1. VAT in Europe
3. VAT in Portugal

VAT in Portugal

The Value Added Tax (VAT) in Portugal is known as Imposto sobre o valor acrescentado (IVA) in their local language.

What are the VAT rates in Portugal?

The Portuguese VAT rates are the following:

• Standard rate: 23%
• Reduced rates: 6% and 13%

Portugal has opted for the reduced VAT rates on a number of items allowed by the VAT Directive.

VAT Rates by goods and services in Portugal

The standard VAT rate is 23%. The standard VAT rate generally applies for all goods and services for which no exemption, 0% or one of the reduced VAT rates is foreseen.

The first reduced VAT rate is 13%. This reduced rate applies to certain food products and wine, certain types of fossil fuels, as well as musical instruments, among others.

In addition, there is a reduced VAT rate of 6%. This reduced rate applies to basic food products, certain books, and newspapers, some pharmaceutical products, medical equipment, passenger transport, and hotel accommodation, among others.

Supplies and services at 0% are the standard supplies, such as exports or intra-Community supplies.

Finally, some supplies are VAT exempt, such as health services, public education, and financial services, among others.

To confirm the VAT rate applicable to your product or service in Portugal, we recommend that you contact us. 

• Foodstuff
  6% and 13%
• Water supplies
  13%
• Pharmaceutical products
  6%
• Medical equipment for disabled persons
  6%
• Children´s car seats
  23%
• Passenger transport
  6%
• Books
  6%
• Books on other physical means of support
  6%
• Newspapers
  6%
• Periodicals
  6%
• Admission to cultural services (theatre, etc)
  23%
• Admission to amusement parks
  23%
• Pay TV / cable
  23%
• TV licenses
  23%
• Writers / composers
  23%
• Hotel Accommodation
  6%   
• Restaurant and catering services
  13%   
• Restaurants
  13%   
• Medical and dental care
  Exempt and 6%
• Repair of shoes and leather goods
  23%
• Repair of clothing and household linen
  23%
• Hairdressing
  23%

VAT deduction limits in Portugal

Input VAT is generally deductible as long as the goods or services are used for business purposes.

According to the national legislation, in particular article 21 of the Portuguese VAT Code, following expenses are excluded from the right to deduct:

• Acquisition/hiring/use/transformation/repair/manufacturing or import of passenger cars, pleasure crafts, helicopters, planes, motorcycles, except for goods which sale or exploitation is the object of activity;
• Fuel:
• Petrol
• Partially deductible (50%) - diesel, LPG, natural gas and biofuels, except
• Fully deductible (100%) - diesel, petrol, LPG, natural gas and biofuels, in the case of: Heavy passenger vehicles; Vehicles licensed for public transport, rent-a-car vehicles excluded; Diesel; LPG, natural gas or biofuel consuming machines, which are not registered vehicles; Tractors exclusively or predominantly used for fieldwork related to agricultural activity; Vehicles transporting goods, weighting more than 3 500Kg.
• Business travels made by taxable person and staff, including toll fees.
• Food, accommodation, beverages and tobacco, except in cases the expense is related to conferences, fairs, expositions or congresses, where a deduction of 50% or 25% can be applied, according to the Portuguese VAT Code (Art. 21, paragraph 2, Portuguese VAT Code).
• Fun and luxury, not considered normal operating expenses.

A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.

The VAT deduction limits in Portugal are regulated in Article 21 CIVA.

Statute of Limitations in Portugal 

The statute of limitations in Portugal is four years, counted from the beginning of the natural year following the date when the VAT became deductible or due.

The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests. Also, the statute of limitations determines the period a taxpayer can voluntarily correct any errors on past submissions, and deduct input VAT. There is a limit to arithmetical errors, which is two years for making these corrections.

Tax point rules in Portugal

The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.

• General rule: When the supply of goods or services is subject to the mandatory issuance of an invoice, then the tax point is by the time the invoice is issued, or should have been issued. Otherwise, VAT becomes due when the goods are put at the customer’s disposal, or when the services are completed.  
• Prepayments or advanced payments create a tax point because an invoice must be issued for each instalment or prepayment.
• Intra-Community acquisitions: Tax point occurs on the invoice date or the 15th day of the month following the month in which the invoice was issued, whichever occurs earlier. This rule does not apply in case of partial advanced payments prior to the moment in which the goods are placed at the customer’s disposal.
• Import: Tax point occurs when the goods are imported according to the relevant import documents.

Tax point rules in Portugal are regulated in Articles 7 and 8 CIVA.