Value added Tax (IVA)
Tax and Accounting Information in Portugal
Value Added Tax (IVA), as regulated by the European Directive 77/388/CEE and respective ensuing alterations, was approved by Decree-Law 394-b/84 dated 26/12 and entered into force on 01/01/1986.
What is IVA?
It is an indirect tax levied on the supply of goods and services rendered for remuneration. The framework of the Value Added Tax provides for a deduction of Value Added Tax based on the acquisition of goods and services. Each economic agent reverts the difference between Value Added Tax paid and Value Added Tax undertaken to the state. Hence the Value Added Tax goes all the way around the economic circuit to the end consumer, who undertakes the total tax.
Since 1993 intra-community transactions are subject to a special regime. Directive 91/680/CEE dated 16/12, was applied in Portugal by Decree-Law 290/92 dated 28/12 substituting the previous concept of “import” by a new concept - “intra-community transactions”. In this context, import in the legal sense of the term, became the designation exclusively for the entry of merchandise or services from third countries or territories which are not integrated into the European Union’s fiscal framework.
|Regular Tax (Goods and Services in general)||23%||22%|
|Reduced Tax (includes food and other essential goods, etc.)||
|Intermediate Tax (includes food services, beverages, etc.)||13%||12%|
Value Added Tax returns must be filed periodically (monthly for companies with a turnover greater than €650,000.00, or every three months for other companies) to the tax authorities; This applies even to companies that are not carrying out any activity.
Due dates for filing quarterly Value Added Tax returns:
- 1st quarter – May 20;
- 2nd quarter – August 20;
- 3rd quarter – November 20;
- 4th quarter – February 20 of the following year.
Due dates for filing monthly Value Added Tax returns:
- Up to the 10th of the 2nd month following that when the transaction took place (example: The return for the month of May must be filed by July 10).
In addition to the above referenced periodical Value Added Tax returns, a recapitulative statement must be submitted in respect of any intercommunity supply of goods or services until the 20th of the following month or quarter.
VAT deductions and refunds
In order to calculate the tax owed, taxpayers deduct the following from the tax that applies to the taxable operations they undertook:
- Tax owed or paid for the acquisition of goods and services from other taxpayers;
- Tax owed for importing goods;
- Tax paid as the beneficiary of taxable operations made by taxpayers living abroad, when these have no legal representative in national territory and have not invoiced it.
Only the tax mentioned in the following documents, in the taxpayer’s name and possession, may be deducted:
- Invoices and equivalent documents, issued legally;
- Import declarations’ VAT receipt.
One can only deduct the tax that applies to goods and services acquired, imported or used by the taxpayer for the following purposes:
- Buying or selling taxable, non-exempt, goods and services;
- Buying or selling goods and services, which consist of (among others):
- Exports and other exempt operations;
- Operations made abroad that would be subject to tax had they been made in national territory;
- Services whose value is included in the net price of imported goods (other expenses such as commissions, packaging and insurance).
One can deduct tax from expenses relative to the acquisition, manufacturing or importing, renting, using, transforming and repairing non-commercial vehicles, boats, helicopters, and aeroplanes, motorcycles, only when relative to goods whose sale or use is part of the taxpayer’s activity.
Transport expenses are deductible in 25% of the tax regarding the taxpayer’s and his/her staff’s business trips, including tolls, food, lodging and drinks relative to participation in congresses, trade fairs, exhibitions, conferences and similar events, when these are a result of a contract between the taxpayer and the event organisers and when they clearly contribute to taxable operations.
The deduction must be made in the period declaration or in that of a tax period after the one when the invoices, equivalent documents or import declarations’ VAT receipt were received.
Whenever the tax deducted exceeds the value owed due to taxable operations in their corresponding period, the excess is deducted in the following tax periods. If after 12 months relative to the period when this excess began, there is still a credit over 250 Euros in favour of the taxpayer, he/she may ask for its refund. The taxpayer may ask for the refund before this 12-month period if, among other reasons, his/her tax activity has permanently ended, if the value of the refund is higher than 25 Euros, or if the credit in favour of the taxpayer exceeds 3000 Euros.
The Portuguese Tax Authority (“Direção-Geral dos Impostos”) may demand a deposit, bank guarantee or another adequate form of assurance when the refund amount exceeds 30 000 Euros.
After July 1, 2010, value added tax reimbursements, when applicable, should be carried out by the “Direção Geral dos Impostos” - DGI (tax revenue services) until the end of the second month, following the submission of the request.
A monthly regime for reimbursement of Value Added Tax is available to companies. As such, registration for this regime is carried out by request of the taxable entity on the DGI’s website, by the end of November of the year preceding that on which the monthly reimbursement regime is to take effect. Reimbursement to these taxable entities should take place 30 days after the request has been filed.
Taxable entities registered in the monthly reimbursement regime, are obligated to remain so, for one year.
At the end of the 60 or 30 day period, depending on the case, if the DGI has not reimbursed the taxable entity, the said entity may request compensatory interest.