Rules around taxes on change of permanent residency leave people slightly dazed and confused when importing a left hand drive car…
And it is something we get asked about almost on a daily basis. The principle behind it are the tax concessions that a country offers someone who is changing their place of permanent residence. In some instances this becomes an issue of not having to pay import duty and sales tax effectively again and in other it can be about not having to pay lumpy sum relating to the registration fees.
Generally speaking most countries work to variations of the same rules which generally mean you need to have owned a car for 6 months in the country of previous residence to be able to import with these concessions. There are variations on this around the world sometimes relating to age or specific government schemes. For example, Morocco offer an age related import relief, Ecuador offer a returning citizens relief capped at $20000 value. Concentrating specifically on the EU Portugal has slightly different rules in that you need to have owned the vehicle for at least 12 months prior to importing it. To summarise on the rules would be as follows:
• You are the registered owner of the vehicle
• You have had a valid driving licence for at least 12 months.
• The vehicle is for your private use only;
• You are transferring your residence from another EU member state (or are returning to live in Europe after living outside the EEC) and provided that you have been resident there for at least 12 months; (you will need to provide proof of this fact in the form of utility bills)
• You have owned the vehicle in that country for at least six or twelve months depending on the country.
• The request for legalization is presented within 6 months of cancelling residency;
• All taxes relating to the vehicle have been fully paid in your last country of residence.
So in summary you need to have been in the other country for at least 12 months, owned the car for at leats 6-12 months and that left hand drive car must have been fully legalised in that country. So lets look at the taxes involved.
Import Duty: Only applicable when importing a car from a non-EU destination. If importing a car from Switzerland, Africa, America, Middle East or Asia then import duty would ordinarily apply other than in the instances demonstrated above. There is no import duty on a LHD cars being imported from say France to Spain or Germany to the UK.
VAT or other such sales taxes: Again ordinarily if coming from outside of the EU, VAT would potentially be charged at the countries prevailing rate based on invoice or current value of the car. If the above rules are applied then no VAT would be charged. Within the EU, VAT must have been paid in the previous country (or if a military or diplomatic perosnnel been given the tax free concession) to not have to pay VAT in the new country.
Matriculation taxes: So these vary a left hand drive cars in the UK wouldn’t attract much only £55 first registration fee so there is no concession. Somewhere like Spain has a scaling co2 related taxes up to 16.75% and Portugal a tax based on a complex tax which can run into tens of thousands of Euro’s. Again with the above rules being met these taxes can be conceeded by the coutnry for new citizens.
So there it is, we hope that clears up some of the questions. We would always advise a client thinking about a move abroad to take this into consideration in their planning as it can be worthwhile in the long run!