Portugal: Non-Discrimination and Access to Domestic Law Incentives for Individuals in the Residence State

Abstract

In this article, the author makes a critical exam of a decision of the Portuguese Supreme Administrative Court which interprets the prohibition of discriminatory treatment as enshrined in tax treaties and assesses whether nationals of another State may access, in the same conditions, tax benefits and incentives that were originally designed for Portuguese nationals. Several features of the case could be highlighted; however, the author would like to reserve this conclusion to the function and meaning of article 24(1). In this case, the non-discrimination clause of the tax treaty is argued as a tool to ensure national treatment of the taxpayer (in the sense that a taxpayer, when entering and when inside the market of another Member State, should be given the freedom to enter that market under the same conditions of national market players). Article 24(1) is specially targeted to cases of direct discrimination, and particularly within the European Union and the European Economic Area, these cases are very rare if even existent at all, at least in tax matters. More than 30 years since the first decision in direct tax matters, Member States are quite aware of the prohibition to discriminate based on nationality or similar criteria. In this case, national treatment is already ensured by domestic law. Furthermore, domestic law does not entail any discrimination between individuals based on their nationality. At least in the EU and EEA context one may wonder what is the real meaning of a clause such as article 24(1). It is rather odd to conventionally prohibit "nationality non-discrimination" in tax systems that already do not entail any distinction based on nationality. This basically means that the ultimate meaning of this provision, if one does not consider its historical context, will be very odd for most of our tax judges and will continue to puzzle them throughout Europe and eventually the world. For this and other reasons, one should rethink whether this provision should continue to be inserted in treaties between countries in the EU and EEA arenas.

Keywords: Taxation, Tax Law, European Taxation

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24