VAT, GST and Sales Tax in Portugal

Summary

Name of the tax Value-added tax (VAT)
Local name Imposto sobre o valor acrescentado (IVA)
Date introduced 1-Jan-86
Trading bloc membership European Union (EU) Member State
Administered by Autoridade Tributária e Aduaneira (Tax and Customs Authority) (http://www. portaldasfinancas.gov.pt)
VAT rates Mainland
Standard 23%
Intermediate 13%
Reduced 6%
Other Exempt and exempt with credit
Autonomous region of Madeira
Standard 22%
Intermediate 12%
Reduced 5%
Autonomous region of Azores
Standard 18%
Intermediate 9%
Reduced 4%
VAT number format PT 5 1 2 3 4 5 6 7 8
VAT return periods
Monthly If the turnover in the preceding VAT year was equal or exceeded EUR650,000
Quarterly If the turnover in the preceding VAT year did not exceed EUR650,000
Annual All taxable persons that performed any taxable operations
Thresholds
Registration None
Distance selling EUR35,000
Intra-Community acquisitions None
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Portugal by a taxable person
  • The intra-Community acquisition of goods and services in Portugal from another EU member state made by a taxable person (see the chapter on the EU)
  • Reverse-charge services received by a taxable person in Portugal
  • The importation of goods from outside the EU, regardless of the status of the importer

For VAT purposes, the territory of Portugal includes the auto­nomous regions of Azores and Madeira. However, special VAT rates apply to supplies made in these islands.

Who is liable

A taxable person is any business entity or individual that makes taxable supplies of goods or services or intra-Community acqui­sitions or distance sales in the course of a business in Portugal.

No VAT registration threshold applies in Portugal. A taxable person that begins activity must notify the VAT authorities of its liability to register.

Special rules apply to foreign or “non-established” businesses.

Group registration. VAT grouping is not permitted under Portuguese VAT law. Legal entities that are closely connected must register for VAT individually.

Non-established businesses. A “non-established business” is a business that has no fixed establishment in the territory of Portugal. A non-established business that makes supplies of goods or services in Portugal must register for VAT if it is liable to account for Portuguese VAT on the supplies or if it makes intra-Community supplies or acquisitions of goods.

The reverse charge applies generally to supplies made by non-established businesses to Portuguese taxable persons. For these purposes, non-established businesses are entities that are neither established nor registered in Portugal. Under the reverse-charge provision, the taxable person that receives the supply must account for the Portuguese VAT due. If the reverse charge applies, the non-established business is not required to register for Portuguese VAT. The reverse charge does not apply to supplies to private persons or to nontaxable legal persons. Consequently, non-established businesses must register for Portuguese VAT if they make any of the following supplies:

  • Intra-Community supplies or acquisitions (see the chapter on the EU)
  • Distance sales in excess of the threshold (see the chapter on the EU)
  • Supplies of goods and services that are not subject to the reverse charge

Tax representatives. Businesses that are established in the EU are not required to appoint a tax representative to register for VAT in Portugal. However, EU businesses may opt to appoint a tax rep­resentative if they wish to do so.

Businesses that are established outside the EU must appoint a resident tax representative to register for Portuguese VAT. The tax representative is the first entity deemed responsible for the pay­ment of the VAT debts with the business represented by it.

EU businesses that opt not to appoint a tax representative must register for VAT at the following tax office:

3rd Tax Office

Rua dos Correiros, 70 1º

1100-167 Lisbon Portugal

However, a nonresident entity registered for VAT in Portugal that intends to cease activity in Portugal must appoint a Portuguese tax representative established or resident in Portugal. This rule is aimed at ensuring payment of any outstanding tax that may be levied after the cancellation of the activity. Thus, the tax repre­sentative is jointly and severally liable for the payment of VAT.

Registration procedures. Entities must register with the National Register of Corporate Entities (Registo Nacional de Pessoas Colectivas, or RNPC. A certificate of legal standing of the com­pany must be filed with the registration application form. The referred application should be signed and filed by a Portuguese attorney. The company is provided with a Portuguese corporate registration number within 10 working days. This number will be coincident with the VAT registration number once the company files for a Statement of Beginning of Activity, together with other relevant documents, with the competent tax office.

The registration of a foreign company for VAT purposes in Portugal may take 10 working days. An online VAT registration system is not yet in force in Portugal.

Late-registration penalties. The following penalties are levied for late VAT registration in Portugal:

  • A penalty ranging from EUR600 to EUR7,500 if the taxpayer’s actions were not intentional
  • A penalty ranging from EUR600 to EUR15,000 if the taxpay­er’s actions were intentional

Reverse charge. In cross-border B2B supplies of services, the acquirer of the service (VAT-able entity) should apply the reverse-charge mechanism and self-assess the VAT due on such operation.

The reverse-charge mechanism is also applicable in the following situations, in which the taxable person to whom the supplies of goods or services are rendered becomes liable for the payment of VAT:

  • Supplies of ferrous waste and scrap, residues and other recy­clable materials consisting of ferrous and nonferrous metals to a Portuguese VAT taxpayer
  • Supplies of civil construction services to a Portuguese VAT taxpayer
  • Supplies of services involving emission rights, certified emis­sion’s reductions and emission reduction units of greenhouse gases to a Portuguese VAT taxpayer

If the reverse charge is not recorded, the penalties may amount to 200% of the output tax not recorded in the case of fault, even if there is no cash flow disadvantage for the State. In case of negli­gence, penalties may vary between 30% and 100% of the VAT not self-assessed.

However, these penalties are subject to the following limits:

  • In the case of negligence – EUR45,000
  • In the case of fault – EUR165,000

Digital economy. EU VAT place of supply rules apply to business­to-consumer (B2C) supplies (i.e., supplies to non-VAT taxable customers) of telecommunications, broadcasting and electronic services. These services are taxed in the country where the cus­tomer is established. Thus, where the customer is established in Portugal, Portuguese VAT is due.

A new use and enjoyment rule applies in Portugal for telecom­munications, broadcasting and electronic services. In particular, Portuguese VAT is due when 1) these services are supplied to a person established or domiciled outside the EU, 2) the provider has its head office, a fixed establishment or a domicile from which these services are rendered in Portugal, and 3) the effective use and enjoyment of these services takes place within Portugal.

Mini One-Stop Shop (MOSS). EU suppliers are permitted to dis­charge their VAT obligations using a “Mini One-Stop Shop” scheme, which enables them to fulfill their VAT obligations (VAT registration, reporting and payment) in their home country, including for services provided in other Member States where they are not established. Accordingly, EU suppliers are able to apply a simplification measure similar to the one that is in place for non-EU providers of electronic services.

Taxpayers registered under the MOSS scheme in Portugal are required to submit a single calendar quarterly return and make payment of VAT due to the Portuguese tax authorities, who send the appropriate information and remit the VAT paid to the rele­vant Member State’s tax authority.

Deregistration. Individuals or companies subject to VAT must, within 30 days from the date of termination of activity, submit a Statement of Termination of Activity with the competent tax office.

Tax authorities are able to declare, on their own authority, the termination of activity of a company following a judgment under insolvency proceedings determining the winding-up of the com­pany.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are liable to a rate of VAT.

The VAT rates in mainland Portugal are:

  • Standard rate: 23%
  • Intermediate rate: 13%
  • Reduced rate: 6%

The standard rate of VAT applies to all supplies of goods or ser­vices, unless a specific measure provides for the intermediate rate, the reduced rate or an exemption.

In the autonomous region of Madeira, the following VAT rates apply:

  • Standard rate: 22%
  • Intermediate rate: 12%
  • Reduced rate: 5%

In the autonomous region of Azores, the following VAT rates apply:

  • Standard rate: 18%
  • Intermediate rate: 9%
  • Reduced rate: 4%

Examples of goods and services taxable at 6% (5% in Madeira and 4% in the Azores)

  • Basic foodstuffs
  • Books and newspapers
  • Pharmaceuticals
  • Medical equipment
  • Passenger transport
  • Hotel accommodation

Examples of goods and services taxable at 13% (12% in Madeira and 9% in Azores)

  • Canned meat and fish
  • Fuel and colored oil marked with government-approved addi­tives
  • Admission to music and dance shows, theaters, cinemas, bull­fighting and circuses

The term “exempt supplies” refers to supplies of goods and ser­vices that are not liable to tax and that do not give rise to a right of input tax deduction (see Section F). Some supplies are classi­fied as “exempt with credit,” which means that no VAT is charge­able, but the supplier may recover related input tax. Exempt with credit supplies include, among others, exports of goods outside the EU and related services, and supplies of banking, financial and insurance services made to a recipient outside the EU (see the chapter on the EU).

Examples of exempt supplies of goods and services

  • Leasing or letting of immovable property
  • Medical services
  • Financial services
  • Insurance
  • Copyrights by authors
  • Training provided by public sector institutions

Option to tax for exempt supplies. The Portuguese VAT law fore­sees the following options for taxation of exempt supplies:

  • Supply of training services:
    • Supply of food and drinks made by employers to their employees
    • Supply of medical and sanitary services performed by hos­pitals, clinics, dispensaries and similar establishments, which are not carried out by entities from the public sector, i.e., entities that do not have any agreement with the State
    • Supplies of services rendered by non-agricultural coopera­tives, to their farmer members

In the above cases, if the taxpayer opts to waive the VAT exemp­tion, it must remain under this regime for five years.

  • Leasing or supply of immovable property or independent parts thereof to other taxable persons. In this case, the waiver of the exemption must be carried out on a case-by-case basis and sup­ported by a certificate issued by the Portuguese tax authorities.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” The basic time of supply for goods is when they are delivered. The basic time of supply for services is when they are performed.

An invoice must be issued before the fifth business day following the basic time of supply. The actual tax point becomes the date on which the invoice is issued. However, if no invoice is issued, tax becomes due on the fifth business day after the basic tax point.

If the consideration is paid in full or in part before the invoice is issued, the actual tax point becomes the date on which payment is received (with respect to the amount paid). The VAT invoice must be issued immediately in these circumstances.

Prepayments. For prepayments or advance payments, the tax point is the date on which the advance payment is received. The supplier must issue an invoice as soon as an advance payment is received.

Intra-Community acquisitions. The time of supply for an intra­Community acquisition of goods is the 15th day of the month following the month in which the basic time of supply for the goods occurs. If the supplier issues an invoice before this date, the time of supply is when the invoice is issued.

Intra-Community supplies. Although no VAT is chargeable for an intra-Community supply, an invoice must be issued by the 15th day of the month following the month in which the goods are delivered to the customer.

For continuous intra-Community supplies of goods over a period of more than one calendar month, the tax point shall be regarded as being completed on expiry of each calendar month until such time as the supply comes to an end.

Cash accounting. A VAT “cash accounting regime” entered into force effective 1 October 2013. In accordance with this regime, taxpayers will only pay the VAT due once they receive payment of an invoice from a customer. This regime is optional and will apply to companies with a turnover of up to EUR500,000.

Imported goods. The time of supply for imported goods is either the date of importation or when the goods leave a duty suspen­sion regime.

Reverse-charge services. The rules stated above also apply to reverse-charge services. However, the tax point rule is irrelevant for the supplier since no VAT is assessed by the supplier (who must still issue the invoice within five working days after the service is rendered).

The purchaser should self-assess the VAT when receiving the invoice. However, if there is a delay in the supplier issuing the invoice the VAT should be reverse charged on the fifth day (after the taxable event), but the purchaser cannot recover the VAT until he has the original invoice. Therefore, in practice, the reverse charge is normally applied by the purchaser when the invoice is issued, even if more than five days have elapsed from the taxable event.

Continuous supplies of services. Regarding continuous supplies of services based on agreements foreseeing successive payments, the time of supply occurs at the end of the period concerning each payment. However, where the payment schedule is not defined or is greater than 12 months, the VAT is due and shall become chargeable at the end of each 12-month period, for the corre­sponding amount.

Leased assets. Since leasing agreements are also considered a continuous supply of services, the time of supply occurs at the end of the period foreseen for each payment.

Moreover, when the client exercises the purchase option, the VAT is due per the supply of goods, for the difference value of the asset.

Recovery of VAT by Portuguese taxable persons

A taxable person may recover input VAT incurred with the acqui­sition of goods and services for its business purposes. A taxable person generally recovers input VAT by deducting it from output tax charged on the supplies carried out.

Input tax includes VAT charged on goods and services supplied in Portugal, VAT paid on imports of goods and VAT self-assessed on intra-Community acquisitions of goods and services and reverse-charged services (see the chapter on the EU).

A valid tax invoice or customs document is usually requested by the tax authorities during their analysis of a claim for input tax.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

Examples of items for which input tax is nondeductible

  • Purchase, hire, lease, maintenance and fuel for private cars, vans and trucks
  • Business gifts (unless valued at less than EUR50)
  • Restaurant meals
  • Entertainment and luxury goods and services
  • Transport expenses and business travel, including toll costs, incurred outside the scope of the organization or participation in congresses, fairs or exhibitions
  • Accommodation and meals incurred outside the scope of the organization or participation in congresses, fairs or exhibitions
  • Drinks and tobacco

Examples of items for which input tax is deductible (if related to a taxable business use)

  • 50% of VAT related to diesel or liquefied petroleum gas (LPG) for vans and trucks
  • 50% of VAT related to expenses incurred with respect to orga­nization of conferences, seminars and training courses (for example, travel, food and beverage, accommodation and lease of immovable property)
  • 25% of VAT related to expenses incurred with respect to par­ticipation in conferences, seminars and training courses (for example, travel, food and beverage, accommodation and lease of immovable property)

Partial exemption. Input tax directly related to exempt supplies is not generally recoverable. If a Portuguese taxable person makes both exempt and taxable supplies, it may not recover input tax in full. This situation is referred to as “partial exemption.” Exempt with credit supplies are treated as taxable supplies for these pur­poses.

The first method consists of the following two stages:

  • The first stage identifies the input VAT that may be directly allocated to taxable and to exempt supplies. Input tax directly allocated to taxable supplies is deductible (this method is usu­ally referred to as the “direct allocation method”). Input tax directly related to exempt supplies is not deductible.
  • In the second stage, the remaining input tax that is not allocated directly to exempt and taxable supplies is apportioned. The apportionment may be calculated based on the value of taxable supplies carried out compared with the total turnover, or by using another acceptable method agreed on with the tax author­ities. The recovery percentage is rounded up to the nearest whole number (for example, a recovery percentage of 72.1% is rounded up to 73%).

Under the second method, a taxable person may use a general pro rata calculation based on the value of taxable supplies made compared with total turnover.

Taxable persons may use both methods at the same time for dif­ferent operations or for different sectors of activity. The Portuguese VAT authorities may also impose the use of one of these two methods to prevent distortions of competition.

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years. Input tax is deducted in the VAT year in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption recovery position in the VAT year of acquisition. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person’s partial exemp­tion recovery percentage changes by more than 5% in any year during the adjustment period or if goods are taken from a taxable sector or activity for use in an exempt sector or activity.

In Portugal, the capital goods adjustment applies to the following assets for the number of years indicated:

  • Immovable property: adjusted for a period of 20 years
  • Movable property: adjusted for a period of five years

The capital goods adjustment does not apply to the following items:

  • Goods with a purchase value of less than EUR2,500
  • Goods with a useful life of less than five years (for example, computers)

The adjustment is applied each year following the year of acqui­sition to a fraction of the total input tax (1/20 for immovable property and 1/5 for other movable capital goods). The adjust­ment may result in either an increase or a decrease of deductible input VAT, depending on whether the ratio of taxable supplies made by the business has increased or decreased compared with the year in which the capital goods were acquired.

Refunds. If the amount of input tax recoverable in a monthly period exceeds the amount of output tax payable in that period, the taxable person has an input tax credit. A refund of the credit may be claimed in certain circumstances. If a refund may not be claimed, the input tax credit may be carried forward to offset output tax in a subsequent period.

A refund may be requested if the credit balance is at least EUR250 and if the taxable person has been in a credit position for 12 or more consecutive months. However, if the VAT credit exceeds EUR3,000, a VAT refund may be claimed immediately.

A refund may also be requested before the end of the 12-month period for amounts greater than EUR25 if any of the following circumstances exist:

  • The taxable person has ceased operations.
  • The taxable person has ceased to make taxable supplies and now exclusively makes supplies that are exempt from VAT.
  • The taxable person begins to use the special VAT accounting regime for retailers.

In general, a refund is claimed by submitting the VAT return form by electronic means, together with the following annexes:

  • A list of clients
  • A list of suppliers
  • Adjustments in favor of the company

Preregistration costs. There are no guidelines issued by the Portuguese tax authorities with this regard.

Write-off of bad debts. Bad debts may be adjusted (and recovered) on periodic VAT returns.

Effective 1 January 2013, a new regime for recovering the VAT paid in case of bad debts is in place.

As a general rule, the new regime is applicable to debts overdue effective 1 January 2013 onwards, while the older regime still applies with small adjustments for debts overdue before that date. Therefore, both regimes may coexist during a certain period of time.

Moreover, in accordance with the changes introduced in the VAT code, a bad debt is considered to exist in case of debts that non­payment risk is duly justified, namely:

  • The credit is overdue for more than 24 months and there are objective proofs of its impairment and actions performed regarding its payment, including the asset being recognized in the accounts
  • The credit is overdue for more than six months, its amount does not exceed EUR750 (VAT inclusive) and its debtor is a private individual or a VAT-able person performing operations exempt from VAT without the right to deduct

In the case of debts from special judicial or extra judicial presses, the VAT adjustment can be performed before the above men­tioned deadlines in case that the process is previously decided.

The following debts are not considered as bad debts:

  • Credits secured or covered by an insurance, or by any guarantee in rem
  • Credits over related parties
  • Credits over entities declared insolvent or bankrupt before the realization of the transaction
  • Credits over the State certified by a chartered accountant and also a prior electronic authorization request to the Portuguese tax authorities.

Noneconomic activities. In principle, VAT may only be recovered if incurred in the course of an economic activity. If costs are incurred to acquire or maintain assets which are to be used for the purposes of an economic activity, the costs are potentially deductible. If assets are not used for such a purpose, the VAT will not be deductible.

Please see Nondeductible input tax above.

Recovery of VAT by non-established businesses

Portugal refunds VAT incurred by businesses that are neither established in Portugal nor registered for VAT therein. Non-established businesses may claim Portuguese VAT to the same extent as VAT-registered businesses.

For businesses established in the EU, the refund is carried out under the EU Directive 2008/8/CE. For businesses established outside the EU, the refund is carried out under the EU 13th Directive on the condition of reciprocity. Consequently, Portuguese VAT is refunded only to non-EU claimants estab­lished in countries that, by their turn, refund VAT or similar tax to Portuguese businesses.

For the general VAT refund rules of the EU Directive 2008/8/CE and EU 13th Directive refund schemes, see the chapter on the EU.

Refund application. The deadline for refund claims is the last business day of September in the year following the calendar year in which the tax was incurred.

VAT refund claims by non-established businesses must be sub­mitted electronically to the tax authorities of the country where the claimant is established. Subsequently, such tax authorities remit the VAT refund claim to the Portuguese tax authorities.

The deadline for the approval or denial of the refund is four months, but it may be extended to six or eight months if the Portuguese tax authorities issue one or two requests for additional information or documents.

The invoices underlying the VAT incurred must be provided to the tax authorities electronically only if they are specifically requested.

The minimum amount claim period is three months, while the maximum period is one year. The minimum claim for a period of less than a year is EUR400. For an annual claim, the minimum amount is EUR50.

Repayment interest. Claimants may request payment of interest if an EU Directive 2008/8/CE or EU 13th Directive claim is repaid more than 10 working days after the 4-, 6- or 8-month period has elapsed.

Invoicing

VAT invoices and delivery notes. A Portuguese taxable person must generally provide a VAT invoice for all taxable supplies made, including exports and intra-Community supplies. To docu­ment retail transactions of less than EUR1,000 paid by a private person, or to document transactions performed to taxable persons of less than EUR100, the taxpayers can issue a simplified invoice, effective 1 January 2013.

A VAT invoice (or equivalent document) is necessary to support a claim for input tax deduction or a refund under the EU Directive 2008/8/CE or EU 13th Directive refund schemes (see the chapter on the EU).

As a general rule, goods in transit within the Portuguese territory must be accompanied by a special delivery note or invoice. Effective 1 January 2013, delivery notes must be electronically communicated to the Portuguese tax authorities before the begin­ning of the transport. These transport documents must contain the same information as an invoice, excluding the value of the trans­action. These documents must also contain details indicating from where the goods were dispatched, the destination of the goods and the time of commencement of the dispatch.

Effective 1 January 2013, Portuguese taxable entities with head office, permanent establishment or domicile in Portuguese terri­tory must communicate electronically to the Portuguese tax authorities the relevant data of the invoices issued during a par­ticular month, at the latest on the 25th day of the subsequent month.

Electronic invoicing. Effective 1 January 2013, the VAT law has been amended to permit electronic invoicing in line with EU Directive 2010/45/EU.

Credit notes. A VAT credit note may be used to reduce the VAT charged and reclaimed on a supply. A credit note must be cross-referenced to the original invoice. The mention of VAT on a credit note is optional. If VAT is mentioned, the supplier may reduce the VAT payable with respect to the supply. However, the supplier can make this reduction only if it has written confirma­tion from the purchaser acknowledging the VAT adjustment.

Proof of exports and intra-Community supplies. VAT is not charge­able on supplies of exported goods or on the intra-Community supply of goods (see the chapter on the EU). However, to qualify as VAT-free, exports and intra-Community supplies must be sup­ported by evidence that confirms the goods have left Portugal. Acceptable proof includes the following documentation:

  • For an export, stamped customs documentation and an indica­tion on the invoice of the Portuguese VAT law article that per­mits exemption with credit for the supply
  • For an intra-Community supply, a copy of the invoice indicating the customer’s valid VAT identification number (issued by another EU Member State), plus a range of commercial docu­mentation, such as bills of lading, transport documentation and proof of payment

Foreign-currency invoices. If a VAT invoice is issued in a foreign currency, the values and VAT amounts used must be converted to euros (EUR). The conversion must be done using the sales rate used by a bank established in Portugal or by the European Central Banking System on the date on which the tax is chargeable or on the first business day of that month. The invoice must indicate the exchange rate used.

The above rules apply only to invoices issued by Portuguese tax­able persons. For invoices received from foreign suppliers (for example, invoices related to intra-Community acquisitions), the acquirer may indicate the exchange rate used to convert the amounts to euros on the face of the invoice.

B2C invoices. Effective 1 January 2015, new rules apply to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers. For fur­ther details of the VAT rules on electronic services in the EU, please refer to the European Union chapter.

Suppliers of these services are required to issue invoices to non­taxable customers.

VAT returns and payment

VAT returns. Periodic VAT returns are submitted in Portugal for monthly or quarterly periods, depending on the taxable person’s turnover in the preceding VAT year. All taxable persons must also complete an annual return.

Monthly VAT returns must be filed if the taxable person’s turn­over in the preceding year exceeded EUR650,000.

Quarterly VAT returns must be filed if the taxable person’s turn­over in the preceding year did not exceed EUR650,000.

Periodic VAT returns must be filed together with full payment of VAT. Monthly VAT returns must be submitted before the 10th day of the second month after the end of the return period. Quarterly VAT returns must be submitted before the 15th day of the second month after the end of the return period.

In general, annual returns must be submitted by 15 July following the end of the calendar year.

Return liabilities must be paid in euros.

Special schemes. A new VAT “cash accounting regime” was introduced in Portugal, effective 1 October 2013. In accordance with this new regime, taxpayers will only pay the VAT due once they receive payment of an invoice from a customer. This new regime is optional and will apply to companies from all sectors of the economy with a turnover of up to EUR500,000.

Special regime of VAT exemption. This special regime applies to entities that are not required to have organized accounting records; that do not import or export goods, or related activities; and whose turnover does not exceed EUR10,000 (retailers EUR12,500).

These taxpayers do not charge VAT on their supplies and input VAT cannot be deducted.

Special regime of small retailers. This special regime applies to entities that are required to have organized accounting records; do not import or export goods or related activities; exercise a retail trade activity; have a volume of purchases not exceeding EUR50,000; have a goods purchase volume not less than 90% of the total volume of purchases; do not carry out intra-Community transactions of goods; and have a volume of services, not exempt from VAT, not exceeding EUR250.

The VAT paid by these taxable persons amounts to the 25% of the tax paid on the purchase of goods and raw materials without processing. Moreover, they can only deduct the VAT paid on the purchase or lease of capital goods, and other goods for the com­pany’s own use.

Secondhand goods. For supplies of secondhand goods, works of art, collectors’ items or antiques, the taxable amount will be the difference between the sale price and the purchase price in accor­dance with the provisions of special legislation and supported by the documentation underlying the supply.

Electronic filing and archiving. In Portugal, VAT returns should be submitted by electronic means. For this purpose, the taxable per­son should register at the Portuguese tax authority’s website in order to receive an access code.

Intrastat returns, EC Sales List returns and annual VAT returns are submitted by electronic means as well.

In Portugal, VAT records should be retained for a period of 10 years.

Purchase invoices that are not issued electronically cannot be stored electronically; if they are stored electronically, the deduc­tion of VAT may be disallowed. However, electronic storage is allowed for invoices issued electronically in accordance with the Portuguese VAT legislation.

Additionally, electronic storage of issued invoices and other rel­evant documents is allowed as long as the documents are issued electronically.

Other information/documentation may be kept in digital formats if a minimum of three years has elapsed.

Annual returns. The annual return is a summary of all the peri­odic VAT returns for statistical purposes as well as corporate income tax and personal income tax.

The annual return is a global return for all taxes (corporate tax, VAT, etc.). The annual return has a number of appendices attached including VAT — tax and accounting requirements that detail the VAT and net amounts in relation to supplies, carried out and received, and suppliers and customers lists, which provide information on all local supplies and purchases made by a com­pany in Portugal. These listings are used for cross-checking data of purchases and sales with the periodic VAT returns.

Foreign companies that do not have a permanent establishment in Portugal, are only registered therein for VAT purposes and did not carry out any operation in a particular fiscal year (i.e., no peri­odic returns were submitted) are not required to file the annual VAT return.

Penalties

The following penalties apply to the late submission of periodic and annual VAT returns:

  • A penalty ranging from EUR300 to EUR3,750 if the taxpayer’s actions were not intentional
  • A penalty ranging from EUR300 to EUR7,500 if the taxpayer’s actions were intentional

The following penalties apply to the late payment of VAT:

  • A penalty ranging from 30% to 100% of the VAT due, up to a maximum of EUR45,000, if the taxpayer’s actions were not intentional
  • A penalty ranging from 200% to 400% of the VAT due, up to a maximum of EUR165,000, if the taxpayer’s actions were inten­tional

In addition, interest applies (currently at a 4% annual rate).

EU filings

Intrastat. A Portuguese taxable person that trades with other EU countries must complete statistical reports, known as Intrastat statements, if the value of its sales or purchases of goods exceeds certain thresholds. Separate reports are required for intra-Com­munity acquisitions (Intrastat Arrivals) and for intra-Community supplies (Intrastat Dispatches).

The threshold for Intrastat Arrivals for 2014 is EUR350,000. The threshold for Intrastat Dispatches for 2014 is EUR250,000.

The Intrastat return statement is submitted on a monthly basis. The submission deadline is the 15th business day following the end of the return period.

The maximum penalty for the non-submission, late submission or incorrect submission of an Intrastat statement may range from EUR250 to EUR25,000 for individuals and from EUR500 to EUR50,000 for legal persons.

EU Sales Returns. If a Portuguese taxable person carried out intra-Community supplies of goods and/or services, it must sub­mit an EU Sales Return (ESR) by the 20th day of the month following the month in which the operation takes place. An ESR is not required for a period in which the taxable person does not carry out any intra-Community supplies.

ESRs should be submitted quarterly if the VAT returns are sub­mitted quarterly, or monthly if the VAT returns are submitted monthly. If the VAT returns are submitted quarterly but in one of the previous four quarters the amount of the intra-Community supplies of goods exceeded EUR50,000, ESR should also be submitted monthly.

Penalties may be imposed for late, missing or inaccurate ESRs.