Value Added Tax (VAT) Guidelines: Portugal

Generally, the following supplies would be taxable in Portugal:

 

The Portuguese law provides three types of rates: reduced, intermediate and standard VAT rate. The VAT code contains list 1 and list 2 specifying the goods which are applicable the reduced and intermediate rates. The stan­dard VAT rates are: 23 percent applicable in Portugal Mainland, 22 percent in Madeira Islands and 16 per­cent in Azores Islands.

 

The intermediate rates are: 13 percent applicable in Portugal Mainland, 12 percent in Madeira Islands and 9 per­­cent in Azores Islands. This rate is applicable to supply of some foods, to some food and beverages services, pre-cooked meals and ordinary wines.

 

The reduced rates are: 6 percent applicable in Portugal Mainland, 5 percent in Madeira Islands and 4 percent in Azores Islands.

  

There are some rules for VAT exemptions as well. It will be distinguished between VAT exemptions with input VAT recovery (so-called zero rated supplies) and VAT exemption without an input VAT deduction (exempt supplies).

 

Zero rated supplies are, for example:

 

VAT exempt supplies without input VAT deduction are, for example:

 

The general rule is that the goods are deemed to be supplied in the Portuguese territory if they are herein loca­ted at the beginning of the expedition or, if there is no transport or expedition, if they are made available to the customer in Portugal.

 

If a business sells goods to a customer who is registered for VAT in another EU Member State and the supply involves the removal of those goods from Portugal (either by the supplier or the customer) to that EU Member State, then the business does not need to charge VAT and may zero rate the supply as an intra-Community shipment. 

 

If a business sells goods to a customer who is not registered for VAT in another EU Member State and the sales involves the removal of those goods from Portugal by the supplier, the supplier will have to charge Portuguese VAT. 

 

If a business exports goods to a customer (business or private) outside of the EU and the supplier arranges for the goods to be transported the supplier does not need to charge VAT. 

 

As a general rule, supplies of services are subject to VAT in Portugal if provided to taxable persons that have their head office, a fixed establishment, or domicile in Portugal to which the services are provided (B2B rule). 

 

As a general rule, the place of supply of services to customer who does not receive such services for their busi­ness (so-called B2C services) is where the service provider has its head office, a fixed establishment, or domi­cile from which the services are provided. 

 

Apart from these general rules, there are special rules for certain types of services. 

 

If the customer is resident outside the EU the place of supply of certain B2C services is where the customer is resident or domiciled. 

 

For telecommunications, radio or television broadcasting and electronically supplied services and intra-Com­mu­nity distance sales of goods there is the mechanism of the One Stop Shop – OSS (“Regime do Balcão Único”), which allows traders who supply these services and goods to submit their periodic VAT return and pay the tax through the electronic portal of the tax administration of a single EU Member State. 

 

If this registration is done before the Portuguese Tax Authority the economic operator declares in Portugal all the intra-Community supplies of services and goods. The supplies of services and goods, when made to non-taxable persons established in the EU, are taxed at the place where the customer is established or domiciled. However, economic operators may be taxed in the State where they are established if:

 

For the distance selling of imported goods, that is, for the supply of goods shipped or transported from a third country/territory to the customer, where the customer is a private individual, the economic operator can benefit from the Import One Stop Scheme – IOSS (“Regime de Importação”) by joining it in the country where it is head­quartered.

 

Under this regime, distance sales of goods imported into the Portuguese territory are not subject to VAT in Portugal when the place of arrival of the dispatch or transport of the goods to the buyer is outside the national territory.

 

On the other hand, distance sales of goods imported into another Member State are subject to VAT in Portugal when the place of arrival of the dispatch or transport of the goods to the recipient is within the national territory.

If an entrepreneur performs taxable supplies in Portugal, it will be required to notify the Portuguese Tax Autho­rities of the date of commencement of taxable activities; the business will grant a local tax registration/ identi­fication number (Número de Identificação Fiscal – NIF).

 

If an entrepreneur makes intra-Community supplies of goods in Portugal, it will be required to notify the Portuguese Tax Authorities of the date of commencement of such activities, also it will be granted a Portuguese VAT identification number (tax identification number – NIF PT).

 

The registration rules which apply to Portuguese entities also apply to non-Portuguese entities providing taxable supplies in Portugal. 

 

Fiscal representation is mandatory only for foreign taxable persons who are not residents of EU Member States providing taxable supplies in Portugal. For foreign taxable persons which are residents of EU Member States, fiscal representation is optional. 

 

There are some simplification rules to avoid a registration for VAT purposes in Portugal.

 

If an entrepreneur supplies goods and installs or assembles them in Portugal, the customer can account for any VAT due, in effect, as an acquisition. The supplier must be registered for VAT purposes in another EU Member State.

 

If the entrepreneur is established in an EU Member State it is possible to appoint a fiscal representative in Portugal, however, this appointment is mandatory if the entrepreneur is established in a non-EU Member State. After nomination and acceptance, the fiscal representative is responsible to comply with the VAT duties and obligations. 

 

Rödl & Partner in Portugal also provides VAT compliance/declaration services for foreign companies which are obliged to register for VAT in Portugal.

Entrepreneurs liable to Portuguese VAT are required to submit VAT returns on a monthly filing basis, up to the 10th of the second month following the one to which the transactions relate, or, if the annual turnover is lower than EUR 650,000, quarterly basis filing, up to the 15th of the second month following the three months period to which the transactions relate. The entrepreneurs with an annual turnover lower than EUR 650,000 may choose to deliver the VAT return on a monthly basis, which will remain mandatory for a three years period. 

 

VAT returns must be filed exclusively through electronically form. VAT payer must also file nil VAT returns.

 

If an entrepreneur supplies goods or services from Portugal to VAT registered businesses in other EU Member States, it is required to correctly complete ESL forms (recapitulative statements) in paper form or electronically.

  

The declaration must be filled up to the 20th of the month following the moment on which the intra-Community supplies of goods or intra-Community services were provided.

 

The Intrastat report is a statistical record concerning the intra-Community trade of goods (not services), which must be filled up to the 15th of the month following the moment on which the goods were physically moved.

 

The report must be delivered by VAT registered entrepreneurs with a value of dispatches or deliveries to or from EU Member States, which exceeds a certain threshold. The dispatches detailed with statistical procedure (Mainland and Azores Islands) has the threshold of EUR 6.5 Million. Regarding the arrivals the threshold is EUR 5 Million. Regarding the arrivals the detailed declaration has the threshold of EUR 350,000. Concerning decla­rations regarding the Autonomous region of Madeira, the threshold is EUR 25,000, both for dispatches and arrivals. Once the entrepreneur is liable to submit the declaration, it should be submitted even if there are no transactions to report.

 

Intrastat reports are to be filed electronically or on paper.

 

Failure to comply with the obligations regarding VAT obligations, involves both the obligation to pay tax arrears together with default interest and the possible penal fiscal responsibility for the depletion of liabilities against estate budget. Such a failure is punishable with a fine as well as crime depending on the amount in default.

 

Several penalties may apply for late submission or other compliance related failures. Such penalties are struc­tured as lump-sum penalties set based on the offence (negligence or willful misconduct) involved. Penalties up to 100 percent of the mistake may apply to negligence cases. 

 

Failure to comply with the obligations regarding VAT obligations, involves both the obligation to pay tax arrears together with default interest and the possible penal fiscal responsibility for the depletion of liabilities against estate budget. Such a failure is punishable with a fine as well as crime depending on the amount in default.

 

Several penalties may apply for late submission or other compliance related failures. Such penalties are struc­tured as lump-sum penalties set based on the offence (negligence or willful misconduct) involved. Penalties up to 100 percent of the mistake may apply to negligence cases. 

 

If your business is registered for VAT purposes in Portugal it is possible to declare and deduct Portuguese input VAT within the VAT return on the regular tax procedure under further preconditions.

 

The right to deduct only arises in respect of VAT shown in an invoice legally issued.

 

A Portuguese established company filing a claim to a non-EU Member State shall meet the requirements of the country of refund.

 

If Portugal is the Member State of Refund and there is an EU established company intending to claim refund in Portugal, the following conditions shall be fulfilled:

Taxable persons should issue an invoice (or “invoice – receipt”) for each supply of goods or supply of services or, in some situations, a simplified invoice. If the taxable amount or VAT amount of a transaction changes due to any reason (including errors or discounts), a correcting document of the invoice should be issued (a “debit note” or “credit note”).

 

If invoices do not content all of the necessary requirements or if some indications are not correct it is possible to amend these invoices through different ways, for example via cancellation and new issuing or amendment with an additional document and respective references to the original invoices. 

 

An electronic submission of invoices is generally possible, subject to the recipients’ acceptance. Specific con­ditions must be fulfilled in order to ensure its authenticity, content and the validity and the integrity of the issued/received invoice, for example, use of a qualified electronic signature or an electronic data interchange procedure, in order to allow a reliable audit trail. 

 

A correcting invoice could be issued with the possibility to claim back already paid VAT from the tax authority. If the taxable amount or VAT amount of a transaction changes due to any reason (including errors or discounts), a correcting document of the invoice should be issued (a “debit note” or “credit note”).

 

A correcting invoice must be issued by the seller in cases where the supply was cancelled/returned in full or part, in case of discounts and the correcting invoices which amend the original invoices must refer to the original.

 

To operate via self-billing is possible, provided an entrepreneur has the agreement of the customer, through written form, before doing so. If the recipient of the supply issues an invoice to the supplier (and not the supplier by itself) – in scope of the self-billing procedure – the invoice documents will contain the term “autofaturação” (it means self-invoicing).