IUC exemptions in Portugal: which vehicles do not pay the Single Circulation Tax?

Portugal’s Single Circulation Tax (IUC) has prompted considerable debate and is about to enter a new phase, as changes to its payment timetable are set to reshape how millions of drivers approach this annual charge.

Until now, IUC has been paid in the month of a vehicle’s registration. Because this arrangement spread payments across the year, many people only noticed the tax when they received a notification from the Tax Authority. Under the new rules, payments will be concentrated into a single period, which should make them easier to manage - while also bringing everything together in one annual “bill”.

As this is a tax on vehicle ownership rather than on a vehicle’s actual use, exemptions remain just as significant as the standard rules. There are also more exempt cases than many people realise.

The provisions are set out in Article 5 and Chapter IV of the IUC Code. These detail both the exemptions available and the requirements that must be met to qualify for them.

Electric cars

First, there is an exemption that is not exactly new: the one for electric cars. However, it applies solely to vehicles powered entirely by electricity.

Hybrid and plug-in hybrid vehicles are still liable for the tax. However, because they produce lower emissions, they pay less than vehicles powered solely by internal combustion engines.

People with disabilities

People with a disability level of 60% or above may also be exempt from paying IUC on their vehicle, provided they meet the criteria laid down in law.

The exemption covers only one vehicle per beneficiary and requires proof of disability. Limits also apply in relation to the vehicle’s emissions.

For instance, for a Category B vehicle - passenger cars, mixed-use vehicles or goods vehicles first registered from 1 July 2007 - emissions must not exceed 180 g/km (NEDC) or 205 g/km (WLTP).

What about classic cars?

Contrary to a common belief, classic cars do not automatically qualify for an IUC exemption. This is partly because the definition of a “classic” vehicle can itself differ. According to FIVA (Fédération Internationale des Véhicules Anciens), the designation is determined not only by age but also by factors including technical and aesthetic value, historical importance, rarity and even the model’s emotional significance.

Nevertheless, some of these vehicles may receive an IUC exemption. They must meet several statutory conditions: they must be over 30 years old, form part of public collections or museums, be used only occasionally, and travel no more than 500 km per year.

Further exemptions

The law also provides exemptions for a range of public-service vehicles, including:

• Vehicles used by central, regional and local government;
• Vehicles used by the military and security forces;
• Fire service and civil protection vehicles;
• Diplomatic and consular cars and motorcycles;
• Vehicles belonging to international organisations and European agencies;
• Non-motorised vehicles;
• Special goods vehicles with no transport capacity;
• Ambulances and patient transport vehicles;
• Funeral vehicles;
• Agricultural tractors;
• Taxis and TVDE vehicles, subject to emissions limits;
• Vehicles seized in criminal proceedings;
• Abandoned vehicles acquired by the State or local authorities;
• Vehicles forfeited to the State;
• Vehicles used by forestry ranger teams;
• Vehicles belonging to Private Social Solidarity Institutions (IPSS);
• Transport vehicles in autonomous regions, which receive a 50% partial exemption;
• Travelling entertainment and performing-arts vehicles, which receive a 50% partial exemption;
• Vehicles registered in another Member State under temporary admission arrangements.

In addition, where the tax due is less than €10, no payment is owed and no amount is collected, as established by paragraph 6 of Article 16 of the Single Circulation Tax Code.

This applies, among other cases, to motorcycles, mopeds, tricycles and quadricycles with an engine capacity of up to 350 cm³.

Check the conditions carefully

IUC rules can differ according to the type of vehicle, its registration date and how it is used, so it is always advisable to verify the position with the Portuguese Tax Authority.

In many situations, the exemption is not granted automatically and must be recognised by the Tax Authority. Failing to comply with the legal conditions may also result in the benefit being withdrawn and the unpaid tax being recovered.

The full rules are available in Article 5 of the IUC Code, published in the Diário da República.