Portugal vehicle tax reform proposal aims to phase out ISV by 2036

The Portuguese Automobile Association (ACAP) has proposed a plan to gradually phase out the Vehicle Tax (ISV) over the next decade. Based on a study by EY, the proposal suggests a cumulative annual reduction of 10% in ISV, aiming for its total elimination by 2036.

To compensate for the loss of ISV revenue, the proposal suggests increasing the weight of the Single Circulation Tax (IUC). For example, a segment B car paying 923.60 euros in ISV in 2026 would see that tax drop to zero by 2036, while its IUC could rise from 111.50 euros to 135.90 euros in the same period.

The reform aims to shift taxation criteria away from engine displacement and toward environmental factors, such as CO2 emissions, fuel type, and vehicle age. Additionally, the study suggests annual IUC updates based on inflation to address the aging vehicle fleet in Portugal.