This article covers the basic rules of VAT taxation in Portugal.
Foreign businesses importing or trading goods or services in Portugal may be required to comply with Portuguese VAT rules, including compliance, reporting and payment obligations.
It is important for businesses located in and outside of the European Union (EU) to assess their VAT exposure before the commencement of any commercial activity in Portugal.
Value Added Tax
Value Added Tax was introduced in Portugal in 1986, as part of the measures to be implemented when adhering to the EU. The Portuguese name of this tax is Imposto Sobre o Valor Acrescentado (IVA).
An EU Member-State, Portugal has transposed into its legal framework EU’s rules on VAT registrations, compliance, returns, Intrastat and EC Sales Lists.
VAT rules in Portugal
Suppliers of goods and services are required to collect VAT on transactions, except if an exemption applies, as follows:
- supplies of goods and supplies of services for consideration;
- importation of goods; and
- intra-community acquisitions of goods.
Other transactions, such as deemed supplies of goods or supplies of services for consideration can also be liable to VAT.
In Portugal, VAT rates are as follows:
- Standard Rate — 23%
- Reduced Rates — 13% or 6%
- Standard Rate — 22%
- Reduced Rates — 12% or 5%
- Standard Rate — 18%
- Reduced Rate — 9% or 4%
A taxable person for VAT purposes is any entity carrying out an economic activity that falls within the scope of the Income Tax.
State, regional and local government authorities and other public entities shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities.
Nonresident enterprises doing business in Portugal
Non established companies may be required to register, appoint a fiscal representative and/or collect Portuguese VAT.
If a company not established in Portugal provides ‘taxable supplies’ of goods or services in Portugal, it may be required to register for VAT purposes in Portugal. Under certain circumstances, non-resident taxable persons are required to register for VAT, report taxable transactions, and disclose and pay VAT.
For instance (other rules may apply), registration obligations are triggered when:
- importing goods into Portugal from a non-EU country
- buying and selling goods in Portugal where the reverse charge mechanism is excluded
- selling goods from Portugal which are delivered to customers outside of Portugal
- conducting intra-community acquisitions from another EU country
- holding inventory in Portugal for sale, distribution or consignment
- conducting e-commerce sales of goods to consumers, while triggering Distance Selling VAT registration thresholds
- organizing events in Portugal with paid admission
B2C sale of goods — E-Commerce
The distance sale of goods to Portugal (E-Commerce) triggers registration obligations. If a seller exceeds Euro 35.000 in annual sales, VAT registration is mandatory.
Providers of B2C electronic, broadcast or telecom services in Portugal must register for VAT purposes under the MOSS scheme.
Businesses established outside the EU must appoint a tax representative to register for VAT purposes in Portugal.
EU businesses are not required to appoint a fiscal representative when registering for VAT in Portugal. Nevertheless, we recommend having a point of contact in Portugal to communicate and represent your company before the Portuguese Tax Authorities.
Transactions liable to Portuguese VAT
As a rule, the supply of B2B services and goods in intra-community transactions is subject to the reverse charge mechanism.
However, regardless of where the provider and acquirer are established or act as taxable persons, the supply of the following services is liable to Portuguese VAT:
- services connected with real estate property in Portugal
- passenger transport for the distances covered in Portugal
- admission to cultural, artistic, scientific, sporting, educational, entertainment or similar events
- restaurant and catering services
- short-term hiring of means of transport (up to 30 days, for boats up to 90 days) if the means of transport are at the disposal of the customer in Portugal
Furthermore, the supply of the following B2C services is liable to Portuguese VAT if physically carried out in Portugal:
- transportation of goods, outside the scope of intra-community transportation of goods, for the distances covered in Portugal
- intra-community transport of goods, departing from Portugal
- works on movable property
- services and ancillary services related to cultural, artistic, sporting, scientific, educational, entertainment or similar activities
- the hiring of means of transport, other than short-term hiring, when the acquirer is established, has his permanent address or usually resides in Portugal
Companies registered for VAT purposes in Portugal must file VAT returns quarterly for annual turnovers not exceeding Euro 650.000,00, or monthly if such threshold is surpassed.
EC Sales List and Portuguese Intrastat Returns are filed monthly for intra-community transactions. Annual returns are filed in July.
Value Added Tax Desk
Gil Figueira & Devillet Lima Advogados provides VAT analysis, registration, and compliance for companies trading in the European Union.
Our VAT desk provides advice on VAT efficient consulting for a variety of business models and industries such as:
- Media & Entertainment
- Pharmaceutical & Medical products
- Luxury items & Retail
- Real estate
- Consumer goods.
- Consulting services for cross-border or domestic suppliers of goods and services
- Advice on prospective domestic and cross-border transactions
- Compliance services
- Claims and refunds
- Representation and registration
- Tax optimization