Fiscal Representation Part II
On the 5th May 2011, the European Court of Justice found the Portuguese Republic guilty (Process C-267/09) in respect of the obligation made by the Portuguese fiscal law to non residents concerning the appointment of a fiscal representative.
The European Court’s decision declares that the Portuguese Republic is violating the principle of free movement of capital within the European Union countries, thus violating directly Articles 18 and 56 of the EC and 40 of the EEE Agreement by demanding that non resident citizens appoint a fiscal representative in Portugal:
“Because it was approved and maintained in force article 130 of the Individual Income Tax, which demands that non resident tax payers appoint a fiscal representative in Portugal, when obtaining income in regards to which it is required the submission of a tax declaration, the Portuguese Republic did not fulfill the obligations imposed by article 56 of the EC”
In fact, the Portuguese law, in its number 4 article 19.º, of the General Tax Law (and article 130 of the Individual Income Tax, 126 of the Corporation Income Tax), clearly specifies the obligation to appoint a fiscal representative for individuals or companies nonresident in Portugal.
Such obligation was introduced in the Portuguese legislation with the purpose of better controlling tax evasion and tax fraud, however the European Court thought that though this is a legitimate concern of a sovereign State, there are other means to achieve such an aim through the different European pacts for mutual collaboration. The demand made to nonresident taxpayers is in fact a general assumption that all non residents will commit tax evasion or tax fraud. Nonetheless such assumption is not compatible with the European Union principles, it is highly discriminatory and violates the free circulation of capital principle.
With this conviction of the Portuguese Republic, the Fiscal Administration, though it has not proceeded with an alteration of the law itself yet, took a position and is obeying the courts decision.
Therefore, there is now NO obligation of the nonresident to appoint a fiscal representative. This appointment is now an option of the nonresident tax payer, who can choose between appointing a fiscal representative (who must be resident in Portugal and must accept such appointment through the website of the finance department), or simply have none in Portugal.
In such event that the person does not have a fiscal representative, in order to obtain the fiscal number in Portugal, one can just exhibit an identification document (original document) and a proof of address, declaring at such time that he/she waives the fiscal representation.
The practical side of this decision will be important as for example the correspondence address will be, at this moment and provisionally, Finanças – 3 (Rua dos Correeiros, Lisboa) and this will be the address used for all correspondence by the Fiscal Administration including new evaluations of property, fines, taxes of all type and description, return of overpaid tax, etc.
For residents not included in the 27 countries which are part of the European Union, it is still mandatory to appoint a fiscal representative in pursuant of article 130 of the Individual Income Tax, 126 of the Corporate Income Tax and numbers 4 and 5 of article 19 of the General Tax Law.
We await the law alteration itself in order to better understand how this new system will work.
