GLOBAL INDIRECT TAX SERVICES
Portugal Country Fact File kpmg.com
TAX
b or Brochure b || Section Portugal: Country name Fact File
Updated 15 July 2010 Š 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
Portugal:
Country Fact File Contents Scope and Rates
2
International Supplies of Goods and Services
6
What supplies are liable to VAT?
2
What is the standard rate of VAT?
2
How are exports of goods and services from Portugal treated?
6
Are there any reduced rates, zero rates, or exemptions?
2
How are goods dealt with on importation?
7
Registration
3
Who is required to register for Portuguese VAT?
3
How are services which are brought into Portugal from abroad treated for VAT purposes?
7
Are there penalties for not registering or late registration?
Invoices
8
3
What do I have to show on a tax invoice?
8
Are there any simplifications that could avoid the need for an overseas company to register for VAT?
Can I issue invoices electronically?
8
3
Is it possible to operate self-billing?
8
VAT Grouping
4
Transfers of Business
9
Is VAT grouping possible?
4
Is there a relief from VAT for the sale of a business as a going concern?
9
Options to Tax
9
Are there any options to tax transactions?
9
Head Office and Branch Transactions
9
How are transactions between head office and branch treated?
9
Bad Debt
9
Am I able to claim relief for bad debts?
9
Can an overseas company be included in a Portuguese VAT group?
4
Returns
4
How frequently are VAT returns submitted?
4
Are there any other returns that need to be submitted?
4
VAT Recovery
5
Can I recover Portuguese VAT if I am not registered for VAT in Portugal?
5
Does your country apply reciprocity rules for reclaims submitted by non-established businesses?
5
Anti-Avoidance
9
Are there any items that you cannot recover VAT on?
5
Is there a general anti-avoidance provision under Portuguese VAT law?
9
Penalty Regime
9
What is the Portuguese penalty and interest regime like?
9
Updated 15 July 2010 Š 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
2 | Portugal: Country Fact File
Scope and Rates What supplies are liable to VAT? Value-added tax (VAT) is due on any supply of goods or services made in Portugal, where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by said person. Supply includes all forms of supply. It is not restricted to the provision of goods and services by way of sale but can apply equally to other forms of transaction, including the leasing or hire of goods, the grant, assignment, surrender of a right, or even an agreement not to do something. Supply does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are deemed to be supplies; for example, giving business gifts, and private use of business assets, and movement of own goods for trade into Portugal from another European Union (EU) Member State. What is the standard rate of VAT? With effect from 1 July 2010 the standard rate of VAT is 21 percent in continental Portugal (previously the standard rate was 20 percent). The standard rate for Madeira and the Azores is 15 percent (previously 14 percent).
•
Medicines
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Passenger transport
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Hotel accommodation
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Cultural entertainment
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Sport activities
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Electricity and natural gas.
There is an extensive list of zero-rate supplies, including: •
Exports
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Intra-EU dispatches
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International services provisions
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Transport of goods and people between the mainland and the islands of Azores and Madeira and in between the islands
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Supplies to NATO forces
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Supplies to national exporters
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Supplies to international organizations recognized as such by Portugal or other Member States.
The list of exemptions includes:
Are there any reduced rates, zero rates, or exemptions?
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Immovable property (subject to option to tax)
Yes. There is a reduced rate of 13 percent (9 percent for autonomous regions) for certain goods and services including:
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Financial transactions
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Insurance
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Restaurant services
•
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Preserves of meat, shellfish, fruit, and vegetables
Services of a cultural nature (artists, libraries, and museums)
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Fats and oils
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Agricultural activity (option to tax)
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Coffee
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Postage stamps
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Ornamental plants.
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Health and welfare
In addition, there is a reduced rate of 6 percent (4 percent for autonomous regions) for certain goods and services, including:
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Betting and similar games of chance
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Education
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Public garbage collection.
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Meat, shellfish, fruit, and vegetables
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Other essential foods
Note: It is not possible to recover VAT incurred in making exempt supplies.
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Water supply
•
Books and newspapers
Updated 15 July 2010
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© 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
Portugal: Country Fact File | 3
Registration Who is required to register for Portuguese VAT? Portuguese Entities If your business makes taxable supplies in Portugal, it is required to register for VAT; if your turnover exceeds EUR 10,000 you are also required to account for Portuguese VAT. Optional VAT registration is possible. Non-Portuguese Entities The registration rules that apply to Portuguese entities should also apply to non-Portuguese entities that are making taxable supplies in Portugal. However, in practice the threshold does not apply for foreign established businesses. To deal with its VAT affairs businesses, which are not established in the European Union, must appoint a VAT representative with joint and several liability to the tax authorities. If your business is not registered for VAT in Portugal, but sells and delivers goods from another Member State to customers in Portugal who are not VAT registered (distance sales), where the value of those sales exceeds a threshold of EUR 35,000 your business is required to register and account for VAT in Portugal.
Triangulation If your business is an intermediate supplier to a Portuguese buyer of goods which you purchase from a business in a European Union (EU) Member State other than your own and are delivered from there to Portugal, VAT due can be accounted for by the customer in Portugal. Call-Off Stock No simplification procedures apply. Supply and Install If your business supplies goods and installs or assembles them in Portugal, your customer can account for any VAT due in effect as an acquisition. If third-party supplies are made from outside Portugal directly to the place of installation, VAT registration will generally be inevitable in order to account for acquisition VAT. Reverse Charge Services These services are covered in more detail at (section International Supplies of Goods and Services).
Are there penalties for not registering or late registration? Yes, there is a penalty of EUR 200 on the act of retroactive registration. In the case of late remitted VAT, penalty interest is compounded over period of the delay. In addition fines are levied in proportion to the amount of VAT remitted late. Are there any simplifications that could avoid the need for an overseas company to register for VAT? Generally the obligation to account for the VAT due can be shifted to your customer, if the customer is registered for VAT purposes in Portugal.
Updated 15 July 2010
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Š 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
4 | Portugal: Country Fact File
VAT Grouping
Returns
Is VAT grouping possible?
How frequently are VAT returns submitted?
No.
Most registered businesses are required to submit VAT returns on a monthly basis. However, if your estimated annual turnover is less than EUR 650,000, you may opt to submit quarterly VAT returns.
Can an overseas company be included in a Portuguese VAT group? Not applicable.
In addition to periodic returns, your business must also submit an annual summary VAT return and an annual listing of clients and suppliers with which the total transactions in the year exceed EUR 25,000. Failure to furnish VAT returns and settle any outstanding VAT payments on time may result in a penalty ranging between 20 percent and 100 percent of the VAT in default with a maximum of EUR 30,000. In addition, penalty interest is charged at 4 percent per year. Are there any other returns that need to be submitted? European Sales List (ESL) If your business supplies goods or services that are supplied from Portugal to VAT registered businesses in other EU Member States, you are required to complete European Sales Lists (ESLs) - recapitulative statement. This return must be submitted by the 20th day of the following month after the month in reference. Declaration on Supplies in Autonomous Regions Mainland VAT registered tax payers who supply goods and/ or services within the fiscal boundaries of the autonomous regions of Madeira and Azores must declare these on a separate return to be attached to the ordinary periodic VAT return. Intrastat Supplementary Declarations VAT registered businesses with a value of dispatches or arrivals to or from other EU Member States, which exceed a certain threshold (EUR 400,000 for arrivals and EUR 550,000 for dispatches per calendar year) must complete supplementary declarations each month. Failure to submit Intrastat declarations on time may result in a penalty of up to EUR 65,889.62.
Updated 15 July 2010
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© 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
Portugal: Country Fact File | 5
VAT Recovery Can I recover Portuguese VAT if I am not registered for VAT in Portugal? Yes. If you are established in another EU Member State, then you should make a claim under to your local EU Tax Authority. If you are a non-EU business, you may recover the VAT under the 13th Directive, provided that there is a reciprocity agreement between Portugal and the tax authorities of the home country of the claimant.
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Passenger vehicles up to nine seats: With certain exceptions you cannot recover VAT on the purchase of passenger vehicles.
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Accommodation, food, drinks, taxis, car hire, and petrol: VAT is not generally recoverable on these costs. However, as per 1 January 2005, VAT incurred is recoverable at 50 percent on transport, accommodation, food, drink, and other expenses incurred for the purpose of organization of congresses, fairs, and exhibitions, when these are directly contracted with the service supplier(s) or through entities legally qualified and these clearly contribute to carry out VAT-able supplies; and 25 percent of the VAT when such costs are incurred only in participation in these events, contracted directly with the organizers of those events and duly justified as contributing in the realization of VAT-able supplies.
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Purchases falling within the Tour Operators’ Margin Scheme. The VAT on goods and services that fall under this scheme cannot be reclaimed.
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Goods sold under one of the margin schemes for second hand goods. There are a number of schemes which provide for VAT to be accounted for on the goods’ sales margin, but do not allow VAT recovery on the purchase of those goods.
Under both of these provisions there are strict time limits for making claims - the claim period covers the calendar year and claims must be submitted by the 30 September of the following year. Quarterly claims are also allowed. Does your country apply reciprocity rules for reclaims submitted by non-established businesses? Information not available. Are there any items that you cannot recover VAT on? Yes. There are certain items that you cannot recover VAT on. For example: •
Exempt supplies: Where VAT relates to both taxable and exempt supplies, you will need to make an apportionment.
•
Non-business (including private) activities: Where VAT relates to both business and non-business activities, an apportionment is required.
Updated 15 July 2010
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© 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
6 | Portugal: Country Fact File
International Supplies of Goods and Services How are exports of goods and services from Portugal treated?
The following exceptions apply to the B2B and B2C main rules as described above: •
Services involving real estate (taxable in the country where the real estate is located).
•
Restaurant and catering services (taxable in the country where these services are performed. Other rules apply if these services are performed on board a ship, aircraft, or train).
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Passenger transport (taxable in we country here the transport services are actually performed).
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Services with regard to cultural, artistic, sporting, scientific, educational, entertainment, and similar activities, along with the ancillary services (taxable in the country where those activities are physically carried out). With effect from 1 January 2011, this exception will apply to services performed for VAT entrepreneurs only with respect to admission to the aforementioned events and the appurtenant admission-related services. Nothing will change as of 1 January 2011, with regard to services performed for non-taxable persons.
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Short term hiring of transportation vehicles (for ships maximum 90 days/for other means of transport maximum 30 days; taxable in the country where the vehicle is actually put at the disposal of the customer.
Goods If you sell goods to a customer who is registered for VAT in another European Union Member State and the sale involves the removal of those goods from Portugal (either by you or your customer) to that Member State, then you do not need to charge VAT and may zero rate the supply as an intra-EU dispatch. You must obtain your customer’s VAT number and quote it on your invoice. You should also obtain evidence of the goods’ removal from Portugal. If you sell goods to a customer who is not registered for VAT in another EU Member State, you will have to charge Portuguese VAT. If your sales exceed a certain threshold for that Member State you may have to register in the Member State under what is known as the Distance Selling Scheme. If you export goods to a customer (business or private) outside of the EU, then you do not need to charge VAT; but, as for intra community sales, you should make sure that in all cases you keep proof of dispatch/delivery to support your zero rating. Services The Directive 2008/9 has been transposed in the Portuguese legislation by the Decree-Law nr. 186/2009 dated 12 August 2009. Accordingly, there are now two general rules on the localization of the supply of services, based on the status of the acquirer: •
When the acquirer of the services is a taxable person (B2B transactions), VAT is generally due in the place where the acquirer of the services is located.
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When the acquirer of the services is a non taxable person (B2C transactions), VAT is generally due in the place where the supplier of the services is located.
Updated 15 July 2010
The following exceptions apply to the B2C main rule: •
Intermediary services (taxable in the country where the underlying transaction is taxable).
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Intra-Community transport of goods (taxable in the country of departure). For other types of goods transportation for non-taxable customers, the place of service is the place where the transportation is actually performed.
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Transportation-related services (taxable in the country where the services are physically carried out).
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© 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
Portugal: Country Fact File | 7
• •
Services involving movable tangible goods (taxable in the country where the activities are actually carried out). Services performed electronically by a VAT entrepreneur not established in the EU to non-taxable customers (taxable in the country where the customer of the service is located).
The following services performed for non-taxable customers established or resident outside the EU are taxable in the country where the customer is established: •
the transfer of licenses and similar rights;
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advertising services;
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services performed by consultants, as well as dataprocessing and information-provision services;
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the obligation to refrain, in whole or in part, from pursuing a business activity;
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banking and insurance services;
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supply of staff;
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hiring out of movable property, with the exception of means of transport;
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operating natural gas and electricity-distribution systems;
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telecommunications services;
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radio and television broadcast services; and
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services performed electronically.
Updated 15 July 2010
How are goods dealt with on importation? When goods are imported into Portugal from outside the EU, import VAT and customs duty may be due. This has to be paid or secured before the goods will be released from customs’ control. The VAT paid can be offset against the VAT charged by the acquirer on its VAT able operations, on its VAT return. How are services which are brought into Portugal from abroad treated for VAT purposes? If you buy services from outside Portugal, you will be required to apply the reverse charge. This is intended to take away any VAT advantage of buying those services from outside Portugal. Under the reverse charge, you are required to account for a notional amount of VAT as output tax on your VAT return covering the period in which you made the payment and you recover this VAT as input tax on the same return. If you are able to recover all of your VAT, the reverse charge has no cost effect and is a VAT compliance matter only. However, if you are partially exempt, there is likely to be a VAT cost depending on the level of recovery allowed under your partial exemption method.
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© 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
8 | Portugal: Country Fact File
Invoices What do I have to show on a tax invoice?
•
Invoices are required for zero-rated and exempt supplies. Although Portuguese suppliers that exclusively carry VATexempt supplies do not need to issue invoices for these supplies.
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There are local language requirements for invoicing
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The invoices regarding new means of transport (on intra-EU supplies) should include the identification of the vehicle (license plate number or register number), specification of its characteristics, and number of kilometers traveled at the time of the supply.
If you have to issue a tax invoice it must contain the following data: •
A sequential invoice number (maximum of 11 digits)
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The time of the supply
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The date of issue of the document
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The name, address, and registration number of the supplier
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The name and address of the customer
Can I issue invoices electronically?
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The VAT registration number, if any, of the customer
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The quantity and nature of the goods/services supplied at each VAT rate
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Unit price (exclusive of any VAT) at each VAT rate
Yes. Invoices and equivalent documents may be issued by electronic means provided that the origins, authenticity, and integrity are guaranteed by an advanced electronic signature or Electronic Data Exchange (EDI). Your customer must agree to this method of invoicing in advance.
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Each rate of VAT chargeable and the net amount of VAT chargeable at each such rate
Is it possible to operate self-billing?
•
The rate of any discount
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The total amount of VAT payable, expressed in EUR. If it is in another currency, the exchange rate used must be stated on the invoice and the foreign exchange rate used in accordance with the rate from a Portuguese commercial bank's selling rate either on the date of issue of the invoice or on the first working day of the month.
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The legal basis for exemption (if applicable)
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Margin schemes legend should be included
Updated 15 July 2010
Yes, provided you have a written agreement of your customer before doing so. Prior authorization of the Portuguese tax authorities is required if the customer is established outside the EU.
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© 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
Portugal: Country Fact File | 9
Transfers of Business
Bad Debt
Is there a relief from VAT for the sale of a business as a going concern?
Am I able to claim relief for bad debts?
Yes. If you sell your business as a going concern, then VAT may not be due. There are certain conditions to satisfy: for example, the purchaser should be registered for VAT in Portugal at the time of the transfer (or immediately register as a consequence of the transfer) and should intend to use the assets to carry on operations that are subject to VAT.
Options to Tax Are there any options to tax transactions? There is an option to tax services supplied by health establishments. In addition, there is an option to tax certain types of transaction in immovable property, as well as on meals provided by companies to its employees.
Head Office and Branch Transactions How are transactions between head office and branch treated? According to new guidelines from the Portuguese Tax Authorities, charges between head office and branch are not treated as supplies for Portuguese VAT purposes.
Updated 15 July 2010
You may claim VAT relief for bad debts under different circumstances such as bankruptcy of the customer or his/her insolvency.
Anti-Avoidance Is there a general anti-avoidance provision under Portuguese VAT law? There is a general anti-avoidance provision under the Portuguese law that also applies to VAT.
Penalty Regime What is the Portuguese penalty and interest regime like? There are a number of penalties that apply in Portugal for compliance failures. Penalties are usually confined to lump-sum penalties that are fixed dependent on the type of tax-payer and offence involved. If you make an error on a VAT return that understates your liability or overstates your entitlement to a VAT credit, a penalty of up to 100 percent (as of 1 April 2004) of the error may apply. If, however, you voluntarily disclose the error to the tax authorities, the penalty can be mitigated. Interest would normally apply to an error.
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Š 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.
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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2010 KPMG & Associados – Sociedade de Revisores Oficiais de Contas, S.A., a Portuguese company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. Designed by Evalueserve. Publication name: Portugal – Country Fact File Publication number: 101025 Publication date: November 2010