Revising the Portuguese exit tax (Understanding the concept and dealing with the case)

• Author: Vasco Branco Guimarães
• Position: Tax Law Professor at the Lisbon Academy
• Pages: 1-9

European Tax St udies 1/2010

News and Commentary - Exit T ax: Comparative Analysis in a EU P erspective (n. 1/2009)

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1

Revising the Portuguese exit tax

(Understanding the concept and dealing with the case)

Vasco Branco Guimarães1

1. Introduction. General Remarks

Starting first January 2010 some changes were introduced to the IR C2

(company taxation). Can we still see situations where the concept of exit

tax – as ruled by ECJ - can be found? In an environment where exists

freedom of movement f or persons, capital and goods conducting to freedom

of establishment can the act of cha nging reside nce determine taxation? The

question was a lready answered in the ECJ Judgment of Court Case C-9/023

known as Lasteyrie du Saillant the name of the Author of the complaint

against the French legislation that introduced in 1999 a disposition that

would tax the latent increase in securities held but not sold by a taxpayer

that transferred his residence f or another Member State.

Although the French State argued that t he taxpayer could avoid payment by

suspending the taxat ion trough the setting up of guarantees a nd the aim of

the measure w as to avoid tax planning or avoidance the Court ruled that:

“The principle of freedom of establishment laid dow n by Arti cle 52 of the EC

Treaty4 (now, after ame ndment, Article 43 EC) must be interpreted as

precluding a Membe r S tate from establishing, in order to prevent a risk of

tax av oidance, a mechanism f or taxing as yet unrealised increases in value

such as that laid down by Article 167a of the French Code Général des

Impôts, where a taxpayer transfers his tax residence outside that State.”

1 Tax Law Professor at t he Lisbon Academy.

2 To understand th e co ncept and basi c feat ures of IR C see, Manuel Pires, in European Tax

Studies nº1/2009.

3 European Court of Ju stice, Judgment of 11 Mar ch 2004, C-9/02, case Lasteyr ie du Saillant.

4 EC Treaty.