Portugal: Lisbon property owners ‘to sue’ if city pays no interest on tax refund

Lisbon, Portugal – An association representing Lisbon property owners has threatened legal action to force the city council to pay interest on refunds to residents of a civil defence levy that Portugal’s Constitutional Court struck down as illegal.

In a note released on Monday, the ALP warns that it “will demand of the Municipality of Lisbon, in the person of the Mayor, payment of indemnity interest in the ambit of the unconstitutional levying of the Municipal Civil Protection Tax between 2015 and 2017” on its 10,000 or so members.

“If this demand is not satisfied [the ALP] will resort to the Tax Tribunals to obtain an order that the Municipality of Lisbon pay indemnity interest that is constitutionally due to Lisbon property owners,” the statement says.

It adds that the ALP is prepared to take the case all the way to the Constitutional Court “to restore legality in Lisbon.”

If the city were allowed not to pay interest, the ALP argues, “any council in the country could obtain free forced loans from its residents” simply by “inventing pseudo-taxes” the proceeds from which could later be refunded, but without interest.

The mayor of Lisbon, Fernando Medina, said on 5 February that the council would not be paying interest on amounts raised under the levy to be refunded by residents, even though he had intended to, because the law does not allow this.

According to Medina, “the jurisprudence of the Constitutional Court itself corresponds to this interpretation, that the Council is barred from making this payment with interest.”

For its part, the ALP notes that indemnity interest is foreseen in Portugal under general tax law, based on constitutional rights.

The civil defence levy, which was struck down by the Constitutional Court in December of last year, had been applied to properties in the capital since 2015, replacing the existing levy for conservation and maintenance of sewers, which was in turn folded into the sanitation levy.

Lisbon council must return some €58 million to property owners in the city after the court’s ruling.