The European Commission has issued a formal request to Portugal requesting urgent action to amend its discriminatory rules currently allowing foreign lottery winnings to be taxed whilst at the same time granting exemption to winnings from lotteries organised in Portugal.
Under Portuguese rules, income earned in Portugal in the form of prizes or winnings from competitions, games or gambling is subject to taxation. Despite these clearly defined regulations, Portugal continues to apply an exemption to winnings from lotteries (Euromilhões e Liga dos Milhões) and games organised in Portugal by Santa Casa da Misericórdia de Lisboa - an entity carrying out activities of social interest.
The Commission considers these exemption rules, provided in the legislation, to contravene the EC Treaty and the EEA Agreement as they restrict the freedom to provide services since the favourable treatment is not open to other EU entities also carrying out activities of social interest.
The Commission argues that this exemption cannot simply be justified as a measure to avoid the damaging consequences of gambling.
The Commission of the European Communities is responsible for ensuring that Community law is correctly applied. Non-compliance by a member state results in three stages of actions culminating, at the Commission’s own discretion, in referral of the case to the European Court of Justice thus commencing the litigation procedure.
In this case, the request is in the form of a reasoned opinion, the second stage of the infringement procedure, under Article 226 of the Treaty. Portugal has two months to comply or face referral to the Court.
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