Value Added Tax (VAT) in Portugal

Natural persons (self-employed persons) or legal entities (companies) that produce, market or provide services in Portugal have to pay taxes, and are required to submit a declaration of commencement of activity.

Self-employed persons are not obliged to declare the start of their activity if they only issue a single invoice (once in the course of the year for the sale of goods or provision of services) which does not exceed EUR 25 000.

For more information, please refer to Article 2 of the Value Added Tax (VAT) Code.

Reporting commencement of activity

Before starting an activity, a self-employed person or company must submit a declaration of commencement of activity.

For companies that are registered at a business registry, the declaration of commencement of activity must be submitted no later than 15 days after registration.

The declaration must be submitted by:

• the self-employed person, company or a tax representative, whenever they do not have organised accounts
• the certified accountant of the self-employed person or company, should they have organised accounts.

Accounts must be maintained whenever annual income is estimated to be more than EUR 200 000. Should lower income have been predicted, you may opt for organised accounting at any time.

For more information on accounting schemes, please see the Tax and Customs Authority information leaflet.

The declaration may be submitted:

• via the Tax and Customs Authority website
• at any Tax and Customs Authority department
• at a Citizens’ Bureau (Loja de Cidadão), when submitted by a self-employed person.

For more information please see the Frequently Asked Questions page of the Tax and Customs Authority website or the activity commencement manual.

Appointing a tax representative to submit the declaration

Self-employed persons or companies without an established address in Portugal but which have an established address in another Member State of the European Union may submit the declaration of commencement of activity through a representative with a tax address in Portugal.

Self-employed persons or companies without an established address in Portugal or a in Member State of the European Union are obliged to appoint a tax representative in Portugal.

For more information please see the Frequently Asked Questions page of the Tax and Customs Authority website.

Reporting changes in activity

Companies not registered in the commercial register or entered in the central register of legal persons

When there are changes to the data submitted in the declaration of commencement of activity, self-employed persons or companies must submit a declaration of changes in activity within a maximum of 15 days from the day on which the change occurred.

Companies registered in the business register

Companies registered in the commercial register are exempt from submitting a declaration of changes in activity to the Tax and Customs Authority (AT), if the changes refer to:

• entry in the commercial register
• amendments to the Articles of Association as regards legal status, company name, registered office or principal place of business, capital and object
• appointment and termination of service, for any reason other than the passage of time, of management or supervisory bodies
• merger and division
• appointment and termination of office of liquidators, prior to completion of the liquidation
• appointment and dismissal of the insolvency practitioner
• winding up and closing the liquidation.

Companies entered in the central register of legal persons

Companies entered in the central register of legal persons which are not subject to a trade register are exempt from submitting a declaration of changes in activity to the Tax and Customs Authority (TA) in the following cases:

• initial registration
• change in company name
• change in the location of the registered office, domicile or postal address
• winding up and closing the liquidation.

How to submit the declaration

The declaration of changes in activity must be submitted by:

• the self-employed person or company, whenever they do not have organised accounts
• the certified accountant of the self-employed person or company, should they have organised accounts.

The declaration of changes in activity may be submitted:

• via the Tax and Customs Authority website
• at any Tax and Customs Authority department
• at a Citizens’ Bureau (Loja de Cidadão), when submitted by a self-employed person.

For more information please see the Frequently Asked Questions page of the Tax and Customs Authority website or the activity amendment manual.

Reporting termination of activity

When self-employed persons and companies cease to perform tax-paying acts, they must submit the declaration of cessation of activity.

A declaration of termination of activity must be submitted within 30 days after the end of taxable activity.

Companies registered in a commercial register or registered in the central register of legal persons are exempt from submitting a declaration of termination of activity to the Tax and Customs Authority (AT).

A declaration of termination of activity must be submitted by:

• the self-employed person or company, whenever they do not have organised accounts
• the certified accountant of the self-employed person or company, should they have organised accounts

The declaration of termination of activity may be submitted:

• via the Tax and Customs Authority website
• at any Tax and Customs Authority department
• at a Citizens’ Bureau (Loja de Cidadão), when submitted by a self-employed person.

For more information please see the Frequently Asked Questions page of the Tax and Customs Authority website or the activity termination manual.

The taxable amount on the sale of goods and the supply of services is the value received by the seller or supplier in exchange for the goods or services supplied without Value Added Tax (VAT).

The taxable amount includes:

• taxes, duties, fees and other charges
• incidental costs charged, e.g. commissions, packaging, transport, insurance and advertising
• subsidies linked to the price of the transaction, set before the sale or provision of services takes place and established on the basis of the number of units transmitted or the volume of services rendered.

The taxable amount does not include:

• Value Added Tax (VAT)
• interest on payment in instalments and amounts received as compensation defined in court for non-payment of responsibilities
• discounts, rebates and bonuses granted
• the amounts paid by the buyer of the goods or service, recorded by the seller or service provider in the appropriate accounts of third parties
• the packaging values, provided that the invoice contains information that their return has been agreed.

Where the information necessary to determine the taxable amount is not in euro, the exchange rate to be used is the last rate published by the European Central Bank or the sell rate used by any bank established in the national territory.

When the payment is not made in full or is made partly in cash

The taxable amount is the amount paid in cash plus the open market value of the goods or services supplied in exchange.

The open market value of goods or services is the value which would be paid for the goods, for the supply of the service or for similar goods or services.

In the absence of a similar situation, the open market value may not be lower than the purchase price of the goods. In the absence of a purchase price, the open market value may not be lower than the production price of the goods.

In the absence of a similar service, the open market value may not be lower than the cost of providing the service.

For more information, please refer to Article 16 of the Value Added Tax (VAT) Code.

Time limit for archiving transaction records

Business owners must keep transaction records for 10 years.

If the tax settlement period is longer than 10 years, the recording of transactions has to be maintained until the end of the settlement period.

If accounting or billing is carried out in computerised form, it is mandatory to keep documentation relating to the analysis, programming and implementation of computer processing and back-up data for billing and accounting programmes during the period for which transaction records are mandatory.

More information can be found on the Tax and Customs Authority website.

Location of archived transaction records

Companies or self-employed persons with an address in Portugal

If invoices, books, records and other documents are available on paper, they have to be stored in Portugal.

If business owners have more than one establishment, they can centralise the documents of all establishments in the same archive.

If invoices, books, records and other documents exist in electronic form, they must be stored in any Member State of the European Union.

The archive location, whether in paper or electronic form, must be indicated in the declaration of commencement of activity or declaration of changes in activity.

More information can be found on the Tax and Customs Authority website.

Companies or self-employed persons without an address in Portugal

Companies or self-employed persons without an address in Portugal may store invoices, books, registers and other documents, in paper or electronic form, in any Member State of the European Union.

The archive location, whether in paper or electronic form, must be indicated in the declaration of commencement of activity or declaration of changes in activity.

More information can be found on the Tax and Customs Authority website.

Storing archives outside the European Union

Any company or self-employed person wishing to store records of transactions, whether in paper or electronic form, outside the European Union must request prior authorisation from the Tax and Customs Authority (AT) via the Tax and Customs Authority website.

More information can be found on the Tax and Customs Authority website.

In Portugal, there are three rates of Value Added Tax (VAT):

• a reduced rate of 6% in mainland Portugal, 4% in the Autonomous Region of the Azores and 5% in the Autonomous Region of Madeira for goods and services in List I of the Value Added Tax Code
• an intermediate rate of 13% in mainland Portugal, 9% in the Autonomous Region of the Azores and 12% in the Autonomous Region of Madeira for goods and services in List II of the Value Added Tax Code
• a standard rate of 23% in mainland Portugal, 16% in the Autonomous Region of the Azores and 22% in the Autonomous Region of Madeira for all remaining goods and services.

For more information, please refer to Article 18 of the Value Added Tax (VAT) Code.

Exemption for trade and services sectors

Trade in and supply of certain goods and services is exempt from payment of Value Added Tax (VAT) in Portugal. Some examples are:

• the provision of services by health professionals
• the provision of services by kindergartens, free-time activity centres, residential homes and day care centres for the elderly
• the supply of services by non-profit-making organisations operating establishments or facilities for artistic, sporting or entertainment activities.

The list of all activities exempt from value added tax (VAT) can be consulted in Article 9 of the Value Added Tax (VAT) Code.

Exemption for low turnover

Companies or self-employed persons are exempt from the payment of Value Added Tax (VAT) when they have a turnover of less than:

• EUR 10 000 if activity started before 31 March 2020
• EUR 11 000 if activity started after 1 April 2020
• EUR 12 500 if activity starts as of 2021.

If a company or self-employed person meets the requirements for inclusion in the special scheme for small retailers turnover may not exceed EUR 12 500 irrespective of the date of commencement of activity.

In addition to the turnover limit, companies and self-employed persons must:

• not have, and not be required to have organised accounts for personal income tax purposes
• not import or export products
• not market or provide services in the waste, scrap and recycling sector.

For more information, please refer to Article 53 of the Value Added Tax (VAT) Code.

Exemption for small traders

The Special Scheme for Small Retailers, intended for small traders, grants exemption from payment of Value Added Tax (VAT) to self-employed persons who must meet the following conditions:

• not have, and not be required to have organised accounts for personal income tax purposes; accounts must be maintained whenever annual income is estimated to be more than EUR 200 000; should lower income have been predicted, you may opt for organised accounting at any time
• have not purchased more than EUR 50 000 from suppliers in the previous year (if activity is just starting, the forecast for the current year should be used)
• at least 90% of the purchase volume has to be applied to goods intended for sale without further processing
• not import or export goods or services within the European Union
• not exceed EUR 250 in non-tax-exempt activities
• not market or provide services in the waste, scrap and recycling sector.

For more information, please refer to Article 60 of the Value Added Tax (VAT) Code.

In order to pay Value Added Tax (VAT) in Portugal, companies or self-employed persons have to submit a periodic declaration.

The declaration must be submitted:

• quarterly for companies or self-employed persons with a turnover of less than EUR 650 000 in the previous calendar year
• monthly for companies or self-employed persons with a turnover exceeding EUR 650 000 in the previous calendar year.

Companies or self-employed persons submitting on a quarterly basis (turnover of less than EUR 650 000) may, in their declaration of commencement or change of activity, opt for monthly submission.

If monthly submission is chosen, this scheme must be maintained for at least 3 years.

Quarterly declarations must be submitted by the 15th day of the second month following the quarter to which the declaration relates.

Monthly declarations must be submitted by the 10th day of the second month following the month to which the declaration relates.

Periodic declarations are submitted via the Tax and Customs Authority website.

For more information, please refer to Article 41 of the Value Added Tax (VAT) Code.