The Author of the VAT Guide
What does this guide contain?
The guide provides you with practical VAT information for Portugal :
- Your VAT registration in Portugal
- Your VAT obligations TVA in Portugal
- The invoicing rules in Portugal
VAT REGISTRATION IN PORTUGAL
When do you have to register for VAT?
It is mandatory for your company to apply for VAT registration with the Portuguese tax authorities before starting your activities. Financial penalties may apply if the application for registration is submitted late.
What documents do I need to provide when I register?
If your company wishes to register for VAT in Portugal, it is essential to contact the Portuguese tax authorities. There is no need to contact the tax authorities in your country of establishment.
In particular, your company will need to submit the following documents:
- The VAT registration form(s) completed in the language of the country
- A copy of the articles of association
- An extract from the trade register
- A certificate of VAT liability
- Power of attorney (if using a fiscal agent)
- Proof of activity on the territory of the country concerned: a contract, an order form, etc.
The Portuguese tax authorities may require some of these documents to be translated into Portuguese.
The VAT expert's eye
In Portugal, some additional obligations can quickly become binding such as:
- Since 2019, a new mandatory obligation for all VAT registered entities in Portugal is to submit UBO (Ultimate Beneficiary Owners) data in the proper Portuguese registry.
- Registration fees can only be paid directly on the spot, within the Portuguese territory.
How long does it take to get a VAT number?
If your file is complete, it generally takes at least 2 months to obtain the VAT number. There are two competent administrative services which deal with foreign companies depending on your legal personality: either AT (autoridade tributaria e aduaneira) or IRN (instituto dos registos notarios).
Is a fiscal representative necessary?
Non-European companies cannot register for VAT themselves in Portugal. They have to do it through a VAT representative. This is a local company that will represent you to the local VAT authorities. He is responsible for the respect of all your VAT obligations, including those of which he was not aware. For this reason, he may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.
European companies are not obliged to appoint a VAT representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder (agent) to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts.
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VAT OBLIGATIONS IN PORTUGAL
Is it necessary to keep VAT accounting ledgers?
Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the Portuguese tax authorities.
When do you have to file a VAT return?
Your company is required to file periodic VAT returns on quarterly basis if your annual turnover of preceding year does not exceed € 650.000 and on a monthly basis otherwise. However, monthly reporting period can be opted for.
Monthly VAT return must be filed electronically by the 10th day of the second month following the end of the taxable period.
Quarterly VAT return must be filed electronically by the 15th day of the second month following the end of the taxable period.
The VAT expert's eye
Member States set the duration of the taxable period at one, two or three months. However, they may set different periods provided they do not exceed one year. The VAT return must be submitted within a period to be determined by the Member States. This deadline may not be more than two months after the end of each taxable period (Art. 250 of the VAT Directive).
Do I have to submit an annual return?
An annual VAT return must be filed electronically by 15 July of the following year.
The VAT expert's eye
Member States may require the taxable person to file a return containing all the data referred to in Articles 250 and 251 and concerning all transactions carried out during the previous year. This return shall include all the information necessary for any adjustments. They authorize, and may require, the return to be made by electronic means under conditions which they determine (Art. 261 of the VAT Directive).
What is the deadline for paying Portuguese VAT?
The company must pay the VAT due has the same deadline as the VAT return. The deadline for the payment of the Portuguese VAT has been amended (see our VAT news 06/2019): the taxpayers now have an additional 5 days in order to transfer the money to the bank account of the Portuguese Authorities.
The VAT expert's eye
Every taxable person who is liable for the tax must pay the net amount of VAT when filing the VAT return. Every taxable person who is liable for the tax must pay the net amount of VAT when submitting the VAT return. However, Member States may set a different deadline for the payment of this amount or collect instalments (Art. 206 of the VAT Directive).
When should the intra-EU statement be filed?
The company filing monthly VAT returns is obliged to submit an electronic intra-Community listing at the latest on the 20th day of the month following the reporting period.
The company filing quarterly VAT returns must however submit the Statement on a quarterly basis, unless the amount of intra-EU delivery of goods during the current quarter or any of the four preceding quarters exceeds € 50.000, in which case it must be submitted monthly. When the threshold is exceeded, the requirement to submit a monthly recapitulative statement becomes irreversible.
The eye of the VAT expert
A recapitulative statement is drawn up for each calendar quarter within a period and according to procedures to be determined by the Member States. However, Member States may provide for recapitulative statements to be submitted on a monthly basis. Member States may allow, and may require, recapitulative statements to be submitted electronically under the conditions they determine (Art. 263 of the VAT Directive).
INVOICING RULES IN PORTUGAL
Does the invoice have to include VAT? Reverse charge?
As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.
The special reverse charge rules have been introduced in Portugal for foreign companies:
For supplies of goods:
The reverse charge is applicable to all domestic supplies of goods provided that the customer is taxable person.
For supplies of services:
The reverse charge is applicable to all domestic supplies of services provided that the customer is taxable person, or a non-taxable person VAT registered for intra-EU operations.
What are the mandatory mentions on an invoice?
The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.
What VAT rate should be mentioned on an invoice?
Portugal has 3 differents VAT rates :
- Standard rate : 23%
- Intermediary rate : 13%
- Reduced rate: 6%
VAT REFUNDS IN PORTUGAL
How can I recover VAT in Portugal?
There are several methods to obtain refunds of Portuguese VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in Portugal:
- If your company has a VAT number in Portugal, it will have to submit a refund application in the form and within the timeframe required by local regulations. In principle, the VAT credit is automatically transferred to the following month unless a tax refund has been applied for.
- If your company is established in a European country and does not have a VAT number in Portugal, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.
- If your company is established outside Europe and does not have a VAT number in Portugal, it will have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.
Is Portuguese VAT recoverable on all expenses?
VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.
No input VAT can be recovered on any of the following expenses:
- Business travel expenses incurred for the benefit of the company's managers or employees.
- Expenses associated with cars, mixes vehicles or motorcycles.
- Expenses in connection with accommodation, food and beverage, except in cases the expense is related to conferences, fairs, expositions or congresses, where a deduction of 25%, 50% or 100% can be applied under conditions.
The VAT expert's eye
In Portugal, the right to deduct VAT on expenses is detailed in its VAT law decree where it states that every VAT taxable person has the right to reclaim VAT on its purchases except for accommodation, meals, drinks, transport or entertainment costs. Where these expenses related to the organization of fairs, exhibitions, conferences and similar events and these services were re-invoiced directly, VAT on these expenses was only deductible at 50%.
On 1 January 2023, a change in the VAT code entered into force. Since this date, some specific taxable persons can now deduct 100% of VAT on their expenses related to :
- Transport and travel costs on behalf of the company and its staff
- Expenses related to accommodation, food and drink
- Reception expenses, including those related to the welcoming of people from outside the company
- Expenses relating to buildings or parts of buildings and their equipment intended for receptions
In order to benefit from the additional 50% deduction, taxable persons must meet two conditions :
- Have as principal activity NACE code 82300 - Organisation of fairs, congresses, conferences, exhibitions and similar events and;
- Have applied to the Portuguese authorities for a 100% deduction authorization
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