VAT Refund Guide in Portugal | VAT IT

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Portugal’s VAT Rates

Portugal introduced a value added tax (VAT) in 1986 to meet the conditions required to join the European Union, which compels its members to hold a VAT rate of at least 15%. 

At 16%, this EU country’s initial VAT rate (referred to as imposto sobre o valor acrescentado, or IVA) fell just above the EU’s minimum. Despite two slight dips in the 1990s and the late 2000s, the rate has risen slowly through the years. Since 2011, Portugal’s standard VAT rate has remained fixed at 23%—one of the highest VAT rates in the EU.

Current Rates in Portugal

In Portugal, VAT rates fall under three categories:

• Standard VAT Rate (23%) – The standard rate applies to most goods and services.
• Intermediate VAT Rate (13%) – This category includes dining and café food, wine, certain foodstuffs, admission to cultural events, and agricultural supplies.
• Reduced VAT Rate (6%) – The reduced VAT rate covers many essentials, including some foods, pharmaceutical products, books, diapers, and hotel accommodations.

Additionally, while Portugal does not officially list a zero rate, some goods and services have VAT exemption. These include healthcare services, children’s services such as daycares, and services from non-profit organizations. Portuguese companies earning less than 12,500 euros per year are also VAT exempt.

Finally, Portugal’s autonomous regions have slightly lower VAT rates. The adjusted categories are as follows:

• The Azores – The standard rate is 18%; the intermediate rate is 9%; the reduced rate is 4%.
• Madeira – The standard rate is 22%; the intermediate rate is 12%; the reduced rate is 5%.

How to Pay VAT Bill in Portugal

If you are a self-employed person or the owner of a legal entity (a company) that does business in Portugal, you must register for VAT.

Once registered, you are required to submit a VAT declaration that follows one of two schedules:

• Monthly submissions – Those with an annual turnover that exceeds 650,000 euros must submit monthly. You must submit your declaration by the 10th day of the second month following the relevant month and maintain the payment schedule for a minimum of three years.
• Quarterly submissions – Those with an annual turnover below 650,000 euros should submit quarterly, though opting for the monthly scheme is possible. You must submit your declaration by the 15th day of the second month following the relevant quarter. 

You must log into your account on the Portuguese tax authority website to pay your VAT bill.

Portugal VAT Compliance

Most VAT requirements in Portugal revolve around proper record keeping. For example, you must:

• Save all transaction records for ten years
• Back up data for all online billing and accounting programs
• Keep all paper records and books in Portugal
• Store all electronic data in the European Union

You must also sign all documents and invoices using an acceptable electronic signature. Additionally, if you want to claim a VAT refund, Portugal requires you to appoint a tax representative within the country.

Should you ever need assistance complying with the above standards or obtaining a Portugal VAT refund, feel free to contact our team of international experts.

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Sources:

Organisation for Economic Co-operation and Development. Consumption Tax Trends – Portugal. https://www.oecd.org/tax/consumption/consumption-tax-trends-portugal.pdf

ePortugal.gov.pt. Value Added Tax (VAT) in Portugal. https://eportugal.gov.pt/en/cidadaos-europeus-viajar-viver-e-fazer-negocios-em-portugal/impostos-para-atividades-economicas-em-portugal/imposto-sobre-valor-acrescentado-iva-em-portugal

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