60% of the total tax income. The tax name will change from IA to Imposto Sobre Veículos (ISV - Vehicle Tax).

Besides the rise of the environment component, the government decided that part of the tax should be transferred from buying to circulation.

Until now the income from circulation tax, called Imposto Municipal sobre Veículos (Vehicle City Tax), would go to the City where the vehicle was registered. The value of this tax is/was rather low. You can see the current rates here.

The tax due when buying a car (ISV) is expected to drop (average 10%), but the circulation tax, now called Imposto Único de Circulação (IUC - Unique Circulation Tax), payable every year, will rise substantially (average 300-500%). You can see the future rates here (ISV) and here (IUC).

Cars registered before July 2007 will pay IUC according to the current values forever. Cars registered after July 2007 will pay the new values.

Used vehicles imported from any Country pay ISV. When imported from an European Union Country there is a discount given based on age, the older the bigger discount. Starting July imported used vehicles will pay exactly the same IUC that new vehicles pay. This is an "effort" of the government to reduce the import of used vehicles (much more cheaper than new vehicles). You can see the discount percentages here.

If you're moving to Portugal, and you want to bring your car along, you're exempt from ISV. There are three conditions that you must meet to be exempt:
- you must be over 18 years old and have a driver's license for more than 12 months
- you must provide documentation that proves that you were a resident in another country for at least 12 months (a declaration from an official entity - such as an embassy, and some house bills/receipts or income/tax/social security documents)
- you can't sell the car for at least 12 months after portuguese registration

You'll have to visit personally the portuguese customs (Alfândega) and explain your intents. You can find Alfandega's several addresses here.

Sorry, but due to some time restrains, I'm not able to answer any further questions.

30.05.2007. 00:30

R van der Heijden em 28.05.2008. 00:31

Dear FD,

On this site I have read the following

Se comprou carro a partir do dia 1 de Julho de 2007 tem a partir de agora as seguintes obrigações:

• pagar o IUC num prazo máximo de 90 dias após a data da matrícula
• pagar o IUC todos os anos no mês da matrícula do carro

"They" told me that, since the 1st of January 2008, you have to pay the IUC in the month
that is mentioned on the Livrete or the Certificado de Matrícula.

Please help me out because I don't understand what's the difference between the two options mentioned above.

Best regards
Rob

Paul em 27.05.2008. 18:41

Hi,

I would like to import an older car, 3000cc, from 1979. The car has no record of CO2 emmissions.
Would the ISV calculation be, for 2008:
3000xEur 9.25 x 20% then deduct 9199.88?

Thanks in advance,

Paul

FD em 16.05.2008. 10:13

As long as the driver and owner doesn't work, earn any money, or reside in Portugal for more than 183 days per year, you can drive a foreign car without any problems, considering it's legal in it's country of origin - MOT certified, insurance, etc.

If the car stays in Portugal for more than 183 days per year, you'll have to pay IUC, the portuguese annual road tax. It's based on engine displacement and CO2 emissions.

You can drive it from the garage to your property without any problems as long as the above conditions are met.

For you to be able to drive it without any restrictions in Portugal, you would have to legalize it, but the cost of that procedure, specially in this case because of the vehicle characteristics (pollution and engine capacity), is absurd. You could expect to pay around 5.000€ just to get license plates, and around 550€ every year for road tax (IUC). With 550€ you can rent a new car almost every time you come over here.

From July 2007 forward, the road tax (IUC) is payable by every newly registered/legalized car, be it manufactured in 1900 or in 2008, they pay exactly the same. It's this way to prevent the import of "european junk/scrap" as the government puts it.

Ray em 12.05.2008. 16:43

I have a 21 year old Range Rover which decided to retire in Portugal August 2006.It broke down on private property and was then taken by transporter to a garage. They think they have fixed it but advise against s trip back to England. I have declared a SORN in England when the UK tax ran out but need to know what to do now we know it is not returning. We have property in Portugal where it would make a good air conditioning unit[!] and possibly be a run-about to the local shops. What is our situation re tax please with either option?
If it is taken by car transporter from the garage to our property without any Portugese tax having been paid is that acceptable within the law? At what age does tax cease to become payable? Finally if we do manage to become roadworthy how much is the tax likely to be [3.5 engine] Many thanks RD

FD em 29.04.2008. 13:05

The law that regulates what you're asking is "Lei 22-A/2007", look for Capítulo V Regimes Suspensivos (page 4164-(13) - PDF 12/29). You can find here: http://www.dre.pt/pdf1sdip/2007/06/12401/00020030.PDF

Relatives: partner (wife, husband, etc.), first degree ascendants (father, mother) and descendants (sons). To my understanding, as to what this law concerns, father-in-law isn't considered a relative, but I think when in the presence of both you shouldn't have any problems with police authorities. Regarding this, you should read nr. 2, 30th article of the forementioned law.

As long as you're a portuguese resident you can't drive any foreign car in Portugal, even in the situation you're referring to.

Alex em 27.04.2008. 13:42

Hi,

I read your reply to Maxine and have a few questions of my own.

Can you please give me the reference of the legislation that forbids Portuguese residents from driving foreign registered cars, please.

Secondly, could you define relative. For example, is father-in-law a relative – my wife drives her Fathers car, may I, as a Portuguese resident?

Finally, can you confirm that it is permissible for a Portugeuse Resident to use a foreign registered car provided by an employer, if that car is used essentially for business.

Thanks for your help.

FD em 22.04.2008. 10:59

If you stay more than 183 days per year in Portugal - like you say you do, from what I'm understanding - by this law, you're considered a portuguese resident. Therefore, you can't drive any vehicle with a foreign license plate, exactly like any other portuguese resident.

Even if you spent less than 183 days in Portugal, as long as you earn money or work in Portugal, you're considered a resident too.

Furthermore, only relatives of the foreign vehicle's owner can drive it, unless it's a lease or a rental.

Maxine em 18.04.2008. 11:01

Bom Dia,

My friend lives in England, when he comes to visit me, may I drive his English registered car – I am Portuguese/English resident, but with a UK driving licence, because I spend four months every year in England.

I’m a bit confused, I don’t want to be in trouble.

Obrigada,

Maxine

FD em 15.04.2008. 10:37

You can leave your british car here for 183 days (consecutive and/or non consecutive) without any tax/legal concerns. As long as you don't work or earn money in Portugal you're completely legal. If you pass the 183 days mark you're required to pay a tax called IUC, which is payable at the tax office (Finanças). This tax is based on your car's engine displacement and CO2 emissions - you can find the current rates here:
http://impostosobreveiculos.info/tabela-imposto-unico-de-circulacao/tabela-imposto-unico-circulacao-2008/

The auditing of this time period is done on road by two authorities - GNR (a kind of military oriented police present on small or rural cities and responsible for most road vigilance - white, green and orange stripes cars) or PSP (ordinary police - white and blue/red stripes cars).

This is off the record but, usually, you shouldn't be worried about this as your profile doesn't fit the ones the police is eager to inspect.

Happy holidays! ;)

Miles em 10.04.2008. 12:37

Hello,

I live in the UK, and I’m lucky enough to be able to holiday in your beautiful Country four or five times a year for three or four weeks at a time.

I drive down when time is available for a leisurely journey, (if my health allows), and for my other visits I fly.

My question to you is this: may I leave a UK registered, UK Tax/Insurance/MoT’d car in Portugal for my use two or three times per year? Returning with it to England at least once per year? Or is there a limit for the time my car can stay in Portugal?

Wish Best Wishes,

Miles

FD em 08.04.2008. 11:36

Reply to Paul em 06.04.2008. 10:28:

Thanks. :)

In order to be ISV exempt you must provide the portuguese customs office a declaration from an official entity of your country of origin, that proves that you've been a resident in that country. This declaration should mention the date when you were first registered as a resident and the date when you ceased to be a resident. The car's registration title must coincide with those dates.

The exemption is given per person.

As for the previous exceptions given to "classic" vehicles, you're absolutely correct. Be the car's year 1971 or 1997, the tax calculation formula is exactly the same.
Please notice that to cars registered before 1970 you don't have any "reduction", simply put, the tax calculation formula is different because of CO2 emissions, nothing more - there is no "classic" car status regarding ISV tax.

Paul em 06.04.2008. 10:28

Hi,

Let me say what a fantastic site this is, it is an immense help.

Just a few questions:

Your comment em 11.01.2008. 10:10

The law, as strange as it may seem, doesn't set a time limit for a ISV exempt request when you move to Portugal.
To clarify with an example please. If I move to Portugal this year, and in two years time decide import a vehicle, does the 12 months ownership period commence on the date I apply for the exemption, or the date I register in Portugal?
Is the ISV exemption per person, or per household?
Until recently concessions were available for cars over thirty years old. Now I see a reduction available only for cars registered before 1970. Is correct that from now a car registered in 1975, for example, is simply a car over 10 years old for all tax calculations, without any concessions?

Many Thanks in Advance,

Paul

FD em 11.03.2008. 12:43

Reply to floydborga on 07.03.2008. 20:55:

The discount for cars imported from a third country outside UE is always 10% as long as it's at least one year old.

When using the simulator, just input in the age field "Sim" right next to "De 6 meses a 1 ano (6 meses a exactamente 1 ano)" - every car imported from a UE country with that age has the same discount (10%). That way you can use it to calculate the tax amount for cars imported outside the UE.

The alternative method isn't applicable to cars imported outside the UE.

And remember that, in addition to the ISV, you'll have to pay IVA (VAT - value added tax) at the current rate of 21% and the customs tax (10% if I'm not mistaken). The IVA amount is calculated regarding the value of the car, plus the ISV amount, whereas the customs tax is only calculated regarding the car's value.

floydborga em 07.03.2008. 20:55

This site, although informative, is not very clear on total "Imposto" for cars imported from a country other than the EU. From what I understand, the simulator is prepared to calculate the total "imposto" for cars imported from the EU(correct?). I also understand the for cars imported from a country other than the UE, the discount rate for the method "normal" is a straight 10% no matter what the age of the car(correct?). So the formula would be =IF(B25="Sim";SUM($C$13;$C$15;$C$16;$C$18)*.10;0) correct?(I think you should add a line in you simulator for this rate). This of course would make it very expensive. So, would it be appropriate/legal to apply the method "alternativo" for cars imported from outside the UE?

FD em 22.02.2008. 15:54

Reply to D W Taylor em 19.02.2008. 12:41:

Unfortunately, the situation you describe is very common these days. The tax principle changed from circulation to property, where before 2008 if you didn't drive your car you could not pay the tax. But, 2008 forward, even if you don't drive your car, you must pay the tax. This has caused a problem with vehicles which property registration wasn't updated when sold. So, you are in debt of a vehicle that you don't own.

There are two ways to solve this:

- if you sold the car before October 31st 2005, you can register the car in the buyer's name. For this you'll need a "Declaração" like this one:
http://impostosobreveiculos.info/declaracao_venda.rtf
Then, you should go to the Conservatória do Registo Automóvel (http://www.rnpc.mj.pt/contact/endauto.asp), fill the Modelo 2 and deliver both. You'll have to pay 20€ for each vehicle. About 30 days after, the property registration will be regularized and you won't have to pay any tax.

- if you sold it after October 31st 2005 (or you don't remember the buyer's name, address, etc.) you must go to the IMTT (http://www.imtt.pt/imttcont.htm) and require the arrest of the vehicle so that the property registration can be updated. This could take years and until then you'll have to pay the due tax every year.

FD em 22.02.2008. 15:36

Reply to R van der Heijden em 19.02.2008. 12:38:

The transitional article to which this situation refers is:

Artigo 13.º
1 — Com a entrada em vigor da presente lei, são revogados:
(...)
c) O Decreto-Lei n.º 471/88, de 22 de Dezembro, com excepção do disposto na alínea c) do artigo 2.º, que se mantém em vigor até 31 de Dezembro de 2007;

That translates:

Article 13.th
1 — With this law, the following laws are revoked:
(...)
c) The law-decree nr. 471/88, dated December 22nd, with exception to the applicable by the point c) of the 2nd article, which is valid until December 31st 2008.

The forementioned c) point refers to:

c) Been effectively affected to the use of the interested in the country of origin for at least six month before the residence transfer.

You can find this law-decree (471/88) here:
http://www.dre.pt/pdf1sdip/1988/12/29400/50605061.PDF

The point where is decreed in the new law that the vehicle must be ones property for at least twelve months is this:

Artigo 60.º
Condições relativas ao veículo
(...)
c) Ter sido propriedade do interessado no país de
proveniência, durante pelo menos 12 meses antes da
transferência de residência, contados desde a data da
emissão do documento que titula a propriedade ou da
data em que celebrou o contrato de locação financeira,
se for o caso.

That translates:

60th Article
Vehicle requirements
(...)
c) Must have been property of the interested in the country of origin for at least 12 months before residence transfer, counted since the date of emission of the vehicle's title of registration.

If the legalization process entered the alfândega before December 31st, to my understanding, your friend should not pay the tax. But, if he begun the residence transfer process before December 31st and contacted the alfândega after December 31st he should have to pay the tax.

D W Taylor em 19.02.2008. 12:41

Hi,on going to pay my road tax I was presented with a sheet of paper saying I had another two cars which have both been sold some time ago,one 3years & the other at least 5 years,unfortunately I have no proof of these sales & can only remember one persons name.Dave.

R van der Heijden em 19.02.2008. 12:38

Dear FD,

Your answer from 31.01.2008. 11:58 was very clear but... now it seems that the Alfândega still wants my friend to pay the ISV.
In the mean time I have tried to 'understand' the Lei No0 22-A-2007, de 29 de Junho (ISV and IUC) but that's still to difficult for me. Can you please tell me where I can find the 'some transitional articles' as mentioned in your answer from 31.01.2008. 11:58

With best regards
Rob

FD em 12.02.2008. 09:20

No. You must own the car that you want to bring to Portugal for at least 12 months as you were told at the Alfândega. Sadly, there's nothing that you can do to avoid the tax.

KK em 08.02.2008. 13:59

I have bought a new car in my country (European Union) in December 2007, and for personal reasons now moved to Portugal (forever), so the car is like 3 months old. I got to know from Alfandega that i need to have the car in my country for at least 12 months in order to be excluded from the tax. Is it still possible for me to avoid this tax or not really ?

Thanks!

FD em 31.01.2008. 11:58

In the new law there were some transitional articles, and among them the issue that you bring here was one.

The law became valid July 1st, but regarding the exemption due when a citizen transfers his residence to Portugal, in which the vehicle should be his for at least 6 months, the new period, of 12 months, only became valid January 1st.

So, if your friend transferred his residence to Portugal and began the registration/legalization process up to December 2007, he would be required to have his car for at least 6 month. But, if he began the legalization/registration process in January 2008 the time required was no longer 6 month but 12 month.

I think I was clear, if not please say so. :)

R van der Heijden em 30.01.2008. 14:30

Dear FD, reply to your answer 30.01.2008 11:02

"If you could contextualize your question I could be more useful"

Ok, to be more specific. My friend started the import of his car somewhere between August 2007 and January 2008. At that moment he was told that the car had to be registered at his name for at least 6 month in the country of origin. Now (January 2008), áfter finishing the proces, he has been told that he has to pay the ISV (€ 10.000 !) because the new law on the ISV already was validated in July 2007 instead of January 2008.

FD em 30.01.2008. 11:02

Reply to R van der Heijden on 28.01.2008. 23:24:

The law comprises two different taxes: the ISV and the IUC. The ISV is payable upon the first registration/licensing. The IUC is payable every year.

In July 2007, the law (both ISV and IUC) became valid to every vehicle registered from that moment forward. In January 2008, the law, comprising only IUC, became valid to all vehicles, including those registered before July 2007.

If you could contextualize your question I could be more useful.

FD em 30.01.2008. 10:46

Reply to John Fripp on 28.01.2008. 21:49:

These were the intentions behind the new system:

- reduce the load on the tax system caused by paying in a specific period of the year: the queues at the tax offices were huge and the computer network was overloaded becoming many times unusable
- transfer the responsibility of tax supervision from the police authorities to the Ministério das Finanças (Ministry of Finances)
- by basing it on property and not on circulation it's much easier to find out who isn't paying, therefore, on site tax supervision (on the road) is almost not needed

So, with this new system, it's the understanding of the government that the police function is to watch for our safety and not to check if we pay or we don't pay our taxes. That's a job for the tax collectors, the Ministério das Finanças (Ministry of Finances), not for the police. Nonetheless, police authorities can continue to monitor tax payment on the road.

R van der Heijden em 28.01.2008. 23:24

Dear FD,

As a reply on your answer off 21.01.2008. 11:23 the following question.

Today a Dutch friend of mine was told that he had to pay the ISV because the law on the ISV already has been changed in June 2007 and not in January 2008 !.
Please advise me on this and, very important, something I can refer to if it turned out to be that the information that has been given to him, is not correct.

John Fripp em 28.01.2008. 21:49

As a retired British police officer living in Portugal, I was impressed by the old system of paying vehicle tax. There was no doubt as to the legality of a car with regard to documentation, the vehicle tax, insurance cover and MOT were all displayed in the windscreen. The vehicle tax was uniform, as all vehicles had to be taxed between 1 June and 31 July and the annual tax stamp was there for all to see. I cannot see any advantage with regard to the new system introduced on 01.01.2008, can you explain the thought behind this new system, the GNR and Traffic police must be pulling their hair out as they no longer can make an easy check of parked vehicles that are unattended

FD em 25.01.2008. 09:40

If the car is left in Portugal for more than 183 days in each year, you have to register it (legalização). This procedure has a cost that depends on your car's engine displacement (cc/cm3), CO2 emissions and age.

Furthermore, you'll have to pay IUC, the annual tax.

You can do a simulation of how much you'd pay here:
http://impostosobreveiculos.info/simulador-online-isv-iuc-importados-usados/simulador-online-isv-20072008-importados-usados/

For your convenience:
Gasolina = Petrol/Unleaded
Gasóleo = Diesel

Where you see "Mais de 1 a 2 anos (1 ano e 1 dia a exactamente 2 anos)" it translates as: More than 1 to 2 years (1 year and 1 day to exactly 2 years).

The total amount to pay is seen bellow at "Total Impostos (ISV+IVA caso aplicável)", consider the second column value, the first one was for 2007. Below, "Imposto Único de Circulação" is the value of the annual tax.

To register it you'll have to go to 3 different offices, Centro de Inspecção (the same procedure as UK's MOT), Alfândega/DGAIEC (customs) and IMTT (UK's DVLA).

I think it is best for you to contract a "Agência de Documentação" as the task may be daunting at some point. You can search for one here: http://yellowpages.pai.pt/ (Yellow Pages).

Documents: original vehicle registration certificate and or other document that clearly states the vehicle's mechanical characteristics and the owner, and in some cases the COC (Certificate of Conformity) or UK's Homologation Sheet.

Steve Salter em 24.01.2008. 08:13

I own a holiday home in the Algarve,I would like to bring one of my cars from the UK for use when I am there,it would be left in Portugal.Do I have to register this car in Portugal?How do I pay the tax?What documents do I need?

FD em 21.01.2008. 11:23

The six month period was valid in the previous law. In this new law (and since January 1st 2008) it was updated to twelve months.

So yes, if you want to be exempt from ISV when moving to Portugal your car must be registered in your name for at least twelve months.

My portuguese is better than my english. :D

R van der Heijden em 19.01.2008. 12:06

As far as I know one need to prove that the vehicle to be imported into Portugal must have been registered at your name at least for six months in the country of origin. This to get an exempt for the ISV.
Now I have heard rumours that this period has been changed to 12 months.

Is that true or is it just a rumour ?

By the way I'm not a native speaker. I'm Dutch but at the moment my English is better than my Portuguese ;-)

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