The European Commission has decided to take Portugal to the EU Court of Justice for discriminating against taxpayers who cease to be tax resident here.
The Commission says it considers Portugal’s relevant tax laws “to be incompatible” with European taxpayers’ rights to free movement.
Under Portuguese tax law, taxpayers no longer resident in Portugal are subject to immediate taxation when it comes to the exchange of shares.
Taxpayers are also taxed “immediately” in case of transfer to a company located abroad of assets and liabilities related to the exercise of an economic or professional activity.
The Commission says it considers such immediate taxation “penalises people who decide to leave Portugal or transfer assets abroad, by introducing less favourable treatment for them in comparison to those who remain in the country or transfer assets to a resident company”.
Indeed, taxpayers who cease to be resident in Portugal are taxed on the value of their assets at that precise moment “regardless of the future evolution of the value of their assets”, while taxpayers who remain resident in Portugal are not.
The EU concludes that “Portuguese rules in question are therefore likely to dissuade individuals from exercising their right of free movement and, as a result, constitute a restriction of Articles 21, 45 and 49 TFEU and the corresponding provisions of the EEA Agreement”.
