Portugal VAT, GST, and Sales Tax Guide

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Worldwide VAT, GST and Sales Tax Guide 2022

Lisbon GMT +1

EY

Edifício República Avenida da República, 90 4th Floor 1649-024 Lisbon Portugal

Indirect tax contacts

Amilcar Nunes +351 217 912 218 amilcar.nunes@pt.ey.com

Ana Luisa Basto +351 217 912 258 ana.luisa.basto@pt.ey.com

Catarina Anjo Balona +351 217 912 267 catarina.balona@pt.ey.com

Gonçalo Tavares +351 211 542 986 goncalo.tavares@pt.ey.com

João Ribeiro +351 217 912 083 joao.ribeiro@pt.ey.com

Carolina Nery de Almeida +351 211 542 997 carolina.nery@pt.ey.com

Porto GMT +1

EY

Avenida da Boavista, 36 3rd Floor 4050-112 Porto Portugal

Indirect tax contact

Liliana Pinheiro +351 226 079 629 liliana.pinheiro@pt.ey.com

Sara Azevedo +351 211 542 997 sara.azevedo@pt.ey.com

A. At a glance

Name of the tax Value-added tax (VAT)

Local name Imposto sobre o valor acrescentado (IVA)

Date introduced 1 January 1986

Trading bloc membership European Union (EU)

Administered by Autoridade Tributária e Aduaneira (Tax and Customs Authority) (http://www. portaldasfinancas.gov.pt)

VAT rates

Mainland Standard 23%

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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 16% Intermediate 9% Reduced 4%

VAT number format PT 5 0 0 9 9 9 9 9 9

VAT return periods

Monthly

Quarterly

If the turnover in the preceding VAT year was equal or exceeded EUR650,000

If the turnover in the preceding VAT year did not exceed EUR650,000

Annual All taxable persons that performed any taxable operations Thresholds

Registration

Established

None, unless there is a one-time taxable event with a value lower than EUR25,000.

Non-established None Distance selling EUR10,000 Intra-Community acquisitions None Electronically supplied services EUR10,000

Recovery of VAT by non-established businesses Yes

B. 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 European Union (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.

Quick Fixes. Law no. 49/2020 of 24 August 2020 was published, aiming to harmonize and sim plify certain rules in the VAT system for intra-Community trade, transposing the Council Directives 2018/1910 of 4 December 2018 and 2019/475 of 18 February 2019 and amending the VAT Code, the VAT Regime for Intra-Community Transactions (RITI) and the Excise Duties Code.

The referred law applies with retroactive effect as of 1 January 2020 (but taxable persons are given the possibility to comply with the tax obligations by 31 December 2020) and introduces into the Portuguese legal system three of the four measures of the legislative package of implementation

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so called “Quick Fixes.” The fourth measure (concerning the harmonization of the documentation required for the application of the exemption in intra-Community transfers of goods), provided for in Regulations no. 2018/912 of 4 December 2018, which amended Regulation no. 282/2011 of 15 March (amending the EU VAT Directive), was already in force since 1 January of 2020.

New rules introduced into the national VAT law are as follows:

• New requirements for applying the exemption for intra-Community supplies of goods in article 14 of the RITI: (1) Registration of the customer’s VAT identification number in the VAT Information Exchange System (VIES) and the communication of the respective VAT identifica tion number to the supplier; and (2) submission of the EC Sales List return by the supplier of the goods with the filling of the exempt intra-Community transfers of goods performed. Failure to comply with the requirements will result in the non-application of the exemption.

Alongside this amendment, article 45-A of Council Implementing Regulation no. 282/2011 (added by Council Implementing Regulation 2018/1912, as above referred), which provides for the (rebuttable) presumption of dispatch or transport of goods to another Member State when taxable persons have in their possessions the means of proof (i.e., the types of documents) identified by the same rule, must also be taken into account.

• Harmonization of the VAT treatment of supply chain transactions: the intra-Community trans port should be ascribed to one of the supplies and only that supply should benefit from the VAT exemption provided for the intra-Community supplies in article 14º of the RITI. It is foreseen that in successive transfers of goods that are dispatched or transported from the national territory to another Member State directly from the first supplier to the last recipient, the dispatch or transport shall be ascribed to the supply made to the intermediary operator. However, where the intermediary operator has communicated to its supplier the VAT identification issued to it in the national territory, the dispatch or transport shall be ascribed to the supply made by the intermediary operator.

• Simplification and harmonization of call-off stock arrangements for intra-Community transac tions (consignment sales of goods):

The Portuguese State adopted a simplification mechanism by adding article 7º-A to the RITI, where the dispatch or transport of goods by a taxable person to a warehouse/stock located in another Member State under call-off stock arrangements shall not be treated as an intra-Community acquisition, where certain conditions are met, namely: the goods are dis patched or transported to another Member State with a view to their subsequent transmission within one year.

By prior agreement between a supplier not having a registered office or fixed establishment in the Member State in which the goods arrive and a customer who is registered for VAT in that State.

Said transfer is duly recorded in accordance with article 31 of RITI and included in the respective EC Sales List return (in accordance with the new provision of the article (23)(1) (c) of RITI.

Subsequently, when the acquirer takes ownership of the goods, an exempt intra-Community supply in the Member State of departure and a taxed intra-Community acquisition in the Member State where the stock is located are deemed to take place.

With the introduction of this simplification regime, the supplier of the goods does not need to register for VAT purposes in the Member State of arrival of the goods.

In addition, for the application of this simplified scheme, it should be also considered: the conditions set forth in article (7) (4) of the RITI, which lists the situations in which goods are deemed to be transferred to another Member State; and article 54-A provided in Regulations no. 2018/912 of 4 December 2018, added to Regulation no. 282/2011 of 15 March; as regards the elements of information to be entered in the accounting register of article 31 of the RITI concerning the transfers under consideration herein.

Effective use and enjoyment. To avoid instances of nontaxation or double taxation, EU Member States can apply the use and enjoyment rules that allow a service that is “used and enjoyed” in

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the EU to be taxed or prevent a service that is “used and enjoyed” outside the EU from being taxed. If a service is taxed in the EU under the use and enjoyment provisions, a non-EU supplier of the service may be required to register for VAT in every Member State where it has customers that are not taxable persons. For the information regarding the rules relating to VAT registration, see the chapters on the respective countries of the EU.

In Portugal, the following services are subject to the “use and enjoyment” provisions:

• Lease of tangible movable assets, except means of transport, made to a person established or domiciled outside the EU, when the actual use or exploitation of these assets occurs in nation al territory.

• Short-term lease of a means of transport, made to a person who is not a taxable person, when the placement at the disposal of the recipient has occurred outside the Community and the effective use or exploitation of the means of transport occurs in the national territory.

• Lease of a means of transport, other than short-term leasing, made to a person who is not a taxable person, when it is established or domiciled outside the Community and the effective use or exploitation of the means of transport occurs in the national territory.

Additionally, the use and enjoyment rules apply in Portugal for telecommunications, broadcast ing and electronic services. In particular, Portuguese VAT is due when 1) these services are sup plied 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. Special rules will apply from 1 January 2021 onward. Refer to the Digital Economy subsection below.

Transfer of a going concern. A transfer of a going concern (TOGC), under the Portuguese VAT rules, is out of the scope of VAT. An operation may qualify as a TOGC if all of the following conditions are met:

• The transfer of assets is to be performed in definitive terms, i.e., i) the legal title must be passed to the purchaser without any suspensive condition, ii) both legal and economic ownership must be effective (the purchaser must have the right to dispose of the assets as owner) and iii) the purchaser must have the intention to operate the business or the part of the undertaking trans ferred and not simply immediately liquidate the activity concerned and sell the stock.

• The acquirer is or will become a taxable entity that performs taxable operations following the acquisition of the assets.

• The transferred assets/business are capable of, as a whole, constituting an independent business unit.

• Following the transfer, the acquirer will continue to undertake an economic activity.

Hence, for the operation to qualify as a TOGC, all or part of a totality of goods to be transferred needs to qualify as an independent business or activity.

C. 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 (once the threshold is exceeded) in the course of a business in Portugal.

No VAT registration threshold applies in Portugal (except for one-time taxable events, under EUR25,000). A taxable person that will begin its activity must notify the tax authorities of its liability to register.

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

Exemption from registration. Although the supply of a single operation is, by rule, a taxable operation, article 31 (3) of the VAT Code provides that the statement of beginning of activity does

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not need to be submitted (i.e., there is no need to proceed with the VAT registration) where the single taxable transaction does not exceed EUR25,000.

Voluntary registration and small businesses. The VAT law in Portugal does not contain any provi sion for voluntary VAT registration. Nonetheless, if a taxable business incurs expenses within the Portuguese territory, it may opt to register for VAT in Portugal if it has output tax related to its operations. This option may be chosen due to the fact that a VAT refund claim may otherwise be very time consuming.

Group registration. Group VAT registration is not allowed in Portugal.

Holding companies. In Portugal, a pure holding company cannot be a member of a VAT group, as group VAT registration is not available in Portugal.

Cost-sharing exemption. The VAT cost-sharing exemption (in accordance with VAT Directive 2006/112/EEC article 132(1)f) has not been implemented in Portugal.

Fixed establishment. The Portuguese VAT legislation does not provide a definition of “fixed establishment” (FE) for VAT purposes; this means that article 11 of Council Implementing Regulation no. 282/2011 must be analyzed for these purposes, since the Portuguese tax authori ties (PTA) have adopted for VAT purposes the same definition of “fixed establishment” that is stated in article 11. In short, a foreign business is deemed to have a fixed establishment for VAT purposes in Portugal in the following circumstances:

• Existence of a physical installation (suitable structure) – fixed place of business through which the business of the enterprise is wholly or partly carried on by a dependent of the company

• Existence of human and technical resources within the physical installation

• A certain degree of permanence to carry out taxable operations in Portugal (i.e., the FE should be lasting or continuous, as opposed to occasional or temporary)

In view of the above, the PTA consider that in the absence of a fixed/physical establishment/ facility with a minimum consistency that demonstrates an appropriate level of human and techni cal resources, capable of receiving and providing services, a nonresident taxable entity should not be considered to have a FE in Portugal.

Usually, the PTA understands that whenever a permanent establishment (PE) exists for corporate taxation (CIT) purposes, then, such establishment also exists for VAT purposes. In fact, in these situations, the authorities, make no difference in the treatment of the entity for PE (CIT) or FE (VAT) purposes, which implies that the same company tax identification number is both used for CIT and VAT purposes.

Non-established businesses. A “non-established business” is a business that is not VAT registered nor has a 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 (except when the call-off stock simplification rules apply. Refer to such comments under the Quick Fixes subsection above).

The reverse-charge mechanism applies generally to supplies made by non-established busi nesses to Portuguese taxable persons. 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

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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. A VAT representative for UK-based entities is mandatory. Further to Brexit, the possibility for those entities to appoint for a tax representative was extended herein without any penalties being applied if such appointment occurs until 1 July 2022.

Businesses that are established outside the EU must appoint a resident tax representative to reg ister 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.

However, a nonresident entity, with head office or established in a third country, registered for VAT purposes in Portugal that intends to cease activity 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 since its appointment and until the company duly cancels its activity near the competent authorities

Under the recent Ruling no. 30235 of 27 April, the appointment of a tax representative for mere Portuguese VAT registrations (who are entities incorporated or established within the EU, otherwise it would be mandatory) continues to be optional and not mandatory. However, by appointing such representative, such mere Portuguese VAT registrations may continue to charge local VAT when selling goods to entities incorporated, established or mere Portuguese VAT registrations.

Where a tax representative is not appointed, business-to-business (B2B) Portuguese local sup plies shall be subject to the domestic reverse-charge mechanism (article 2(1)(g) of the Portuguese VAT Code), thus, local output invoices must be raised without VAT.

Where a tax representative is appointed, the supplier who is a mere Portuguese VAT registration may continue to charge/report/assess local VAT in its local B2B supplies but must prior to the raise of such invoices communicate to the B2B acquirers that a tax representative was appointed.

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

Domestic reverse charge. The reverse-charge mechanism is also applicable in the following situ ations, in which the taxable person, to whom 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 taxable person

• Supplies of civil construction services to a Portuguese taxable person

• Supplies of services involving emission rights, certified emission’s reductions and emission reduction units of greenhouse gases to a Portuguese taxable person. The person acquiring goods and/or services from a supplier that is not established in Portugal should be the one responsible for the VAT self-assessment of the VAT due, by means of the reverse-charge mechanism. Indeed, this rule transfers the obligation of the self-assessment and payment of the VAT due to the taxable person who has its head office, permanent establishment or domicile in the nation al territory or, that has appointed a tax representative herein, under the terms of article 30 of the Portuguese VAT Code, whenever acquiring goods or services from a nonresident VAT taxable entity that has its head office, permanent establishment or domicile in another EU Member-State, and that does not have a tax representative in Portugal (article 2(1) (g) of the Portuguese VAT Code in line with Ruling no. 30235).

Digital economy. Specific VAT rules apply to cross-border supplies of goods and services sold via the internet (e-commerce) in all EU Member States with effect from 1 July 2021. These new rules apply to all direct sales to nontaxable persons (in practice, these are mostly private individuals),

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but we refer to these rules as e-commerce VAT rules because most of these transactions are con ducted via the internet. In general, the place of supply is in the country of consumption, i.e., where the goods are shipped to or where the buyer of the goods or services resides, subject to any “use and enjoyment” provisions that may override this rule (see the Section B, Effective use and enjoyment subsection above). Therefore:

• For supplies of services made by a nonresident supplier to a business customer (B2B), the busi ness customer is responsible for accounting for the VAT due using the reverse charge.

• For supplies of goods made by a nonresident supplier to a business customer (B2B), where goods are transported from another EU Member State, the business purchasing the goods is responsible for accounting for the VAT due as an intra-Community acquisition. If the goods come from outside the EU, the purchaser may have to report an importation of goods.

• For supplies of goods or services made by a nonresident supplier to a final consumer (B2C), the supplier is generally responsible for charging and accounting for the VAT due at the rate applicable in the customer’s country (unless the supplier’s sales fall beneath the distance selling threshold of EUR10,000 with effect from 1 July 2021). This VAT can be reported using a single VAT registration, using a “one-stop-shop” mechanism.

For more details about intra-EU distance sales, see the chapter on the EU.

Effective 1 July 2021, an e-commerce supplier may have a choice of how to account for VAT on its B2C supplies.

Local VAT registration. A nonresident supplier may choose to register for VAT in each Member State and account for VAT on all supplies made and recover input tax in accordance with local rules (see the Non-established businesses subsection above). Non-EU businesses may be required to appoint a tax representative for accounting for the VAT due on these transactions.

For more details on the application process in Portugal, refer to the subsection Registration pro cedures below.

One-Stop Shop. Effective since last 1 July 2021, a supplier can choose to account for the VAT due under the EU One-Stop Shop (OSS), which can be used for intra-EU cross-border supplies of goods and all cross-border supplies of services made to final consumers in the EU. Unlike the previous Mini One-Stop-Shop (MOSS) scheme that applied until 30 June 2021, the OSS is not limited to cross-border supplies of electronic services, telecommunication services and broad casting services.

Taxable persons can apply to the One-Stop Shop directly through the PTA’s website (www.portaldasfinancas.gov.pt/oss), provided that all conditions required are met.

The OSS is an electronic portal that allows businesses to:

• Register for VAT electronically in a single Member State for all intra-EU distance sales of goods and for B2C supplies of services

• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return

The OSS can be used by businesses established in the EU and outside the EU. If a supplier or a deemed supplier decides to register for the OSS, it must declare and pay VAT for all supplies (goods as well as services) that fall under the OSS.

For more details about the operation of the OSS, see the chapter on the EU.

Import One-Stop Shop. Effective since 1 July 2021, the Import One-Stop-Shop (IOSS) scheme applies for B2C distance sales of goods from outside the EU.

Effective since 1 July 2021, VAT is due on all commercial goods imported into the EU regardless of their value. The actual supply is subject to VAT in the country where the goods are imported

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(the country of destination). The IOSS facilitates the declaration and payment of VAT due on the sale of low-value goods (i.e., consignments valued at less than EUR150 per consignment). It allows suppliers selling low-value goods dispatched or transported from a non-EU country to customers in the EU to collect, declare and pay the VAT due. If the IOSS is used, the importation into the EU is exempt from VAT.

Taxable persons can apply to the Import One-Stop Shop directly through the PTA’s website (www.portaldasfinancas.gov.pt/oss), provided that all conditions required are met.

For more details about the IOSS, see the chapter on the EU.

The use of the IOSS special scheme is not mandatory. If VAT is not collected via the IOSS scheme, the importation of goods into the EU is subject to import VAT in the country of final destination and the Member State can decide freely who is liable to pay the import VAT, which could be the customer or the seller (or an electronic interface).

Postal services and couriers scheme. If the IOSS is not used and the customer is liable for the import VAT due on the supply (and importation) of consignments with a small intrinsic value (i.e., less than EUR150), the VAT can be collected using the special scheme for postal services and couriers.

In Portugal there are no additional specific local rules that apply.

For more details about the special scheme for postal services and couriers, see the chapter on the EU.

Online marketplaces and platforms. Under the new EU VAT e-commerce rules, effective 1 July 2021, taxable persons that “facilitate” certain B2C sales of goods are deemed to have purchased and then supplied those goods themselves. This means that the single supply from the “underlying” supplier to the final consumer is split into two deemed supplies:

• A supply from the supplier to the facilitator (deemed B2B supply).

• A supply from the facilitator to the final customer (deemed B2C supply). Any intermediation service provided by the facilitator is disregarded for VAT purposes.

This provision does not cover all sales facilitated via the facilitator. It only covers distance sales of goods imported from non-EU jurisdictions in consignments with an intrinsic value not exceed ing EUR150. The jurisdiction of residence of the supplier using the facilitator is irrelevant. The supply to the facilitating platform is VAT exempt and the supplies made by that platform follow the e-commerce VAT rules as described above. In addition, the provision also covers sales within the EU if the supplier is not established within the EU. This applies to both local shipments within one Member State, as well as intra-Community shipments. In both cases, the final customer must be a nontaxable person.

In Portugal there are no additional specific local rules that apply.

For more details about the rules for online marketplaces, see the chapter on the EU.

Vouchers. A “single-purpose voucher” (SPV) is a voucher for which all the elements necessary for determining the tax due, regardless of the good or service to be supplied, are known at the time of issue or assignment.

For SPVs, VAT shall be due and payable at the time the voucher is issued/assigned by the taxable person in whose name the transfer of the voucher is made. On the other hand, a “multipurpose voucher” (MPV) is a voucher for which, at the time of issue or assignment, all the information necessary to determine the tax due is not known.

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For MPVs, VAT shall be due and payable at the time the taxable person supplies the goods or services that the voucher relates to, regardless of any assignments that may have previously occurred.

Registration procedures. Entities must register with the National Register of Corporate Entities (Registo Nacional de Pessoas Colectivas – RNPC), as well as with the local tax office. A certificate of legal standing of the company must be filed with the registration application form. The company is provided with a Portuguese corporate registration number within 10 working days. This number will be the same as the VAT registration number once the company files for a dec laration of beginning of activity, together with other relevant documents, with the competent tax office.

The registration of a non-established business for VAT purposes in Portugal may take up to 10 working days. An online VAT registration system is not yet full in force in Portugal. Entities must register with the RNPC in person Registration with the local tax office may be performed elec tronically exceptionally and subject to confirmation, through the PTA website.

The following documentation is required to proceed with the Portuguese VAT registration of a company not established in Portugal:

• Certificate of incorporation issued within the last three months and duly apostilled with the Hague Convention seal. A Portuguese certified translation is required.

• Company’s articles of association issued within the last three months and duly apostilled with the Hague Convention seal. A Portuguese certified translation is required.

• Certificate of status of taxable person proving that the company is a taxable person in the country where it has its head office, issued within the last three months and duly apostilled. A Portuguese certified translation is required.

• The company’s international bank account number (IBAN) and BIC/SWIFT number – for this purpose the applicant should provide official declaration from the bank where the company holds its bank account, provided it is from an EU bank account.

• Power of attorney (PoA) duly apostilled with the Hague Convention seal and issued within the last three months, empowering another business to represent and act on behalf of the company in the process of requesting its registration at the National Register of Companies (Registo Nacional de Pessoas Colectivas – RNPC).

• Copy of identity card/passport of the person who has powers to solely bind the company (e.g., legal representative, when applicable) for PoA purposes.

• Declaration of beginning of activity signed by the person who has powers to solely bind the company (e.g., legal representative) or if applicable, by the tax representative appointed by the company. This form needs to be printed on both sides and signed in duplicate

Other information required for the declaration of beginning of activity: (1) identification of the operations to be carried out in Portugal (imports, exports, intra-Community acquisitions or sup plies – yes/no), (2) company’s business activity code (usually designated across Europe as CAE, NAFT or NACE code), (3) estimated annual turnover in euro and (4) confirmation of the exact date of the beginning of activity in Portugal).

It is also possible to backdate the VAT registration date of beginning of activity if needed (however, in this case, penalties shall apply).

Following recently enacted legislation for the prevention of money laundering and terrorism financing, all entities that obtain a Portuguese taxable person number are required to submit an online form containing information about that entity and about its ultimate beneficial owner(s) (UBO) and management.

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

Tax authorities can declare, on their own authority, the termination of activity of a company fol lowing a judgment under insolvency proceedings determining the winding-up of the company, when it is clear that an economic activity is not being developed or intended to continue to be developed.

Changes to VAT registration details. When there is a change in a taxable person’s VAT registration details (such as name, address, starting/stopping to make imports, exports or intra-Community acquisitions or supplied, inter alia), the taxable person is obliged to inform the tax authorities of such changes through the submission of a declaration of changes of activity. This can either be made in person or online, via the company’s web portal with the PTA.

D. Rates

The term “taxable supplies” refers to imports and 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: 16%

• 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 and other periodic publications that occupy predominantly scientific, educational, literary, artistic, recreational or sporting cultural matters in any medium, provided that it is not wholly or predominantly in video or music

• Pharmaceuticals (some)

• Medical equipment

• Passenger transport

• Hotel accommodation

• Refurbishment of immovable property that is directly contracted for with the National Fund for Rehabilitation of Heritage Building by its management company

• Provision of cleaning services and cultural intervention in certain places in terms of fire pre vention measures

• Traditional cane honey

• Garments for medical purposes, hair prostheses for cancer patients, as long as duly prescribed

• Services rendered by bullfighting artists, in bullfighting shows to the respective promoters

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

• Canned fish and shellfish

• Wine

• Fuel and colored oil marked with government-approved additives

• Musical instruments

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. 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 nonagricultural cooperatives to their farmer members

In the above cases, if the taxable person 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 sup ported by a certificate issued by the PTA.

E. 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.

Deposits and 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.

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

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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 corre sponding amount.

Goods sent on approval for sale or return. As a general rule, under the Portuguese VAT rules, a taxable supply of goods is deemed to have taken place when goods are sold and they are not returned to the supplier within a year.

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 it 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.

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 for the supply of goods for the difference value of the asset.

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

Intra-Community acquisitions. The time of supply for an intra-Community 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 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.

Distance sales. In respect of supplies of goods for which VAT is payable by the person facilitating the supply through the use of an electronic interface, such as a marketplace, platform, portal or similar means; distance sales of goods imported from third territories or third countries in consignments of an intrinsic value not exceeding EUR150; the chargeable event shall occur and VAT shall become chargeable at the time when the payment has been accepted.

For distance sales of goods imported from third territories or third countries on which VAT is declared under the special scheme for distance sales of goods imported from third territories or third countries, in consignments of an intrinsic value not exceeding EUR150, the chargeable event shall occur, and VAT shall become chargeable, at the time of supply. The goods shall be regarded as having been supplied at the time when the payment has been accepted.

F. Recovery of VAT by taxable persons

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

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tax charged on the supplies carried out. The input tax can be deducted in the VAT return of the period or the subsequent period in which the invoices were received.

The time limit for a taxable person to reclaim input tax in Portugal is 4 years/48 months counted from the beginning of the civil year following the date when the VAT become taxable/deductible. This is the general statute of limitation period.

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-charge services (see the chapter on the EU).

A valid tax invoice or customs document is 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 entrepre neur). 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 and vans

• 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)

• Car-related expenses when the acquisition cost does not exceed EUR62,500 for electric vehicles and EUR50,000 for plug-in hybrid vehicles (values net of VAT)

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.

In Portugal, the amount of input tax that a partially exempt business may recover is calculated by using one of two methods.

The first method consists of the following two stages:

• The first stage identifies the input tax 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

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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.

Approval from the tax authorities is required to use the partial exemption standard method or special method in Portugal. The option to use either of the methods outlined above (direct alloca tion or prorate) need to be stated in the declaration of beginning of activity.

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 (including services): adjusted for a period of 20 years

• Movable property: adjusted for a period of 5 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 tax, 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

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Pre-registration costs. According to the guidelines issued by the PTA, input tax incurred on preregistration costs can be deducted under certain circumstances.

The VAT incurred in the acquisition of goods or services that occurs before the submission of the start of activity declaration and its registration for VAT purposes may be deducted if the transac tions represent operations that grant the right to input tax deduction, provided for in the VAT Code. These costs can be deducted in the first VAT return.

Bad debts. Bad debts may be adjusted (and recovered) on periodic VAT returns.

A bad debt is considered to exist for debts for which the nonpayment risk is duly justified, namely when (i) the credit is overdue for more than 12 months (when the debtor is a taxable person entitled to deduct VAT) and there are objective proofs of its impairment and actions performed regarding its payment, including the asset being recognized in the accounts or (ii) the credit is overdue for more than six months (when the debtor is an individual or a VAT exempt taxable person with no right to deduct input VAT and the VAT credit (taxable basis – VAT), per invoice is not higher than EUR750.

In the case of debts from special judicial or extra judicial processes, the VAT adjustment can be performed before the abovementioned deadlines if the process is decided earlier.

The following debts are not considered as bad debts:

• Credits secured or covered by an insurance or by any guarantee in rem (i.e., a real warranty, for instance, pledges or mortgages or other types of real guarantees as defined in Portuguese civil law)

• Credits over related parties

• Credits over entities declared insolvent or bankrupt before the realization of the transaction

• Credits over the State

Additionally, note that for credits overdue for more than 12 months, the VAT adjustment requires a prior report certified by a chartered accountant and a prior electronic authorization request to the PTA. For credits overdue for more than six months, the VAT is automatically recovered through the VAT return.

Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Portugal.

G. Recovery of VAT by non-established businesses

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

EU businesses. For businesses established in the EU, refunds are made under the terms of the EU Directive 2008/9/CE.

The VAT refund procedure under the EU Directive 2008/9/CE, together with the provisions of Decree-Law no. 186/2009 of 12 August, may be used only if the business did not perform any taxable supplies in Portugal during the refund period (excluding supplies covered by the reverse charge and exempt transport services). For full details, see the chapter on the EU.

Please find below specific rules for Portugal:

• The refund request is made electronically in the country where the entity is established and must be sent together with the relevant information (such as the entity’s identification, refund period) and with the required documents that sustain the refund claim, i.e., invoice or import documents and related information that allow for proving the relevant VAT was paid.

• The request must be filed in Portuguese or English and should be submitted by 30 September of the following year when the tax became due. The minimum amount to be refunded is EUR50.

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• 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 PTA issue one or two requests for additional information or docu ments.

• Claimants may request payment of interest if a claim is repaid more than 10 working days after the favorable decision notification.

Non-EU businesses. For businesses established outside the EU, refunds are made under the EU 13th Directive, together with the provisions of Decree-Law no. 186/2009 of 12 August. All refunds must be made taking into account the 13th Directive. There is no specific guidance as for UK companies. For full details, see the chapter on the EU.

Portugal applies the principle of reciprocity; that is, the country where the claimant is established must also provide VAT refunds to Portuguese businesses.

Please find below specific rules for Portugal:

• The procedure is the same as regarding businesses established in the EU with the following particularities regarding non-EU businesses: A tax representative domiciled in Portugal needs to be appointed and granted with powers to comply with all obligations arising from the refund request. The request is made directly by the representative to the VAT Refund Services, in paper or online.

— Filing a certificate, issued by the State where it is established, proving to be subject to a general sales tax, as well as the confirmation from that State on the reciprocity of treatment for taxable persons established in Portugal. This certificate may not be submitted if there is a reciprocity agreement in place between the two countries.

• The VAT refund request must be sent to the following address:

VAT Refund Services Avenida João XXI nº76, 5º 1049-065 Lisboa

Late payment interest. The PTA should pay the refund request until the end of the second month after the submission of the refund. In case of taxable persons that are registered in the monthly reimbursement regime, the PTA must pay until the 30 days after the submission of the refund claim. After that, the taxable person can request the payment of compensatory interest (4% per year).

H. Invoicing

VAT invoices. A Portuguese taxable person must generally provide a VAT invoice for all taxable supplies made, including exports and intra-Community supplies. 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).

Generally, goods in transit within the Portuguese territory must be accompanied by a special delivery note or invoice. Delivery notes must be electronically communicated to the PTA 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.

Portuguese taxable entities with head office, permanent establishment or domicile in Portuguese territory must communicate electronically to the PTA the relevant data of the invoices issued during a particular month, at the latest on the 12th day of the subsequent month. The Portuguese State Budget Law Proposal for 2022 intends to anticipate such communication at the latest to the 5th day of the subsequent month. At the time of preparing this chapter, the State Budget has not yet been approved.

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Issuing invoices through a certified invoicing program is mandatory for taxable persons who:

• Have a head office, fixed establishment or domicile in Portugal, or other, are obliged to raise invoices

• Have had, in the previous calendar year, a turnover exceeding EUR50,000 (or in the year in which the activity begins, the annualized turnover exceeds EUR50,000)

• Use invoicing software

• Are required to have organized accounting or have chosen to do so

Since 1 July 2021, taxable persons who are not established in the national territory but herein registered for VAT are obliged to use an invoicing system certified by the PTA.

This obligation to use certified invoicing systems should be applicable to nonresident entities (even with mere VAT registrations), provided that the company has a turnover threshold higher than EUR50,000 in the calendar year of 2021, or if it uses any billing software to issue its invoices. At the time of preparing this chapter, the threshold for 2022 has not yet been announced.

Under the Portuguese State Budget Law proposal for 2022, taxable persons who are, under article 35.º-A of the VAT Code, subject to invoicing rules in Portugal (including nonresident entities but registered for VAT purposes herein) must communicate to the PTA all the elements of the invoices issued under the terms of the VAT Code, as well as the elements of the documents that enable the verification of goods or provision of services and receipts, by:

• Real-time electronic data transmission, integrated in an electronic invoicing program

• Electronic data transmission by sending a standardized structured file based on the SAF-T (PT) file

Or

• Directly on PTA’s website

At the time of preparing this chapter, the State Budget has not yet been approved.

Credit notes. A VAT credit note may be used to reduce the VAT charged and reclaimed on a sup ply. 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 confir mation from the purchaser acknowledging the VAT adjustment.

Electronic invoicing. Portuguese VAT law permits electronic invoicing in line with EU Directive no. 2010/45/EU (see the chapter on the EU). Electronic invoicing is accepted for all transactions and no formal approval is needed from the PTA in order to implement it if the invoices are stored in Portugal or in another EU Member State (if any taxable person established in the Portuguese territory wishes to store its invoices outside the EU, it must obtain prior authorization from the PTA in order to do so).

Nevertheless, electronic invoices may only be issued through a certified invoicing program and if the recipient of the services expressly accepts the adoption of such procedure. Also, issuing electronic invoices is only acceptable if the authenticity of origin, integrity of the content, and the legibility of the invoice is ensured by business controls that create a reliable audit trail between the invoice and the supply of goods or services.

In practical terms, every electronic invoice should have a digital signature, in order to ensure the authenticity of its origin, the integrity of its content and its legibility. The qualified electronic signature or qualified electronic stamp and EDI are examples of technologies that fulfill this requirement.

Since 1 January 2020 (for large companies, i.e., an enterprise that employs more than 250 people or has an annual turnover of more than EUR50 million or a total annual balance sheet exceeding

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EUR43 million – other deadlines may apply for other entities), electronic invoicing is mandatory for public procurement. This obligation means electronic invoices must be issued from all sup pliers who are involved in public procurement contracts, as well as public authorities and like entities.

In the case of public authorities and similar entities, note that the obligation is that they are issu ers and/or recipients of electronic invoices, in the sense that their IT systems must be ready to export and import the electronic invoices.

However, note that electronic invoicing is not required for the execution of contracts declared to be confidential and/or accompanied by special security measures.

Unstructured invoices raised in HTML, PDF or Word format, as well as invoices in image or paper format that are later scanned, and invoices sent by fax are not included in the concept of electronic invoicing (PDF invoices were, however, accepted as electronic invoices during a spe cial period due to COVID-19 simplification measures). However, invoices sent by digital image or PDF format may be used in addition to the electronic invoice in order to better assess the information being processed by the entity acquiring the goods or services. Under the COVID-19 temporary measure, this rule applies until 31 December 2021.

The bi-dimensional bar code (QR code, which shall become mandatory as of 1 January 2022) and the unique invoice code (UUID/ATCUD under the Portuguese short abbreviation, possibly only to be mandatory by 1 January 2023) are to be implemented by taxable persons and users of billing software programs certified by the PTA or other electronic means.

Unique invoice code. The unique invoice code (UUIC) will only be mandatory as of 1 January 2023 onward. Indeed, the Portuguese State Budget Law Proposal for 2022 foresees the postpone ment of said obligation to 2023, however, being considered in 2022 as optional for those taxpay ers who decide to do so. At the time of preparing this chapter, the State Budget has not yet been approved.

The unique invoice code (UUID) is to be implemented by taxable persons and users of billing software programs certified by the PTA or other electronic means.

The unique invoice code was already briefly mentioned in article 35 of Decree-Law no. 28/2019 of 15 February. It is now clear that such code should result from the combination of the following two elements – separated by the character “-” (without quotation marks):

• Series validation code

• The sequential numbering of the document within its series

Regarding the series’ validation code, this is to be assigned by the PTA upon the taxable person’s electronic communication to the PTA, prior to their use, the identification of the series used for issuing invoices and other tax relevant documents, series per each establishment and per each mean of processing used (as provided for in paragraph 2 of article 35 of Decree-Law no. 28/2019 of 15 February). To obtain the code of the series validation, the following elements needs to be communicated:

• The document series’ identifier

• The type of document, according to the document types defined government ordinance setting SAF-T – corresponding to the fields “Type of document” and “Type of receipt”

• The beginning of the sequential numbering to be used in the series

• The expected starting date for the use of the series for which the validation code is requested

Regarding the sequential number to be used, it is the sequence of numeric characters – for example, for billing software it is the sequence immediately after the slash (/), as defined in the SAF-T’s data structure.

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In this regard, it should be stressed that the UUID (in Portuguese, ATCUD) needs to be stated in all invoices and other tax relevant documents raised by way of electronic billing programs, other electronic means such as cash registers or in pre-printed documents – and specifically mention “ATCUD: Codigode Validação–Numerosequencial” (“UUID: Series validation code-sequential number”).

Regarding documents with more than one page, UUIC must appear on all of them and, when applicable, immediately above the QR code.

QR code. The QR code will be mandatory as of 1 January 2022 onward. The bi-dimensional bar code (QR code) is to be implemented by taxable persons and users of billing software programs certified by the PTA or other electronic means.

Producers of software must guarantee the correct generation of the QR code, which must be included in the invoices and other relevant tax documents issued by invoicing certified programs.

Also, producers and users of certified billing software systems must guarantee the perfect read ability of the QR code, within the body of the document, regardless of the means by which it is presented to the customer (paper or electronic). Regarding documents with more than one page, the QR code can appear on the first or on last page.

Relief from printing or sending e-invoices in transactions with nontaxable persons. Taxable per sons are relieved from printing paper invoices and/or from sending electronic invoices to custom ers/recipients when the same are nontaxable persons, provided that the following conditions are cumulatively fulfilled:

• The tax identification number of the purchaser is included in the invoices

• Invoices are processed and communicated to the PTA through a certified computer program

• The taxable person has opted for the transmission of invoices in real time to the PTA

This relief is not available when the acquirer explicitly requests the paper or electronic invoice.

Simplified VAT invoices. Under the Portuguese VAT code, simplified invoicing may be used for the sale of goods and/or services up to an amount of EUR1,000 for supplies made to nontaxable persons by retailers or street sellers. For other supplies of goods and/or services, a simplified invoice may be issued if the amount of the transaction does not exceed EUR100 (for instance, the identification number of the nontaxable person is only mandatory if its insertion is required by the nontaxable person).

Self-billing. Self-billing is allowed in Portugal and means that the acquirer raises an invoice on behalf of the acquirer of goods or services. For this procedure to be applicable, the following requirements must be met:

• Prior agreement, in the written form, is made between the acquirer and the supplier of the goods or services

• The acquirer must have evidence that the supplier of the goods or the service provider has taken notice of the issuance of the invoice and accepted its content

• The invoice must refer to self-billing (autofaturação)

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, as of 1 January 2020, in accordance with article 45a of the Council Implementing Regulation no. 2018/1912 of 4 December 2018, the necessary transport proofs to apply the exemption to the intra-Community transactions have been legally defined

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and harmonized for all Member States, namely, through the provision of a presumption that the essential condition to apply the exemption – the goods have been dispatched or transported from a Member State to a destination outside its territory but within the EU – is fulfilled when the economic operators are in possession of specific documentation (which varies depending on the entity that takes care of the transport)

When it is the supplier (or third party on its behalf) who carries out the transport: the sup plier needs to have in its possession two noncontradictory elements, issued by independent entities, of the supplier and of the purchaser: 2 of “Type A” or 1 of “Type A” and 1 of “Type B”

When it is the acquirer (or third party on its behalf) who carries out the transport: the sup plier needs to have in its possession two noncontradictory elements, issued by independent entities, of the supplier and the acquirer: 2 of “Type A” or 1 of “Type A” and 1 of “Type B,” and additionally

The “Type C” Document – a written statement from the acquirer (which the acquirer must deliver to the supplier by the 10th day of the month following the supply of the goods)

The documents that are allowed as items of evidence of transport includes:

• Documents relating to the transport of the goods (Type A), such as: signed CMR document, bill of lading, airfreight invoice or an invoice from the carrier of the goods

• Other documents (Type B), such as: an insurance policy regarding the transport of the goods or bank documents proving payment for the transport; official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the Member State of destina tion; a receipt issued by a warehouse keeper in the Member State of destination, confirming the storage of the goods in that Member State

• A written statement from the EU acquirer (Type C), stating that the goods have been dispatched or transported by him, or by a third party on behalf of the acquirer and identifying the Member State of destination of the goods; that written statement shall state: the date of issue; the name and address of the acquirer; the quantity and nature of the goods; the date and place of the arrival of the goods; in the case of the supply of means of transport, the identification number of the means of transport; and the identification of the individual accepting the goods on behalf of the acquirer

Foreign currency invoices. If a VAT invoice is issued in a currency other than the domestic cur rency, which is the euro (EUR), to determine the taxable amount the amount should be con verted into EUR, using the sales rate used by a bank established in Portugal or the exchange rate used by the European Central Banking System on the date on which the tax is chargeable or on the first business day of that month.

Supplies to nontaxable persons. For the sale of goods and/or services up to an amount of EUR1,000 for supplies made to nontaxable persons by retailers or street sellers, simplified VAT invoices can be used. For other supplies of goods and/or services, a simplified invoice may be issued if the amount of the transaction does not exceed EUR100 (for instance, the identification number of the nontaxable person is only mandatory if its insertion is required by the nontaxable person). An invoice does not have to be issued and can be replaced by a sales receipt for supplies of goods made through automatic vending machines and supplies of services for which it is normal to issue a slip, admission or transport ticket.

Transactions between related parties. For a transaction between related parties, the value for VAT purposes is calculated as follows: the normal value overrides the value of the consideration obtained or to be obtained by the supplier, in return for the supply, from the customer (or from a third party).

This exception to the general provision for determining the taxable amount can be excluded if it can be proved that the difference between the consideration and the normal value is justified by circumstances other than the special relationship between the parties. Indeed, this is an anti-abuse

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provision that seeks to prevent situations of manipulation of the value of operations and of the VAT assessed in transactions between entities that have special relationships and restrictions on the right to the VAT deduction.

Records. When the documents are in paper form, the archive must be stored in the Portuguese territory, while if they are in electronic form, the file may be stored in any EU Member State, provided that access is guaranteed through terminals located in Portugal.

Record retention period. In Portugal, VAT records should be retained for a period of 10 years, if another deadline does not result from any special provision. However, the obligation to file and retain all books, registers, and supporting documents must be maintained until the taxable person de-registers from VAT in Portugal.

Electronic archiving. Invoices and other tax-relevant documents issued or received in paper form can be scanned and stored in electronic form. In this respect, an archive plan module should be defined and should comply with several conditions, namely:

• Image files must be named or organized sequentially so that it is possible to search for the image of a document by its identification.

• The images of documents issued by electronic means must be identified as entered in the “Tipo de document” or “Tipo de recibo” and “Identificação única do document” or “Identificação única do recibo” fields of the data group “Documentos comerciais.” Images of documents not issued by electronic means, as well as images of the documents received, must be identified according to their filling in the field “Chave única do movimento contabilístico” of the data group “Movimentos contabilísticos” of the data structure of the file referred in Ordinance no. 321-A/2007 of 26 March (SAFT).

• Where images for the same archival period are not all recorded in the same format, the file image may appear only in the last format used.

• The format used must identify the taxable person by its name, business name or company name and tax identification number and, in the event of the need to use multiple formats, the respec tive format number and total number of formats used.

Also, taxable persons will be obliged to notify the location of the archive to the PTA by elec tronic means (through the PTA’s website).

Invoices and other tax-relevant documents issued and received electronically are also archived electronically, the following should be ensured:

• The performance of controls to ensure the integrity, accuracy and reliability of archiving

• The performance of functionalities designed to prevent improper creation and to detect any alteration, destruction or deterioration of archived records

• The recovery of data in the event of an incident

• Reproduction of readable and intelligible copies of the recorded data

Scanning and e-archiving must be performed with the necessary technical rigor to obtain and reproduce perfect, legible and intelligible images of the original documents, without loss of resolution and information, to guarantee their consultation and reproduction on paper or elec tronic support.

Full access must be granted to the documents and the authenticity of origin, integrity of the content and legibility of any document must be ensured.

It must also be guaranteed that it is not possible to change or destroy the electronic archives.

Electronic copies of invoices must be numbered with a continuous sequence according to a pre defined archiving plan (XML file).

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I. Returns and payment

Periodic 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 exceed ed EUR650,000.

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

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.

Periodic payments. The deadline for paying the VAT due by taxable persons to the Portuguese State is as follows:

• By the 15th day of the second month following the date of the operations for taxable persons in the monthly VAT filling regime

• By the 20th day of the second month following the trimester of the operations for taxable per sons in the quarterly VAT filling regime

If a company is neither resident nor established in Portugal, it has two options to pay VAT: direct debit or bank transfer.

Regarding the VAT payments made by bank transfer to the PTA, after the submission of the VAT return for a taxable period (monthly/quarterly), the taxable person must obtain (besides the document that proves the submission) the respective payment document that includes the spe cific payment reference required to be stated upon making the transfer to the PTA’s bank account (so the authorities are able to recognize the payment performed in due time as corresponding to the appropriate taxable period). The transferred amount should account for the VAT amount due, net of any banking costs and arrive at the PTA’s bank account at the 15th/20th day of the month/ quarter, respectively (assuming no specific COVID-19 deadline extension might apply).

Electronic filing. Electronic filing is mandatory in Portugal. For this purpose, the taxable person should register at the PTA’s website to receive an access code. Intrastat returns, EC Sales List statements and annual VAT returns are submitted by electronic means as well.

Payments on account. Payments on account are not required in Portugal.

Special schemes. Cash accounting. In accordance with this regime, taxable persons 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.

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 taxable persons do not charge VAT on their supplies and input tax cannot be deducted.

Import VAT postponed accounting. The reverse-charge procedure for import VAT (also known as postponed accounting) has been introduced in Portugal. To benefit from this new mechanism, a taxable business must fulfill the following requirements:

• It must fall under a monthly VAT regime.

• Its tax situation must be accurate, e.g., with no debts due to tax authorities.

• No input tax blocked restrictions apply.

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Small retailers. This 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, works of art, collectors’ items or antiques. 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.

Annual returns. An annual return is required to be filed in Portugal if taxable operations were performed during such year. 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 custom ers 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.

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

Supplementary filings. In the context of the reporting obligations relating to VAT, in addition to VAT returns there are three more types of obligations, namely, the Intrastat, the EU Sales Returns and, the Simplified Business Information (that covers all taxes supported in Portugal).

There are also reporting obligations on invoice details and SAF-T files. See the subsection Digital tax administration below for more detail.

Intrastat. A Portuguese taxable person that trades with other EU countries must complete statis tical 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 in 2022 is EUR350,000. The threshold for Intrastat Dispatches in 2022 is EUR250,000. These limits apply to the mainland and the Azores. In Madeira, the threshold for Intrastat Arrivals and Dispatches in 2022 is EUR25,000. If a taxable person reaches the respective assimilation thresholds during 2022, the Intrastat authorities (INE –Instituto Nacional de Estatística) requests Intrastat returns covering all movements during the year 2022.

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. For a period in which the taxable person does not carry out any intra-Community acquisitions (Intrastat Arrivals) or intra-Community supplies (Intrastat Dispatches), a nil return must be completed (after exceeding the thresholds). Intrastat returns must be filed in EUR.

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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).

If a Portuguese taxable person carried out any consignment sales of goods, under the new Simplification rules for call-off stock arrangements for Intra-Community transactions (article 7-A of the RITI, added by Law no. 49/2020) it must submit an ESR in accordance with the terms of the Government Ordinance no. 215/2020 of 10 September.

An ESR must be submitted by the 20th day of the month following the month in which the operation takes place and is not required for a period in which the taxable person does not carry out any intra-Community supplies or consignment sales of goods.

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 intra-Community supplies of goods exceeded EUR50,000, ESR should also be submitted monthly.

Simplified Business Information. The Simplified Business Information – in Portuguese, Informação Empresarial Simplificada (IES), must be filed (general rule, by 15 July next year of the year to which the operations refer to), annual, electronically and completely paper free, i.e., dematerialized, regarding accounting, tax and statistical reporting obligations.

Part of this file will be automatically filed with reference to the accounting SAF-T.

Correcting errors in previous returns. A taxable person should correct any errors or omissions from prior periodic reporting by submitting:

• An Intrastat replacement (for Arrivals or Dispatches)

• An ERS of replacement Or

• A periodic (monthly or quarterly) or annual VAT return out of the respective deadline

To correct any errors or omissions from prior periodic reports, they should be submitted in the same way that was used for the returns that are being corrected. Regarding a periodic or annual VAT return submitted outside of the respective deadlines, see below the penalties for late pay ment and for late filings (given to the correction that needs to be done).

Digital tax administration. Taxable persons must report to tax authorities, by electronic data trans mission:

• The identification and location of the company’s establishments in which invoices and other fiscally relevant documents are issued

• Identification of equipment used for invoice processing and other fiscally relevant documents

• The program certificate number used on each equipment, where applicable

• Identification of distributors and installers who marketed and/or installed the billing solutions

Taxable persons with head office or domicile in Portugal should also communicate by electronic data transmission the elements of invoices issued in accordance with the VAT Code, as well as the elements of the documents enabling the confirmation of goods or the provision of services and receipts (notably by way of filing the SAF-T (PT) file).

SAF-T. From 1 January 2020, taxable persons must report an invoicing single audit file for tax purposes (SAF-T) to the tax authorities by the 12th day of each month (in relation to the transac tions carried out in the previous month). It is also mandatory to file the accounting SAF-T on an annual basis (by 30 of April of the year following the year when the operations were carried out).

The Portuguese State Budget Law Proposal for 2022 intends to anticipate such reports by the 5th day of the subsequent month. At the time of preparing this chapter, the State Budget has not yet been approved.

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J. Penalties

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

• A penalty ranging from EUR600 to EUR7,500 if the taxable person’s actions were not inten tional

• A penalty ranging from EUR600 to EUR15,000 if the taxable person’s actions were intentional

Penalties for late payment and filings. The following penalties apply to the late submission of periodic and annual VAT returns:

• A penalty ranging from EUR300 to EUR3,750 if the taxable person’s actions were not inten tional

• A penalty ranging from EUR300 to EUR7,500 if the taxable person’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 taxable person’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 taxable person’s actions were intentional

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

Penalties for errors. The General Taxation Infringement Regime only sets forth the difference between negligence and willful misconduct. Additionally, on a provision that states both errors and omissions, the applicable penalty is the same, therefore there are no different scenarios. 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 the 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 willful misconduct – EUR165,000

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

Failing to notify material changes of a taxable person’s VAT registration details through the sub mission of a declaration of changes of activity may result in a penalty between EUR600 and EUR7,500.

Penalties for fraud. In Portugal, tax fraud is a tax crime that relates to unlawful conduct typified in the law that aims at the non-assessment, delivery or payment of the tax due or inappropriate grant of tax benefits, refunds or other advantages that may decrease the tax revenues. Thus, tax fraud can take place, for example, when any of the following conduct occurs:

• Concealment or alteration of facts or values that must be contained in the books of accounting or of the statements submitted

• Concealment of undeclared facts or values that should be disclosed to the tax administration

• Entering a simulated business

Tax fraud is punishable with imprisonment up to three years or penalties up to 360 days. Fraud may qualify where there are aggravating circumstances also typified in the law, such as:

• The agent is a public employee

• The agent has been assisted by a public official

• The patrimonial advantage is of a value exceeding EUR50,000

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Qualified tax fraud is punishable by imprisonment from 1 to 5 years for individuals and penalties of 240 to 1,200 days for legal persons. If the patrimonial advantage exceeds EUR200,000, the penalty is imprisonment from 2 to 8 years for individuals and a penalty of 480 to 1,920 days for legal persons.

Personal liability for company officers. In general terms, directors may be held personally account able only in cases where there is an outstanding debt that has already transitioned to enforcement proceedings and the company does not hold enough goods to settle that debt.

Statute of limitations. The Portuguese statute of limitation period is 4 years/48 months counted from the beginning of the civil year following the date when the VAT became taxable/deductible or became due. Thus, the PTA might go back to review the VAT returns previously submitted and identify errors, as well as to apply any additional VAT assessments, penalties and interest until that time is elapsed.

On the other hand, said statute of limitation is also applicable to the taxable persons, who have also four years to voluntarily correct any errors. This period is shortened to two years in case the corrections are related to clerical or arithmetical errors.

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