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Portuguese tax amnesty considered contrary to EC Law
• 25 May 2007 •
 THE European Commission has announced that it considers that the 2005 Portuguese tax amnesty does not respect the free movement of capital, since it provides for regularisation at a preferential penalty rate for investments in Portuguese government bonds.
Therefore, the Commission has sent a reasoned opinion requesting Portugal to eliminate this violation of EU law by applying the same fiscal treatment to all regularisations made in 2005. If Portugal does not take the necessary steps to comply with EU law, the Commission may decide to take the member state to the Court of Justice.“The rules of the internal market forbid any discrimination of investments made by individuals in other member states,” said EU Taxation and Customs Commissioner, László Kovács. “Investment held in other member states should be taxed in the same way as investments held in the member state of residence, even on the occasion of tax amnesties,” he added. According to the EC, the law called “Tax amnesty for undeclared funds held abroad (RERT)” which was approved by the Portuguese Parliament in 2005, constituted a restriction on the free movement of capital guaranteed by the EC treaty. The amnesty law allowed people to disclose and to regularise undeclared funds held abroad by filing a confidential statement before December 16, 2005. It required individual residents to pay a penalty equal to 5 per cent of the value of the relevant investments; however, a reduced tax rate of 2.5 per cent applied to regularised Portuguese government bonds, as well as to any amount of other investments reinvested in Portuguese government bonds at the occasion of the regularisation procedure.
The EC considers that people making use of the amnesty were therefore dissuaded from keeping their regularised assets in other forms than Portuguese government bonds, a difference in treatment which constituted a restriction on the free movement of capital. |  Return to Top
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