Important notice about your car tax (IUC), please read all.
It appears that, at present, there are no discounts or refunds being offered for full-year payments made this year. Perhaps this policy may be subject to change within the next few months. Or it will end up as another way to take more money from us.
Portugal is introducing significant changes to its annual car tax, the Imposto Único de Circulação (IUC), aimed at simplifying the payment process and reforming the tax burden on older vehicles. These updates, part of a broader fiscal simplification agenda, are set to take effect starting in 2026.
Simplified IUC Payment Schedule (Effective 2026)
The most noticeable change is the fixed annual payment date for the IUC, replacing the previous system tied to the vehicle’s registration month.
- Fixed Deadline: Starting in 2026, all vehicles subject to IUC must have the tax paid by the end of February of each year, regardless of the vehicle’s original registration month.
- Instalment Option: To ease the financial burden, taxpayers with an annual IUC amount over €100 will have the option to pay in two instalments:
- First Instalment: By the end of February.
- Second Instalment: By the end of October.
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- Electric Vehicles: Fully electric vehicles remain exempt from the IUC as a continued incentive for sustainable mobility.
Changes to IUC Calculation for Older Vehicles (Effective 2026)
A major structural change addresses the IUC calculation for light passenger vehicles registered before July 2007. Previously, the tax for these older cars was based primarily on engine capacity and registration year.
- New CO2 Component: From 2026, the tax calculation for these pre-2007 vehicles will also incorporate CO2 emissions levels.
- Phased-in Increase: The resulting increase in tax will be phased in gradually. In 2026, only a percentage (often cited as 25%) of the difference between the old and new calculated value will be applied, with the percentage increasing annually until the full value is reached.
Adjustments to Vehicle Tax (ISV) for Imports
In addition to the IUC changes, the Imposto Sobre Veículos (ISV), a one-off tax paid upon a vehicle’s first registration in Portugal (most notably on imported used cars), has seen adjustments, primarily stemming from rulings by the European Court of Justice:
- Equal Age Discount: The calculation for imported used cars has been modified to apply the same age-based depreciation discount to both the engine capacity component and the CO2 emissions component of the ISV. This change aims to level the playing field and can result in significantly lower ISV payments for importing older used cars.
- Hybrid Incentives: Tax breaks for certain imported plug-in hybrid vehicles have been introduced or adjusted, particularly for those previously disadvantaged by older criteria, providing greater fiscal benefits and encouraging their import.
The new IUC payment schedule will bring greater clarity and predictability for all Portuguese vehicle owners, while the reformed tax on older cars and imported used cars reflects a shift toward tax simplification and environmental alignment. It’s crucial for vehicle owners to mark the new February deadline to avoid penalties.