Tax Guide 2024 – VAT
ᐅ Last reviewed 16 September 2024
Taxable transactions / persons
Taxable transactions
The following transactions are subject to VAT:
Supply of goods and supply of services for consideration;
Imports of goods; and
Intra-Community acquisitions of goods and services.
Other transactions of goods or supply of services for consideration and, as such, also subject to VAT (e.g. gifts above € 50 or which total annual amount exceeds 5/1000 the turnover, as well as the non-return within one year of goods sent for consignment).
Non-taxable transactions
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.
Taxable persons
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.
Place of transactions
Supplies of goods
Supplies of goods are subject to VAT in Portugal if the goods are in Portugal when their transport or dispatch to the customer begins. The same applies in case there is no transport or dispatch these are in Portugal when made available to the customer.
Supplies of services
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.
Exemptions
Despite being subject to VAT rules, some transactions are VAT exempt. Exempt transactions that do not grant a right to deduct the input VAT can be designated as “incomplete exemptions”. The transactions that, although exempt, grant a right to deduct the input VAT, can be designated as “complete exemptions”.
Incomplete exemptions
The following supplies are VAT exempt:
medical care and education;
transfer and leasing of immovable property;
certain services rendered by non-profit making organisations;
subscription fees of non-profit organisations;
certain financial operations;
insurance and reinsurance operations;
food and beverages supplied by employers to its staff;
services related with the interpretation of Portuguese sign language.
There is the option to charge VAT on some of the above transactions, under specific conditions. Waiving the VAT exemption allows for the deduction of the VAT incurred.
An exemption from VAT applies on services (as well as on the supply of goods closely related to them) supplied by the following entities:
public bodies or recognized social solidarity (or with any social utility) private organizations, in case of services related to day nurseries, preschools, leisure centers, residential homes, workhouses, establishments for disabled children and youngsters, rehabilitation centers for the disabled, retirement homes, day and entertainment centers for elderly people, holiday camps, youth hostels; and
public bodies and nonprofit entities, in the case of services related with congresses, conferences, seminars, courses and other similar events of a scientific, cultural, educational or technical nature.
Complete exemptions
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.
Chargeable event, chargeability and taxable amount
Chargeable event and chargeability
VAT becomes chargeable when goods are placed at the disposal of the customer and when services are provided.
In case invoices/simplified invoices are required, VAT becomes chargeable no later than the 5th following working day (specific rules apply for the VAT cash regime).
In case of prepayments or advanced payments, VAT becomes chargeable upon receipt of the payment (on the respective amount).
Taxable amount
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.
VAT rates
| Rate | Mainland | Madeira | Azores |
|---|---|---|---|
| Standard | 23% | 22% | 16% |
| Intermediate | 13% | 12% | 9% |
| Reduced | 6% | 4% | 4% |
The reduced rate is applicable to goods and services listed in List I of the VAT Code. Those goods and services include namely, the supply of some essential food products, periodic publications, books, pharmaceutical products, hotel accommodation, agricultural products, passenger transport, admissions to cultural performances, circus events, tickets to exhibitions, public zoos, botanical gardens and aquariums (that are not exempt under Article 9 no. 13 of the VAT Code).
The intermediate rate is applicable to goods and services listed in List I of the VAT Code. Those goods and services include namely the supply of some food products, some food and beverage services.
Deductions
Supporting documents
VAT incurred can only be deducted if it is mentioned in an invoice / simplified invoice issued in accordance to the applicable rules, or in an import document issued by the Portuguese Tax and Customs Authorities.
Mixed-income taxable persons
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.
Capital goods – movable and immovable
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.
Restrictions to the right of deduction 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.
Invoicing
Taxable persons should issue an invoice (or and invoice – receipt) each time they supply goods or services. In certain circumstances, a simplified invoice should be issued.
If the taxable amount of a given transaction or the amount of corresponding VAT is amended by any reason, including in case of error, an amendment document should be issued (debit note or credit note).
Issuance of invoices
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
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”).
Electronic invoicing
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).
Tax obligations
- Statement of commencement of activity – to be filed before the commencement of the activities;
- Statement of changes – 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;
- Periodical VAT returns – monthly filing, up to the 20th of the second month following the one to which the return refers to, if the annual turnover is lower than € 650,000, quarterly filing, up to the 20th of the second following month. The deadline to file the June monthly return and the return concerning the second semester is postponed to 20 September.
- One Stop Shop (OSS) VAT returns – filing up to the end of the month following the month to which the transactions concern.
- EC Sales List – filing up to the 20th of the month following the moment on which the intra-Community supplies or intra-Community services were provided;
- Intrastat return – filing up to the 15th of the month following the moment on which the goods were physically moved;
- Company’s Simplified Information/Annual return – filing until 15th July (or until 15th day of the 7th month following the end of the tax year, if different from calendar year).
Check PwC Tax Calendar 2023.
Communication of documents issued
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 5th 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.
Accounting and archiving
Accounting records should be organized in order to acknowledge all the necessary information for the computation of the VAT, as well as all necessary data for the completion of the periodical VAT return.
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.
© 2024 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.
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