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VAT Returns & Recovery in Portugal

In Portugal, under Article 29 and 41 of VAT Code, taxable individuals are required to submit periodic tax returns on a monthly or quarterly basis, depending on their annual turnover. Taxable persons with an annual turnover of € 650,000 or more in the preceding calendar year are required to file monthly tax returns. On the other hand, taxable individuals with an annual turnover of less than € 650,000 in the previous calendar year generally file quarterly tax returns, but they have the option to file monthly returns if they choose to do so.

vat guide portugal

VAT Returns in Portugal

Returns must be submitted by taxable persons under Article 41 of VAT code. The due date for filing return is the 20th day of the second month after the end of the relevant monthly or quarterly period being reported on. There is an exemption for the month of June and the second quarter, where returns must be submitted by 20th September.

Interest and Penalties

Unpaid VAT liability in Portugal is subject to accruing interest at a variable rate that changes on an annual basis.

Exempt Supplies or Equivalent

There are two types of exemptions:

  • Ordinary exemptions.
  • Exemptions with credit.

Ordinary exemptions, also known as incomplete exempt or simply exempt refer to supplies on which no VAT is charged, no corresponding VAT deduction can be made for the associated input VAT expense. This means that the supplier cannot recover any VAT paid on goods or services purchased for the purpose of making these supplies.

Exemptions with credit, on the other hand, are supplies that carry a right to a related input tax deduction. This means that although no VAT is charged on the supply, the supplier can recover any VAT paid on any goods or services purchased for the purposes of making these supplies. These exemptions with credit are also known as zero-rated supplies.

Electronic Filing

In Portugal, it is obligatory to submit tax-related documents electronically. This means that the taxpayers are required to use electronic means to file their tax returns, submit invoices and fulfill other tax-related obligations.

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VAT Recovery in Portugal

Taxable persons are typically allowed to deduct input VAT on expenses related to their taxable activities including input VAT on intra-Community acquisitions and imported goods. However, there are certain restrictions on the deduction of input VAT.

 

Expenses related to the following, generally do not give the right to deduct input VAT, even if incurred for a taxable activity:

  • Light vehicles, pleasure boats, helicopters, aircraft, and motorcycles that are considered to be used for nonworking purposes. However, if these goods are intended for sale or are used in a business activity, such as rental cars, the expenses can give a right to VAT deduction. Deductions may be allowed for electric or hybrid vehicles.
  • Fuel used in motor vehicles, except for diesel, liquefied petroleum gas, natural gas, and biofuels. In these cases, 50% of the VAT is deductible. VAT on these fuels is 100% deductible if they are used for heavy passenger vehicles, licensed public transport, machines other than registered vehicles, tractors for agriculture, and vehicles designed for transporting goods over 3,500 kilograms. Expenses related to electricity for electric or hybrid vehicles are generally deductible.
  • Expenses related to transport and business travel, representation fees, accommodation, and meals.
  • Entertainment or luxury charges, which are considered not to constitute ordinary operating expenses.
  • Second-hand goods, collections of works of art, and antiques, if the taxable amount of the supply of these is equal to the difference between the selling price and the purchasing price.

Under Article 29 of the Portuguese VAT Code, taxable individuals are required to issue invoices for all goods and services supplied, including exports and supplies within the Community, as well as for any advance payments received. Additionally, a taxable person can reclaim input tax paid on goods and services acquired for business purposes. Generally, this recovery is achieved by deducting the input tax from the output tax charged on the supplies they provide.

 

Exempt Supplies or Equivalent

Article 9 of the Portuguese VAT Code provides for exemptions on certain supplies, subject to certain conditions and requirements.

 

These include:
  • Services provided by healthcare professionals such as doctors, dentists, psychologists, midwives, nurses, and ambulance transportation services.
  • Services provided by other paramedical professionals, including practitioners of nonconventional therapies.
  • Medical, health, and related services provided by hospitals, clinics, dispensaries, and similar establishments. (Note that there is an option to tax available for these establishments.)
  • Supplies of dentures and other dental prostheses provided by dentists and dental technicians.

 

 

 

Last Updated: 29/11/2023

Disclaimer

The information provided by Global VAT Compliance B.V. on this webpage is intended for general informational purposes only. Global VAT Compliance B.V. is not responsible for the accuracy of the information on these pages, and cannot be held liable for claims or losses deriving from the use of this information. If you wish to receive VAT related information please contact our experts at support@gvc.tax

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