1. VAT in Europe
3. VAT in Portugal
5. Reverse Charge in Portugal

Reverse Charge in Portugal

Reverse charge for non-established companies in Portugal

According to art 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses. Portugal has introduced this reverse charge on supplies of goods and services located in Portugal.

Where a non-established supplier, without a fiscal representative appointed, supplies goods or provides services located in Portugal to a VAT registered and established customer, the domestic reverse charge applies. It is not relevant if the supplier is registered or not.

• Supplier requirements
  Not established and without a fiscal representative in Portugal.

  (Irrelevant if the supplier is registered or not for VAT)

• Customer requirements
  Taxable person established in Portugal.
• Scope

  Supplies of goods and services located in Portugal.

The domestic reverse charge on services is rather exceptional as it would only apply where the B2B rule on services does not apply. This is, for example, the case for supplies of services connected to immoveable property.

Additionally, there is a specific reverse charge on supplies of natural gas, electricity, heat and cooling energy supplied by non-established suppliers to taxable dealers established in Portugal.

• Supplier requirements
  Not established in Portugal

  (Irrelevant if the supplier is registered or not for VAT)

• Customer requirements
  Taxable dealers.
• Scope
  Natural gas, electricity, heat and cooling energy.

The reverse charge on supplies made by non-established companies is regulated in Article 2.1º.g) CIVA. Also, the reverse charge on supplies of gas, electricity, heat and cooling energy supplied by non-resident suppliers to taxable dealers is regulated in Article 2.1º.h) CIVA. Also, find here the FAQ published by the PT TAs about reverse charge.

Reverse charge in B2B services

Article 196 of the VAT Directive requires the reverse charge mechanism on all services subject to the B2B rule introduced in art. 44 of the same Directive. The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located.

According to the general B2B rule, any business resident outside Portugal supplying services to a Portuguese based customer will not charge any VAT and the transaction will be reverse charged by the customer.

There are however a number of exceptions to this rule. Where these exceptions apply, reverse charge is still applicable in Portugal provided the following conditions are met:

• Services connected to immoveable property are located where the property is located.
• Passenger transport services will be located where the transport takes places (apportioned if necessary).
• Catering services are located where the catering takes place.
• Short term leasing of means of transport are located where the vehicle put at the disposal of the customer.
• Access to conferences, fairs and exhibitions is located where the event takes place.

The general rule may also be deviated where the supplier has a permanent establishment in the country of the customer and the PE has intervened in the supply.

Reverse charge on specific goods and services in Portugal

Domestic reverse charge may also apply on the supplies of certain goods and services located in Portugal. 

• Construction work including repair, cleaning, maintenance, alteration and demolition services in relation to immovable property, including the handing over of construction works. Article 2.1º.j) CIVA. This reverse charge applies only when the customer is established, or has a permanent establishment, in Portugal.
• Immovable property (where opted to tax).
• Transfer of CO2 emission allowances. Article 2.1º.l) CIVA.
• Used materials, scrap and waste, Article 2.1º.i) CIVA.
• Supplies of forestry goods including cork, wood, pine cones and pine nuts with bark. Article 2.1º.m) CIVA. This reverse charge applies only when the customer is established, or has a permanent establishment, in Portugal.
• Supplies of electricity produced in units for self-production. Article 2.1º.n) CIVA. This reverse charge applies only when the customer is established, or has a permanent establishment, in Portugal.