In Portugal the VAT rates are as follows:

- A reduced rate of 5%;

- An intermediate rate of 12%; and

- A standard rate of 20%.


The reduced rate is applied to, in particular, essential foods, pharmaceuticals, newspapers & books, transportation and accommodation.

The intermediate rate is applied to preserved goods and services of restaurants (meals and beverages).
The standard rate is applied to all supplies of goods and services not covered by the reduced or intermediate rates.

The above mentioned rates are 4%, 8% and 14%, respectively, in respect of those transactions which are deemed to take place in the Autonomous Regions of Azores and Madeira, as well as imports carried out therein.

Once all necessary documents are provided, the Company House will issue immediately a VAT number. Additionally, a business start-up form must be filed with the Portuguese Tax Authorities in order to allow the company to be VAT registered in Portugal.

The Portuguese VAT system does not consider this option. However, taxpayers can close-down the activity for VAT purposes at anytime through the website of the Portuguese Tax Authorities.

Under the Portuguese VAT law, the VAT is due on the value of the supply on the moment the invoices are issued. As a general rule, the taxable entities are obliged to issue an invoice for each sale of goods or services carried out. The invoice must be issued no later than the fifth working day following the goods delivery or the services rendered.

For the purposes of tax control, any invoice or other equivalent document must be processed by computer or printed and numbered at an authorized typography. In addition to numbering and dating, invoices or equivalent documents must include the following information:

• The name, business name or denomination, the head-office or domicile of the vendor and the purchaser, as well as their fiscal identification numbers. This fiscal identification number as shown on an invoice issued to a taxable person of another Member State shall be preceded by the prefix PT (for identification of Portugal as the country attributing such number);


• The detailed statement of goods to which the transactions relate or the nature of the services rendered;


• The price net of tax, the applicable rate and the amount of tax due;


• The respective article of the Portuguese VAT code whenever a good or service is exempt from VAT;


• The indication of the delivery date of the goods and the settled date of the services rendered;


• The addition of the brief note "IDA" when is applied the regime of the VAT due by the acquirer.

Both foreign as well as a Portuguese companies with a turnover higher than EUR 650.000 are required to submit their VAT returns and corresponding means of payment no later than the 10th day of the second month following that to which the transactions relates to.
Any taxpayer whose turnover is lower than the above mentioned amount shall submit its VAT returns and corresponding means of payment until the 15th day of the second month following each period of three months in the calendar year.
European sales listing as well as the report of sales made in Madeira and Azores, when applicable, is due whit the monthly or quarterly VAT return.
All VAT registered entities are required to submit an annual VAT return and annual customer and suppliers listings, whenever transactions for the year with each client / supplier exceed EUR 25.000.

When within a VAT period, input VAT exceeds output VAT for more than ?10.650, the taxpayer may request a refund by indicating this on the periodic VAT return and subsequently submit a refund package which should include items such as VAT ledgers and summaries of VAT regularizations.
For VAT credits lower than the referred amount but higher than ?250 a refund may be requested when 12 months have passed over the period where the credit situation started.
In case a refund is requested, the VAT Authorities tend to audit the records of the taxpayer. A bank guarantee in favor of the Tax Authorities should be provided for VAT refunds higher than ?1.000, to be kept for one year.
The VAT refund shall be made by the VAT Services until the end of the 3rd month following that in which the claim is lodged, on the periodic VAT return, after the expiration of which this timeframe, the taxpayer is entitled to receive indemnity interests.

When a foreign company, EU resident, dispatches goods from an EU country to stock in Portugal, will be making an operation assimilated to an intra-Community acquisition of goods in Portugal, subject to Portuguese VAT. As such, the EU company should register itself with the Portuguese Tax Authorities, and obtain a Portuguese VAT number, in order to assess the VAT due in Portugal regarding said transaction.
For an EU company the assessed VAT should, in principle, also qualify for deduction as input VAT which usually implies that the VAT may be deducted on the same periodic VAT return on which the assessment is shown. It is not necessary to proceed to the payment of said VAT. We are before an accounting operation without any financial impact.
Entities resident in the EU and registering for VAT purpose in another EU member state are not required to appoint a fiscal representative in Portugal.
Non-EU resident entities without a permanent establishment within the Portuguese territory must appoint a fiscal representative who is jointly liable together with the registered entity in order to comply with the obligations resulting from the carrying out in Portugal of transactions chargeable to VAT.
VAT on supplies from outside the EU becomes payable upon import into Portugal along with any customs duties payable.

As a general rule, the transfers of goods executed in Portugal by a foreign company are exempt from VAT provided that, the goods are dispatched or transported from Portugal to a destination outside the EU territory. Furthermore, the company must have evidence that the destination of the goods is to a non- EU State. Otherwise, Portuguese VAT will be due.
A foreign company making such sales from Portugal must issue an invoice regarding each transfer of goods made to non-EU resident entities in the same terms and conditions as a taxable operation must to filling with the same declaratives VAT obligations as a local company, thus a registration for VAT purposes is need.

According to the Portuguese legislation, all taxpayers are allowed to dispute any unfavorable additional tax assessment. This is done through the presentation of a "tax claim" to the Tax Authorities.
Should the dispute not be resolved through this route, the taxpayer can make use of a "court claim" before the Court of justice.

In what concerns the supply of services, the place of supply is generally deemed where the supplier has established his business or has a fixed establishment from which the services are rendered.
This means that the services invoiced by a foreign company to a Portuguese company will not be subject to Portuguese VAT. Thus, the foreign company does not need to register for VAT purposes in Portugal, independently as to whether the services were subcontracted, or not, to a Portuguese company.
There are, however, some exceptions to this rule, in compliance with the 6th Directive requirements.

Thus:

• The supply of services in connection with immovable property shall be deemed to be situated/taxed when the property is situated within the territory;


• The supply of services of an artistic, scientific, sporting, entertaining, educational or of a similar nature shall be taxed in Portugal when such activities are exercised within;


• The supply of transport services shall be taxed in Portugal, having regard only to the distances covered within the territory of the country;


• Work, repair and expertise on movable tangible property, in general, shall be taxed in Portugal when such services are carried out there.
  In case of the subcontracted services by a foreign company have the nature of above mentioned services, in order to comply with the VAT obligations, namely, to proceed with the VAT assess, the foreign company needs to register in Portugal.