Time limit for VAT deduction in Portugal
A proposal on the Budget law foresees a strict timeline on the input VAT deduction.
1 May, 2016
If these changes are introduced, input VAT could only be deducted in the period in which the invoice is received or in the following period.
This is a significant change for businesses processing their AP invoices late on a cash basis, as these amounts may be rejected by the authorities if deducted in the wrong period. Most countries in Europe allow deduction of VAT in any period within the statute of limitations. Poland has strict rules similar to those expected in Portugal. Also Finland requires input VAT to be deducted in the fiscal year when it was incurred.