2023 marks the start of significant changes within the Portuguese VAT regime. Not only have they increased the VAT registration threshold, but significant changes also include a greater reduced VAT rate scope and updated declaration deadlines.
Fortunately, the Portuguese tax authority has issued further clarification in a circular letter regarding the latest VAT changes to guarantee that businesses are well-prepared for the new year.
Here’s what you need to know about the recent changes and whether or not your small business will need to register for VAT in Portugal in the next few years.
An overview of Portuguese VAT rates
To navigate the new 2023 VAT changes, it’s essential to understand the basic structure of VAT in Portugal. Portugal has three rates of Value Added Tax (VAT).
- A reduced rate: 6% in mainland Portugal
- An intermediate rate: 13% in mainland Portugal
- Standard rate: 23% in mainland Portugal
Recent changes introduced by the Budget Law for 2023 (Law No. 24-D/2022) mainly concern the scope of the reduced VAT rate and its application.
The scope for reduced VAT rates
The reduced VAT rate of 6% now includes certain goods such as canned fish and molluscs. One essential addition to the list is acquiring and repairing bicycles (excluding parts/accessories). Approving the reduced VAT rate for bicycles is particularly significant, as it makes Portugal the first EU country to reduce the VAT rate on bicycle purchases officially.
Increased VAT thresholds
Another critical change that The Portuguese tax authority, Autoridade Tributária e Aduaneira, have clarified is the new VAT registration threshold increase of €13,500. Businesses that are considered VAT-exempt must prove that their turnover does not exceed 13 thousand and 500 euros, regardless of the activity’s commencement date.
In addition to the turnover limit, companies or independent workers must meet the following requirements:
- Not exporting or importing goods;
- Not obliged to complete statutory accounts; or
- Not trading scrap metals.
The registration threshold will continually increase, following a phased annual approach of €13,500 in 2023, €14,500 in 2024 and €15,000 in 2025.
Declaration deadline shift
To pay Value Added Tax (IVA) in Portugal, companies or self-employed workers must submit a periodic declaration. As of 2023, the declaration deadline for the June and second quarter period (if following a monthly or quarterly VAT period) is set to 20 September. This new declaration deadline is now one month later than the standard deadline.
Additional changes for non-resident taxpayers in Portugal
Since 1 January 2023, foreign businesses that are VAT-registered in Portugal are required to comply with three additional requirements:
- All invoices must be produced by certified invoicing software that can allocate a unique ATCUD code
- Paper or PDF invoices must include a QR Code
- foreign companies must also comply with monthly invoice reporting via the SAF-T billing file.
These requirements are already in place for resident taxpayers.
For successful VAT recovery in Portugal, your invoices must comply with the latest legislation within the resident country. Fortunately, you don’t have to play compliance catch-up – we’ve got you covered.
Effortlessly navigate change with VAT IT
When it comes to VAT, the only thing you can count on is that the rules, rates, deadlines and regulations are constantly changing. Navigate the changing VAT landscape with industry experts as your true north. Get in touch with our VAT team to successfully manage and recover your VAT in Portugal.
