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VAT in Portugal guide
portugal
Standard VAT/GST rate
23%
Reporting currency
EUR
Administered by
Portuguese Tax and Customs Authority

VAT in Portugal guide

How much is VAT in Portugal? 

The Standard VAT Rate(Imposto sobre Valor Acrescentado (IVA)) in Mainland Portugal is 23%. 

Some supplies are exempt from VAT. This applies to business activities like education, health care, insurance, and banking services.

Portugal VAT RateRate TypeCoverage and imposition
Mainland 23%Azores 16%Madeira 22%StandardThis applies to all taxable supplies of goods and services, with some exceptions
Mainland 13%Azores 9%Madeira 12%IntermediateCertain food products; catering services
Mainland 6%Azores 4%Madeira 5%Reduced Ratecertain food products; books, newspapers, and magazines; rental of reserved areas in camping and caravan parks, including closely linked services

The exact list of taxable transactions and allocated Portugal VAT rate can be found in VAT Portugal regulations. 

VAT thresholds in Portugal 

Valuable information about the VAT threshold in Portugal and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: Threshold of EUR 14,500 

VAT registration threshold for non-resident businesses: No registration threshold

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold

VAT Taxable Activities in Portugal

A taxable person by Portugal VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Portugal VAT: 

  • The supply of goods and rendering of services in Portugal for consideration;
  • Receipt of reverse-charge services by a taxable person in Portugal;
  • Export of goods;
  • Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Portugal VAT on their transactions. 

Tax Representative in Portugal 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is mandatory. 

For EU-established businesses, having a tax intermediary isn’t compulsory. Still, the economic operator could acquire the professional to ease up and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Portugal 

Electronically Supplied Services 

Portugal legislators have incorporated fundamental rules regarding Electronically Supplied Services as defined in the EU VAT Directive. 

The terminology surrounding digital commerce—electronic services, digital services, or digital products—often covers the scope of various services and goods. Yet, the traced differences primarily arise from the absence of a unified approach to their taxation and regulatory treatment.

Using principles outlined in the EU’s VAT Directive, Portuguese authorities indicated a clear path for uniform tax rules for the digital economy. 

Taxability Rules for ESS

The E-commerce regulatory package adopted in July 2021 was part of the legislative measures to align EU VAT rules with the challenges of the digital economy. The adopted legislative measures set forth that the same rules should be applicable within the single market for the supplies of ESS and distance sales of goods. 

This initiative ensures a standardized approach, facilitating businesses within the EU and globally to meet their VAT obligations efficiently.

Taxability rules stemming from the E-Commerce package:

  • B2B Transactions for Electronically Supplied Services: In transactions where the buyer is a taxable person, general rules for the place of supply should be used.
  • B2C Transactions for Electronically Supplied Services by Non-Resident Companies: Businesses outside the country must adhere to EU-specific VAT regulations, primarily using the VAT rate prevalent in the customer’s country, streamlining tax collection and compliance.
  • B2C Transactions for Electronically Supplied Services by Non-EU Suppliers: Suppliers based outside the EU must comply with EU standards for determining the place of supply without possibly leveraging the instituted threshold of the EUR 10,000.
  • VAT Rules for Distance Sales of Goods and B2C ESS: EU-based suppliers generating less than EUR 10,000 annually from distance sales of goods and/ or B2C ESS can opt between applying the VAT rules of their home country or adhering to the One-Stop Shop (OSS) rules, offering flexibility for smaller enterprises.
  • VAT Rules for Distance Sales of Goods and B2C ESS: For annual turnovers exceeding EUR 10,000, suppliers must apply the VAT rate attributable to the place of residence of the customer.  Aligning the applicable tax rules with the place of consumption and ensuring VAT is levied where economic activity occurs.

This structured approach underlines the EU’s commitment to simplify rules surrounding challenges for VAT compliance for ESS and intra-EU distance sales of goods.

How much is VAT in Portugal for Electronically Supplied Services?

VAT rate Portugal: A standard VAT rate of 23% is applied in most cases on sales of Electronically Supplied Services in Portugal

Example of taxable ESS in Portugal:
Supply of digital products, such as software, connected changes, and updates of the software
Website supply, web-hosting, distance maintenance of programs and equipment 
Supply of music, films, and games, including games of chance and gambling games 
Supply of distance learning 
Access or download of music to a physical device
Access or downloading images, jingles, films, ringtones, and other audio output 

E-Commerce VAT Rules in Portugal 

On July 1, 2021, European Union authorities took a necessary step in refining VAT regulations to adjust to the fast-growing demands of the digital economy. This reform was driven by two primary objectives: to ease the complexities faced by businesses in the cross-border transactions and to establish a consistent tax framework for e-commerce activities across the EU.

Highlights of the 2021 E-Commerce VAT Reforms:

  • Cross-Border Sales of Low-Value Goods: Adoption of coherent taxability scenario set forth for the operations covering imports of low-value goods to EU customers from non-EU territories.  
  • Intra-Community Distance Sales: The reforms also revisited the VAT rules for goods sold and transported between EU Member States, streamlining the process to facilitate smoother intra-EU commerce.

Domestic Sales by Deemed Suppliers: Sales conducted within a single Member State, where both parties, i.e., the deemed supplier and customer are based. 

Provision of B2C Services: The VAT implications for B2C supply of services, particularly those provided by taxable persons outside the customer’s residence, have been widened in scope and streamlined. 

Simplification of VAT rules for E-Commerce:

This long-waited reform was not limited to mere updates; it encompassed a comprehensive revision of existing VAT mechanisms and introduced the Import One Stop Shop (IOSS) scheme. 

The evolution of these VAT special schemes, including enhancing the IOSS, marks a crucial development in the EU’s approach to e-commerce taxation. It simplifies the often daunting task of navigating VAT obligations for enterprises, fostering a more accessible and uniform e-commerce environment.

The E-Commerce VAT package made the following special schemes available:

  • Union One-Stop-Shop Scheme;
  • Non-Union One-Stop-Scheme;
  • Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes 

The Non-Union Scheme can be leveraged by:

Non-EU established businesses and those without fixed establishments in the EU. 

The Non-Union Scheme covers B2C supplies of all services where the place of supply is within the Member State. If foreign businesses adhere to this scheme, it should be used to report all B2C supply of services. 

The Union Scheme can be leveraged by

Taxable persons established in the EU for supplies of B2C services and intra-community distance sales of goods. The indispensable parameter for using this special scheme is that the customer is based in a Member State that is different from the one where the supplier is based.

Taxable person not established in the EU for intra-community distance sales of goods 

Digital Marketplace established or not established in the EU for intra-community distance sales of goods and certain domestic supplies of goods

Import Scheme can be leveraged by:

Any taxable person who carries out distance sales of goods imported from third countries or third territories in consignments not exceeding the threshold of EUR 150 

Taxable persons established in the EU, taxable persons non-established in the EU, and electronic marketplaces are eligible to use this type of special scheme. 

OSS Return and Payment 

The domestic tax rules don’t t provide a simplified registration or reporting approach tailored explicitly to suppliers of Electronically Supplied Services. Nonetheless, businesses can engage with the EU-wide One-Stop Shop (OSS) schemes, which simplify VAT obligations on a broader scale.

These schemes are designed to simplify things for businesses participating in the cross-border EU supply. The scope of the schemes covers a wide array of services and distance sales of goods. 

When the foreign business cannot profit from the OSS schemes for it’s supplies to buyers based in Portugal, it needs to follow the national registration and reporting rules. 

OSS Return – In case Portugal is the Member State of Identification(MSI)
VAT Return NameOne Stop Shop Scheme(OSS)
Reporting PeriodQuarter
Submission DeadlineQ1-April 30; Q2-July 31:Q3-October 31; Q4-January 31
Payment DeadlineIt is the same as for the electronic submission of the declaration
Payment CurrencyEUR
Language Portuguese or English
Tax RepresentativeFor Union and Non-Union Scheme – No
IOSS – if the taxable person is established outside the EU – Yes 
Input Tax CreditNot allowed in the OSS return 
Archiving10 years 

Electronic Platform and Deemed Supplier Rules 

Aligning with the European Union’s efforts to harmonize VAT regulations, Portugal has incorporated the EU’s VAT legislation into the national framework. This adjustment made introducing the concept of the “deemed supplier” for the predefined types of e-commerce transactions easier. 

This innovative concept significantly clarifies the tax rules applicable to transactions conducted via digital marketplaces. It categorizes certain online platform operators as “deemed suppliers” when they meet predefined criteria.

These operators are treated as suppliers for VAT considerations upon fulfilling these conditions. 

The marketplace facilitator becomes deemed supplier for the below-indicated transactions: 

  • When goods valued below EUR 150 are imported into the EU from non-EU countries or territories and sold to EU consumers by the original vendors.
  • When the goods, already within the EU and in free circulation, are sold to EU residents by vendors outside the EU, with no restrictions on the goods’ value.

This regulatory framework introduces additional responsibilities for deemed suppliers, vastly changing this sales model’s VAT obligations for taxable entities. In this multi-sided business model, we have two separate transactions: 

  1. The initial supply from the original vendor to the digital platform is recognized as a business-to-business (B2B) transaction.
  2. The subsequent supply from the platform to the final consumer is classified as a business-to-consumer (B2C) transaction.

This ensures compliance and facilitates smoother operations under the simplified tax framework provided by the EU.

Invoice Requirements in Portugal 

General invoice information:

  • Date of invoice issuance;
  • Date of the supply of goods or provision of services;
  • ATCUD – document’s unique code.

Seller information:

  • Company name;
  • Full address(head office);
  • Billing address if different from company address;
  •  VAT number.

Customer information:

  • Name;
  • Full address;
  • VAT number;
  • Delivery address;
  • The billing address is different from the delivery address.

Fiscal Information:

  • Description and breakdown of the goods or services – quantity, discounts, unit price excl. VAT;
  • Net amount;
  • The VAT rate(s) applied and the breakdown of VAT per rate;
  • Invoice Total.

Additional information required in particular cases:

  • Exemption reference – guaranteed by precise norm;
  • Reverse charge – term if applicable;
  • Self-billing – term if applicable;
  • Tax Representative information for non-resident business.

Foreign Currency Invoice in Portugal  

In Portugal, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR. 

VAT Return in Portugal 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Portugal rules should submit monthly or quarterly declarations depending on their turnover. 

Penalties for late reporting and omitted declarations 

Taxpayers should charge Portugal VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted timeframe. 

If the VAT declaration deadline is exceeded, the taxable person could encounter the following penalties:

When the negligence comes from the individual:

  • Missing or late submission of declaration: fine between EUR 150 – 3,750;
  • Lack or delay of invoice issuance: fine between EUR 200 – 10,000;
  • Ommissions or inaccuracies of submitted declarations: fine between EUR 375 – 22,000.

When the negligence comes from a company: 

  • Missing or late submission of declaration: fine between EUR 600 – 7,500;
  • Lack or delay of issuance of supporting documentation: fine between EUR 187.50 – 5,625;
  • Ommissions or inaccuracies of submitted declarations: fine between EUR 750 – 22,500.

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