VAT

Taxable transactions/persons

Taxable transactions

The following transactions are subject to VAT:

• supplies of goods and supplies of services for consideration;
• importation of goods; and
• intra-Community acquisitions of goods.

Some other transactions are deemed supplies of goods or supplies of services for consideration and, as such, are subject to VAT (e.g. gifts of small value and non-return within one year of goods sent for consignment).

The following transactions are considered to fall outside the scope of VAT:

• the transfer, for consideration or not, of a totality of assets or a part thereof that constitute an undertaking or a part of an undertaking capable of carrying on an independent economic activity;
• indemnities for damages;
• repayment of expenditure incurred in the name and on behalf of a third party.

Taxable persons

A taxable person for VAT purposes is any person who, independently, carries out an economic activity or that carries out one single taxable transaction that falls within the scope of the personal or corporate income tax.

State, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities.

Place of supply rules

Supplies of goods

Supplies of goods are subject to VAT in Portugal if the goods are located in Portugal at the moment their transport or dispatch to the costumer begins or, if there is no transport or dispatch, if the goods are located in Portugal at the moment on which they are put at the disposal of the costumer.

Supply of services

General rule

Supplies of services are subject to VAT in Portugal if provided to:

• taxable persons that have their business, a fixed establishment, domicile or residence in Portugal to which the services are provided (“B2B” rule);
• non-taxable persons if the provider has established its business, a fixed establishment, domicile or residence in Portugal from where these services are provided (“B2C” rule).

Exceptions

Independently of the place where the service provider and the acquirer are established and independently of the acquirer being a taxable person or not, the supply of the following services is subject to VAT in Portugal if physically carried out in Portugal:

• services connected with immovable property;
• 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 put at the disposal of the costumer in Portugal.

The supply of the following services is subject to VAT in Portugal if physically carried out in Portugal and if the acquirer is a non-taxable person:

• transport of goods, other than intra-Community transport of goods, for the distances covered in Portugal;
• intra-Community transport of goods, if the place of departure is Portugal;
• valuations of and work on movable property;
• services and ancillary services, relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities, such as fairs and exhibitions, including the supply of services of the organizers;
• hiring of means of transport, other than short-term hiring, when the acquirer is established, has his permanent address or usually resides in Portugal.

Telecommunications, broadcasting, television and electronic services supplied to non-taxable persons are taxed in Portugal when the customer, a non-taxable person, is established, has his permanent address or usually resides herein.

Exemptions

Some transactions are exempt from VAT. Exempt transactions that do not grant a right to deduct the input VAT are “incomplete exemptions”. The transactions that, although exempt, grant a right to deduct the input VAT are “complete exemptions”.

Incomplete exemptions

The supply of hospital and medical care, the provision of education, the supply, leasing or letting of immovable property, subscriptions by non-profit making organisations, certain financial services, insurance and reinsurance transactions and the supply of restaurant and catering services by the employer to its employees are the main transactions exempt from VAT.

For some of these transactions, if certain conditions are met, it is possible to opt to charge VAT. Waiving the VAT exemption allows that the VAT incurred is deducted.

Are also exempt from VAT the supply of services (and the supply of goods closely linked thereto) provided by:

• bodies governed by public law or by other recognized organizations having their aim to supply services and/or goods closely linked thereto in relation with children’s or young people’s education, welfare and social security work, including those supplied by old people’s homes, protection of children and young persons and social wellbeing;
• bodies governed by public law or by non-profit making organizations relating to congresses, conferences and fairs of a scientific, cultural, educational or technical nature.

Complete exemptions

The following transactions are exempt from VAT:

• intra-Community supplies of goods;
• exportations, deemed exportations and international transport services;
• supplies of goods which are intended to be placed under customs warehousing arrangements, warehousing other than customs warehousing and similar arrangements and supplies of goods carried out under one of the referred arrangements;
• supplies free of charge of: goods that will be provided to disadvantaged people by the State, by other recognized organizations or by non-profit making organizations; books provided to the governmental departments for culture and education, to organizations with a cultural and educational aim and to educational institutions for social reinsertion and to prisons.

Chargeable event chargeability and taxable amount

VAT becomes chargeable when the goods are put at the disposal of the customer and when the services are supplied.

Having the obligation to issue an invoice/simplified invoice, the VAT becomes chargeable no later than on the 5th working day in spite of the stipulated on the VAT cash regime.

When a payment is made on account before the goods or services are supplied, the VAT becomes chargeable on receipt of the payment.

Taxable amount

The taxable amount includes everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party.

The taxable amount includes taxes, duties, levies, charges and incidental expenses.

The taxable amount does not include late payment interests, price reductions, price discounts and rebates and amounts received for package material that was not sold to the client.

Special rules apply on the calculation of the taxable amount for transactions carried out between taxable persons with special relations, according to nr. 4 of article 63.º of the Corporate Income Tax Code.

Rates

The reduced rate is applicable to the supply of some essential foods, periodical publications, books, pharmaceutical products, hotel accommodation, agricultural products and passenger transport.

The intermediate rate is applicable to supply of some foods, to some food and beverages services, pre-cooked meals and to the admission to concerts, shows, theatre, cinemas, circus and bullfighting.

Deduction

Supporting documents

Only VAT mentioned in an invoice / simplified invoice issued in a legal form or in an import document issued by the Portuguese Tax and Customs Authorities in which the reverse charge mechanism does not apply can be deducted by the taxable person.

Mixed taxable persons

Taxable persons performing simultaneously activities that give the right to deduct VAT and activities that do not give such right, should use the direct allocation method and/or the deductible proportion in order to determine the amount of deductible VAT.

Capital goods

VAT on capital goods is subject to an adjustment period which is 5 years in case of movable property and 20 years for immovable property.

If, within the referred period, the goods are allocated temporarily or permanently to exempt transactions, an adjustment shall be made in respect of one-fifth or one-twentieth of the deducted VAT for each remaining year of the adjustment period.

Restrictions on the right of deduction

VAT is not deductible in respect of the following expenses:

• non-commercial vehicles (when fueled by gas or diesel), recreational boats, helicopters, airplanes, motorcycles;
• fuel, except for diesel, GPL, natural gas and bio fuels, for which 50% of the VAT is deductible;
• transportation, food, beverage and accommodation;
• tobacco, entertainment and luxury.

If the expenses of transportation, food and accommodation relate to the organization of congresses, fairs, expositions, seminars, conferences and similar events, 50% of the incurred VAT is deductible. If these expenses relate to the participation in the referred events, 25% of the incurred VAT is deductible.

Invoicing

Invoicing

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”).

Issue of invoices

Invoices and amending documents should be issued using an invoicing software previously certified by the Portuguese Tax and Customs Authorities.

These documents are issued in one or more series, conveniently referenced according with business needs and must be dated and numbered progressively and continuously, within each serial, for a period not less than one fiscal year.

The use of pre-printed invoices with a pre-printed sequential numbering is only allowed if certain conditions are met.

Self-billing

Self-billing is allowed if there is a prior agreement between the two parties and if the acquirer can prove that the supplier was informed of the document issuance and has accepted its content.

The self-bill has to mention “autofaturação”.

Electronic invoicing

Invoices and other fiscal relevant documents can be issued by electronic means, subject to acceptance of the recipient, provided that the authenticity of the origin, the integrity of the content and respective legibility is assured, from the moment of issuance until the end of the archive period. Adequate  control allowing a reliable audit trail between the relevant document and the supply of goods or services should be implemented.

The authenticity of the origin and the integrity of the content of the documents issued by electronic means is ensured if one of the following procedures is adopted:

• Qualified electronic signature;
• Qualified electronic seal; or,
• Use of an electronic data interchange system ("EDI").

Additional obligations

Declarations

• Start of activity form – to be filed before the beginning of the activities;
• Change of activity form – whenever a relevant fact considered in the start of activity form has changed;
• Cease of activity form – to be submitted after the end of activities;
• VAT returns – monthly filing, up to the 10^th of the second month following the one to which the return refers to, or, if the annual turnover is lower than € 650,000, quarterly filing, up to the 15th of the second following month;
• Mini One Stop Shop (MOSS) VAT returns – filing up to the 20^th of the month following the quarter to which the services were provided. This return should only be filed by taxable persons who have joined the MOSS regime and only refers to telecommunication, broadcasting and electronically supplied services rendered to non-taxable persons established in another EU Member State rather than Portugal;
• EC Sales List – filing up to the 20^th of the month following the moment on which the intra-Community supplies or intra-Community services were provided;
• Intrastat return – filing up to the 15^th of the month following the moment on which the goods were physically moved;
• Annual return – filing up until 15^th July (or until 15^th day of the 7^th month following the end of the fiscal year, if different from the civil year).

Communication of issued documents

Taxable persons that have established their business, a fixed establishment or have their residence in Portugal and that carry out transactions subject to VAT, are obliged to communicate to the Portuguese Tax and Customs Authorities, by electronic means, the elements of documents issued under the VAT Code (invoices, simplified invoices, debit notes and credit notes) as well as the data of working documents and the receipts.

The referred communication should be done up to the 12^th of the following month:

• by electronic transmission in real-time, integrated in the electronic invoicing program;
• by submitting electronically the invoicing file SAF-T (PT) – this is obligatory for taxable persons that have the obligation to extract the SAF-T (PT) file; or
• orby introducing the elements manually on the website of the Portuguese Tax and Customs Authorities.

Accounting and archiving

The accounting records should be organized in order to guarantee that the VAT can be calculated and that all relevant information is available for completing the periodical VAT return.

A register of the capital goods should be kept in order to allow the control of the VAT deductions and adjustments.

All records and supporting documents, including documents relating to analysis, programming and execution of information systems, should be kept for 10 years.

It is allowed to proceed with an electronic archive of both electronic invoices and paper invoices issued by an invoicing software, considering that in the last situation all the conditions provided in Ministerial Order are complied.