Tax Guide 2022 | VAT

The following transactions are outside the scope of VAT:

• The transfer, either for consideration or for free, of a commercial establishment, or of the totality or part of the assets of an undertaking, capable of carrying on an independent economic activity;
• Indemnities for damages that do not qualify as remuneration;
• Repayment of expenditures incurred in the name of and on behalf of a third party.

For VAT purposes, a taxable person is any natural or legal person who carries out an economic activity or one single taxable transaction (that is connected to a business activity or liable to PIT or CIT).

The State and other public bodies are not regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities.

General rule

Supply of services are subject to VAT in Portugal if the acquirer is:

• a taxable person with its head office, permanent establishment or domicile in Portugal (B2B rule);
• a non-taxable person, in the case of a service provider with its head office, permanent establishment or domicile in Portugal, through which services are provided (B2C rule).

Exceptions

Regardless of the place where the service provider and the acquirer are established and irrespectively of whether the acquirer is a taxable person or not, the supply of the following services is subject to VAT in Portugal if carried out herein:

• services connected to immovable property located in the Portuguese territory;
• passenger transport for distances travelled within Portugal;
• admission to cultural, artistic, scientific, sports, entertainment, educational and similar events;
• food and beverage services;
• short-term (up to 30 days; 90 days in case of boats) means of transport placed at disposal of the customer in Portugal.

In case the acquirer of the following services is a non-taxable person, and these are materially carried out in Portugal, such services will be subject to VAT in Portugal:

• transport of goods, other than intra-Community transport of goods, for distances travelled in Portugal;
• intra-Community transport of goods, if the place of departure is Portugal;
• works on movable property and related valuations/expertise reports;
• services of cultural, artistic, sports, scientific, entertainment, educational and similar nature, including ancillary purposes, comprising services rendered by the entities or person in charge of organizing such activities (as well as ancillary services provided);
• hiring of means of transport, other than short-term hiring, when the acquirer is established or domiciled in Portugal.

Telecommunications, broadcasting, television and electronic services supplied to non-taxable persons are taxed in Portugal when the customer is a non-taxable person resident herein.

The following transactions are VAT exempt:

• intra-Community supply of goods;
• exports, operations comparable to exports and international transport services;
• supply of goods which are intended to be placed under tax and customs bonded warehouses, while the goods are under a suspensive regime;
• free supply of:
  •  goods to be delivered to people in need (by the State), as well as to social solidarity private entities and non profit non governmental organisations;
  • books delivered to governmental departments in the culture and education sectors, to organizations with a cultural and educational aim and to education centers for social institutions for social reinsertion and to prison establishments.

The taxable amount corresponds to the consideration obtained, or to be obtained by the acquirer, the recipient, or by a third party.

The taxable amount includes taxes, duties, levies and other charges, as well as ancillary expenses.

The taxable amount does not include interest on late payment t, discounts, and rebates and bonuses granted, as well as sums related to packaging material that was not sold to the client.

Transactions between associated enterprises, under no. 4 of Article 63 of the Corporate Income Tax Code, as subject to special rules for the computation of the taxable amount.

Taxable persons simultaneously carrying out activities that grant the right to deduct VAT, and activities that do not grant such right (so-called “mixed-income taxable persons”) should use the direct allocation method and/or the prorate method in order to determine the amount of deductible VAT.

VAT incurred on movable and immovable capital assets is subject to an adjustment period of 5 years and 20 years respectively.

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

VAT is not deductible in respect to the following expenses:

• Non-commercial vehicles (that use gas or diesel), leisure boats, helicopters, airplanes, motorcycles;
• Fuel used by motor vehicles, except diesel, LPG, natural gas and biofuels, which VAT is deductible in the proportion of 50%, except in case of certain goods in respect of which the VAT on the consumption of diesel, gasoline, LPG, natural gas and biofuels is fully deductible;
• Transport, food, beverage and accommodation;
• Tobacco, entertainment and luxury expenses.

The VAT incurred in expenses relating to transport, food and accommodation related to the organization of congresses, fairs, exhibits, seminars, conferences and similar events, is deducted by 50%. The deduction is capped at 25% in case these expenses are related to the participation in the referred events.

VAT incurred in expenses with electricity used in electric or hybrid plug-in  vehicles is deductible. 

Invoices and amendment 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, properly identified in accordance to the business needs. They should be dated and numbered progressively and continuously, within each series, for a period of not less than one tax year.

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

Effective 1 January 2022, it is mandatory to include the QR Code in all invoices and other tax relevant documents. Reference to ATCUD it is not mandatory in 2022, becoming however mandatory from 1 January 2023 onward.

Self-invoicing is allowed if there is a prior written agreement between the supplier and the acquirer of goods or services. The acquirer must demonstrate that the supplier acknowledged the issuance of the invoice and has accepted the respective contents. The document issued must include a reference to self-invoicing (“autofaturação”).

Invoices can be issued by electronic means, subject to acceptance by the recipient and provided that the authenticity of origin, integrity of the contents and the readability of the invoice is ensured by any means of management control that creates a reliable audit trail.

Advanced electronic signature and EDI are examples of technologies that ensure the authenticity of origin and the integrity of the content of an electronic invoice.

As from 1 January 2021, electronic invoicing is mandatory on public contracts (except if the contractors qualify as micro, small or medium sized companies, in which the period to implement it is extended until 31 December 2022).

Taxable natural or legal persons with head office, permanent establishment or tax domicile in the Portuguese territory and carry out herein transactions subject to VAT, are required to communicate to the Portuguese Tax and Customs Authorities the elements of documents issued (invoices, simplified invoices, debit notes and credit notes, among others).

The referred communication should be made up to the 12th of the following month*:

• by electronic transmission in real-time, integrated in the electronic invoicing program;
• by electronic data submission of the invoicing SAF-T (PT) file (mandatory for taxable persons that are required to prepare the SAF-T (PT) file), or
• through direct manual insertion in the Portuguese Tax and Customs Authorities’ website.

* From 1 January 2023 onward, invoices must be communicated until day 5 of the following month. This deadline applies to the invoices issued in January 2023, to be communicated by 5 February 2023.

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

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

Electronic archive of electronic invoices and computer processed invoices is allowed under the conditions established by the Minister of Finance.