CJEU – Recent Developments in Direct Taxation 2019

1. S. 114Introduction

The taxation of capital gains derived by non-resident individuals from the transfer of Portuguese-situs real estate properties has been a controversial topic for almost two decades. The multiple court and arbitration cases are proof of such assessment.

The legislature has enacted an option allowing for non-resident individuals to elect to be taxed as resident individuals, but the introduction of such an option has not fulfilled its purpose of ending possible litigation. The existing case law has further fuelled litigation given that non-resident individuals have been successful in the past in fighting tax assessments.

The Court of Justice of the European Union (“CJEU”) is faced once again with a Portuguese case dealing with real estate capital gains, which might again prompt it to discuss from a more general perspective whether optionality is indeed a possible alternative to counter a possible discriminatory tax treatment between resident and non-resident taxpayers.

2. Facts of the case

In 2017, Mr. MK, a French resident for tax purposes, sold a Portuguese residential property he had bought in 2012. He duly and timely filed his Personal Income Tax (“PIT”) form in 2018 re...